N-52024-2025 Bates White FAM Audit Report - Redacted
16 passages
II.A. Background This chapter addresses NSPI's organization, staffing, and controls—including risk management related to fuel and purchased power.
AI summary This section provides an overview of NSPI's organizational structure, staffing, and controls, with a focus on risk management related to fuel and purchased power.
Performance Management NSPI's performance management process remained consistent with the process put into place in the prior Audit Period. NSPI continued the use of "Performance Review," a third-party software tool to manage and track per...
AI summary NSPI's performance management process remains consistent with prior periods, using third-party software and regular employee-supervisor meetings to set and review goals. The process ties to incentive compensation, training, and succession planning. NSPI also tracks leadership competencies to identify strengths and areas for growth. NSPI is involved in other matters before the Board regarding the impact of a cyber event.
Risk Management NSPI's fuel and power purchasing activities inherently expose it to a variety of risks. Prudent utilities manage those risks, such as counterparty, credit, country, market, regulatory, and currency risks,59 through well-def...
AI summary NSPI's fuel and power purchasing activities expose it to various risks, including counterparty, credit, country, market, regulatory, and currency risks. The document notes that NSPI uses industry-standard risk management measures to manage these risks effectively.
II.B.3.b.i. Organization NSPI manages risk both at the company level (i.e., NSPI-specific) and the enterprise level (i.e., Emera-wide). At the enterprise level, Emera's Board of Directors has the overall responsibility to ensure that the p...
AI summary NSPI manages risks at both company and enterprise levels. Emera's Board oversees risk management, delegating authority to the Enterprise Risk Management Committee. The Chief Legal and Compliance Officer has been replaced, and responsibility has been delegated to the Executive Vice President Enterprise Risk.
II.B.3.b.ii. Risk Management Documents NSPI's risk management procedures are presented in the Fuel Manual. Provided as "Links" to the Fuel Manual, the key documents that contain NSPI's approach to risk management are (1) the NSPI Fuel Proc...
AI summary The document outlines NSPI's risk management procedures, including key documents such as the NSPI Fuel Procurement Risk Management Policy & Procedures, the Emera Credit Policy, and the NS Power Fuel Hedging Plan. These documents define roles and responsibilities, including those of the CROC and the middle office, in managing various types of risk.
II.B.3.b.iv. Audit Period Results While we discuss in our FAM Accounting chapter more detail about NSPI's controls and their performance during the Audit Period, we generally observed that NSPI takes the role of the FST seriously and that...
AI summary The audit period results highlight that NSPI's Fuel Adjustment Mechanism (FAM) processes were well-managed, with appropriate approvals and risk assessments. NSPI adhered to its risk management policies, though it reached or exceeded solid fuel transaction limits during the audit period. As coal use declines due to environmental and regulatory factors, NSPI may need more detailed reviews of solid fuel procurement.
ation about the goals and guidelines applicable to NSPI and ERM employees that should serve as the guiding document on a day-to-day basis. Fuel Manual Revision 14 became effective on October 17, 2024. Conclusion II-9: NSPI's risk managemen...
AI summary The document discusses NSPI's risk management processes, noting that they are reasonable but partially outdated. It highlights the impact of the March 2025 cyber event on NSPI's internal controls, including the loss of access to key systems like Aligne Fuels and Allegro, which required manual workarounds.
II.D. Recommendations Recommendation II-1: NSPI should ensure its next Fuel Manual update revises the NSPI Risk Manual, as necessary, to make accurate references to risk management authority delegations at both NSPI and Emera. Recommendati...
AI summary The recommendations focus on updating NSPI's Fuel Manual and Risk Manual to ensure proper risk management authority delegations and completing an internal audit of NSPI's hedging program by December 2025.
that period, while the forecasted load exceeded actual load 84.8% of the time. NSPI provided its own MAPE results that do not match our MAPE calculations, which were calculated using NSPI's own data. Conclusion III-8: Further to Conclusion...
