Topic:"Prudency Review" in M11927

5 the "Reason for Variance" analyses in Sections [2,](#page-9-0) [3,](#page-18-1) and [4](#page-22-0) in order to opine on the overall prudence of the 6 Project cost increases and the extent to which the submitted variances are justified.

AI summary The text refers to the analysis of 'Reason for Variance' in specific sections to assess the prudence of project cost increases and the justification of submitted variances.

- Response IR-12: - a) Midgard revised its conclusion to clarify the relationship between regulatory changes and project costs. - Midgard determined that while regulatory changes influenced project execution, the associated costs - were mo...

AI summary Midgard revised its conclusion regarding the relationship between regulatory changes and project costs, stating that NS Power acted prudently in response to evolving requirements. The costs were deemed necessary and primarily driven by DFO requirements.

CI 50518 – HYD – Ruth Falls Main Dam Refurbishment ATO – Reply Evidence Redacted 1 In its evidence, Midgard indicates that its mandate is to review the ATO on behalf of Board 2 Counsel, however as a result of the extended timeline of the p...

AI summary Midgard reviews the ATO application for the Ruth Falls Main Dam Refurbishment, examining whether cost increases are due to prudent actions by NS Power and if the project remains in the best economic interest of ratepayers. It highlights environmental permitting, construction delays, and Mi'kmaq engagement as key reasons for variance.

CI 50518 – HYD – Ruth Falls Main Dam Refurbishment ATO – Reply Evidence Redacted - 1 Ultimately, Midgard concludes that the changing context of the Fisheries Act and resulting - 2 consequences on NS Power's Project execution process have i...

AI summary Midgard argues that changes in the Fisheries Act have increased costs for NS Power's dam refurbishment project, impacting ratepayers. It concludes that NS Power acted prudently in responding to DFO's requests and that the project remains the lowest-cost alternative for customers.

3.1 Prudency [61] In this ATO application, NS Power stated that following submission of its 2019 ACE Plan for Board approval, the Company was required to obtain an FAA from DFO. Specifically, NS Power submitted a request for DFO review in...

AI summary The document discusses the prudency of NS Power's actions in obtaining an Authorization to Overspend (ATO) for the Ruth Falls main dam refurbishment project. The Board agrees with Midgard that NS Power acted reasonably in expecting that an FAA would not be required in its 2019 ACE Plan and that delays in the FAA process were due to changing regulatory requirements, not imprudence.

am is not an appropriate comparison. The project justifications, project alternatives, project risks, regulatory environments, and impact to NS Power's operations and rate base are entirely different. NS Power noted that in the Lower Water...

AI summary NS Power argues that the Ruth Falls main dam project differs from the Lower Water Street project in terms of project justifications, risks, and NPV differences. It asserts that prudently incurred costs should be recoverable through the rate base, even if they exceed the ATO threshold and are approved by the Board.

4 Request IR-12: 5 Reference: N-8, Original Report, page 13, lines 26-27, and page 14, lines 1-3. Ultimately, Midgard concludes that the changing context of the Fisheries Act and resulting consequences on NS Power's Project execution proce...

AI summary Midgard's report discusses the significant costs imposed on NS Power due to changes in the Fisheries Act and evolving regulatory requirements. The report initially stated that these changes were the primary driver of costs but later revised this to a 'necessary response'. The report also highlights that NS Power acted 'generally prudent' in responding to DFO's requests, though it does not address whether NSPI acted prudently or how it responded to NSECC's requests.

(3) The evidence suggests that NSPI has not acted reasonably or prudently Imprudence in this matter arises in two respects: (a) in preparing the original application and (b) in advancing the capital project forward. Prudency is assessed fr...

AI summary The evidence suggests that NSPI has not acted reasonably or prudently in preparing the original application and in advancing the capital project forward. Prudence is assessed based on the information available at the time the application was filed, not with the benefit of hindsight.

0-0"> [ 48 ](#page-10-1) Exhibit N-3, (CA) RIR- 5 Attachment 1, page 15. [ 49 ](#page-10-3) Exhibit N-06, (NSUARB) RIR – 12, Attachment 2, page 13. impact that needed an FAA.[50](#page-11-0) Respectfully, based on the wording of the legisl...

AI summary The document discusses NSPI's failure to include the costs of a Fisheries Act Authorization (FAA) in its initial application, arguing that this omission was imprudent and potentially misleading, with the burden of this imprudence falling on ratepayers rather than being absorbed by NSPI.

e Items.[65](#page-13-4) Some of these items were identified after the original filing, having been inadvertently omitted, and others arose from the delays and changes associated with the FAA process. The timing of NSPI learning these chan...