AI summary The text discusses NSPI's load forecasting challenges following a cyber event, reliance on PLEXOS for forecasting, emissions modeling practices, and QA/QC processes. It highlights discrepancies in MAPE results, manual forecasting post-cyber event, and the transfer of system planning responsibilities to the IESO.
orary, lasting only to the second or third quarter of 2025. Still, the CROC memo on this subject is instructive and illustrates the risks of the transaction and NSPI's coal purchasing more generally: Cucuta is a principal crossing point fr...
AI summary The CROC memo highlights the risks associated with NSPI's coal purchases from Cucuta, Colombia, due to rising violence, attacks on coal mines, and corruption allegations. Despite these risks, NSPI proceeded based on its Fuel Manual and a reasonable rationale, though the transaction increased its credit risk.
ng adjustments to inventory and consumption data in the third quarter of 2024. The implication for this error is that heat rates have been incorrectly stated for Trenton 5, at minimum, and potentially Trenton 6 and Point Tupper in historic...
AI summary The document highlights an error in heat rate data reporting for Trenton 5, Trenton 6, and Point Tupper in historical FAM reports, recommending NSPI correct the data from the fourth quarter of 2023. It also concludes that NSPI fully addressed prior audit recommendations regarding solid fuel supply management.
X.B.3.a. A Note About Root Cause Analyses This section includes discussion of several Root Cause Analyses, which were conducted by NSPI personnel (and occasionally supplemented by third-party experts/vendors). Root Cause Analyses explore t...
AI summary This section discusses the importance of Root Cause Analyses conducted by NSPI, highlighting their role in identifying issues and opportunities for improvement. It notes that these analyses are typically thorough and recommends that NSPI continue providing updates on the status of recommendations from these analyses to the Board.
ant 2024-2025 Biomass Performance Testing Results," September 26, 2025, slide 8. 529 NSPI, "Port Hawkesbury Biomass Plant 2024-2025 Biomass Performance Testing Results," September 26, 2025, slide 12. unit can produce a maximum of 28 MW.530...
AI summary The document discusses the results of biomass performance testing for NSPI's Port Hawkesbury Biomass Plant, highlighting discrepancies between test results and declared values. It also notes NSPI's progress on implementing recommendations from a root cause analysis, with most recommendations completed and the rest in progress.
XIII.A.1.a.v. Procedure and Oversight Planning, executing, monitoring, and reporting of hedges requires coordination across NSPI. The FST governs fuel procurement and hedging subject to both the Risk Management Policy and the Credit Policy...
AI summary NSPI's fuel hedging and risk management involve coordination across multiple teams, including the Portfolio Optimization Group and ERM. The Fuel Strategy Table (FST) governs fuel procurement and hedging, with quarterly reporting on hedge effectiveness and compliance. Credit risk from bilateral transactions is monitored by ERM and reported to management.
NSPI coordinates earlier in the process with Emera's ERM to discuss forecast assumptions and forecast scheduling and in recent years has increased communication with ERM to communicate NSPI's scheduled rebalance activities. NSPI also conti...
AI summary NSPI collaborates with Emera's ERM on forecast assumptions and scheduling, and uses 'what-if' analysis to evaluate the impact of hedge transactions on portfolio VaR. The VaR model's output was reviewed and found reasonable.
o longer included 2026 PHP load in its hedging forecast. No hedges were unwound as a result of this decision, nor did we observe any unreasonable hedge positions for 2026 in the third quarter of 2024. Conclusion XIII-12: In the Q2 2025 F&P...
AI summary The document outlines several conclusions regarding NSPI's hedging strategy, emissions compliance, and generation planning. NSPI removed the 2026 PHP load from its forecast, adjusted its expectations for Trenton 5 cold storage, used an SO2 emissions buffer, and found that its hedging program significantly reduced value at risk. NSPI also improved its hedging effectiveness analysis by using slope coefficients and continues to monitor this process.