AI summary NSPI did not act diligently in advancing the Applications to the NSECC and DFO, leading to delays and increased costs in the Ruth Falls refurbishment project. The changes in scope since 2021 should have prompted a Scope Change application to the Board, but NSPI only applied in October 2024. The Industrial Group argues that NSPI's lack of diligence during the FAA process should not be passed on to ratepayers.

Test for ATOs The IG referenced an 'explicit ATO test' in its submissions and outlined the conditions for this test within its evidence.2F 3 However, the submissions of the IG do not accurately represent the established tests for ATO appli...

AI summary The Industrial Group (IG) proposed an explicit ATO test, which NS Power argues is incorrect and prescriptive. NS Power asserts that the existing three-part test, focusing on reasonableness, prudence, and the use of a reasonable standard of care, should be used instead. The Board has historically applied this test, and NS Power believes the IG's approach is overly prescriptive and inappropriate for ATO applications.

Archaeology Costs The IG submits that the ATO costs associated with archaeology should be denied, as they were not accurately estimated in NS Power's original application. However, an accurate estimate of costs in the initial project estim...

AI summary The Industrial Group (IG) argues that archaeology costs in NS Power's ATO application should be denied due to inaccurate initial estimates. NS Power acknowledges the initial estimate was low but asserts that the costs were reasonable and prudent at the time, based on available information and studies from the Sheet Harbour system. Midgard's evidence suggests that the low initial estimate did not significantly affect the original decision.

Viewing the evidence as a whole, NSPI acted imprudently by not including the costs of the FAA within its initial application… Either way, the impact of this imprudence should not rest with ratepayers. Respectfully, these submissions from t...

AI summary The NS Energy Board found that NSPI acted imprudently by not including FAA costs in its initial application, but the IG argues that the absence of these costs does not automatically render them imprudent, citing evidence from NS Power and Midgard.

CONCLUSION NS Power submits that the three-part test for ATO's has been met, as follows: 1. Were the utility's decisions reasonable in the context of information which was known (or should have been known) at the time? NS Power's decision...

AI summary NS Power argues that its decision to proceed with the Ruth Falls project was reasonable, prudent, and based on available information at the time, despite higher-than-expected archaeology costs. The company emphasizes that the project was necessary for dam safety and remains the lowest-cost solution for customers.

rk. Going forward, the Company said it will consider its broader hydro fleet and lessons learned concerning the potential for requirements and costs to change significantly in relation to archaeology. [51] NS Power's reply submissions also...

AI summary NS Power addressed concerns regarding decommissioning options, prudency of the project, and cost-effectiveness of Option 4. It committed to providing decommissioning costs in future applications and emphasized that prudency can be challenged with evidence during the IR process.

3.1 Prudency [61] In this ATO application, NS Power stated that following submission of its 2019 ACE Plan for Board approval, the Company was required to obtain an FAA from DFO. Specifically, NS Power submitted a request for DFO review in...

AI summary NS Power's 2019 ACE Plan did not require an FAA, and the Board agrees with Midgard that it was reasonable to expect this. The delay in obtaining the FAA was due to evolving DFO requirements, not imprudence on NS Power's part. The Board finds that NS Power acted prudently in its interactions with DFO and NSECC.

am is not an appropriate comparison. The project justifications, project alternatives, project risks, regulatory environments, and impact to NS Power's operations and rate base are entirely different. NS Power noted that in the Lower Water...

AI summary NS Power argues that the Ruth Falls main dam project is different from the Lower Water Street project in terms of project justifications, alternatives, risks, regulatory environments, and impact on operations and rate base. NS Power highlights that the NPV difference between refurbishment and decommissioning is significant and that all prudently incurred costs should be recoverable through the rate base according to CEJC.

ncrease in project cost over the cost approved by the Board in NS Power's 2019 ACE Plan, refurbishment of the Ruth Falls main dam is the preferred option over decommissioning of the Ruth Falls assets. Given the above findings, the Board ap...

AI summary The Board approves an Authorization to Overspend (ATO) for the Ruth Falls Main Dam Refurbishment project at a total cost of $14,839,116. It finds that refurbishment is the preferred option over decommissioning. The Board disagrees with the Industrial Group's recommendation to manage costs before accounting for AFUDC, citing significant differences in NPV compared to a previous case.