N-1Application
24 passages
1.0 INTRODUCTION NSP Maritime Link Inc. ("NSPML") makes this Application for approval of an assessment from Nova Scotia Power Inc. ("NS Power") for recovery by NSPML of its 2026 revenue requirement. Pursuant to the Maritime Link Cost Recov...
AI summary NSPML seeks approval to recover its 2026 revenue requirement from NS Power under the Maritime Link Cost Recovery Regulations. The Maritime Link has performed well, delivering significant GHG-free energy and cost savings. The Nova Scotia Energy Board approved the 2025 Assessment and provided guidance for the 2026 filing.
As Outlined in the Amended and Restated Joint Operations Agreement, Article 5 Financial and Other Arrangements. 1 the overall components of the full Lower Churchill Project (specifically the Muskrat 2 Falls Hydro Facilities, the Labrador T...
AI summary The text discusses the financial and operational arrangements under the Amended and Restated Joint Operations Agreement, highlighting uncertainties related to the Lower Churchill Project and geopolitical risks such as tariffs. NSPML is considering the appropriateness of multi-year assessments but currently believes a single-year assessment is more suitable due to the level of uncertainty.
9.0 REQUEST FOR RELIEF In consideration of the above, NSPML respectfully requests that the Board issue an Order pursuant to sections 64 of the Public Utilities Act and 8 of the ML Regulations: 1. Approving a 2026 assessment for NSPML in th...
AI summary NSPML requests the Board to approve a 2026 assessment of $198.7 million, a Return on Equity of 9 percent, and a regulated capital structure with 60% debt and 40% equity, along with flexibility for original project capital.
COST OF CAPITAL PREPARED FOR: NSP MARITIME LINK INC. BEFORE THE: NOVA SCOTIA UTILITY AND REVIEW BOARD JULY 2025 © 2025 Concentric Energy Advisors, Inc. All rights reserved. www.ceadvisors.com
AI summary The document is a proceeding related to the cost of capital, prepared for NSP Maritime Link Inc. before the Nova Scotia Utility and Review Board in July 2025. It includes a report by Concentric Energy Advisors, Inc.
3 A. James M. Coyne 4 My name is James M. Coyne, and I am employed by Concentric Energy Advisors, Inc. 5 ("Concentric") as a Senior Vice President. My business address is 293 Boston Post Road West, 6 Suite 500, Marlborough, MA 01752. 7 I a...
AI summary James M. Coyne is a Senior Vice President at Concentric Energy Advisors, Inc., providing expert testimony and advisory services on energy industry economics, finance, and public policy. He has testified before the Nova Scotia Utility and Review Board and has authored papers on utility innovation and regulation.
A. The Fair Return Standard 5 The principles surrounding the concept of a "fair return" for a regulated company (Fair Return 6 Standard) were established by the Supreme Court of Canada in Northwestern Utilities v. City of Edmonton (1929) S...
AI summary The Fair Return Standard, established by the Supreme Court of Canada in Northwestern Utilities v. City of Edmonton and reaffirmed in Ontario (Energy Board) v. Ontario Power Generation Inc. , ensures that regulated utilities can recover their operating and capital costs through rates, enabling them to earn a return equivalent to investments of comparable risk, thus encouraging continued investment and operational maintenance.
3 C. Central Bank Policies 4 The policies of central banks directly impact interest rates, inflation, and the pace of economic 5 growth. All of these factors influence the cost of capital for utilities. In 2022, central banks in both 6 the...
AI summary Central banks' policies, particularly in the U.S. and Canada, have significantly impacted interest rates, inflation, and economic growth, which in turn affect the cost of capital for utilities. In 2022, both countries tightened monetary policy to address high inflation, but inflation proved more persistent than expected, leading to ongoing adjustments in interest rates.
10 2. United States 11 Monetary policy followed a similar path in the U.S., with the U.S. Federal Reserve raising the 12 federal funds rate to combat higher than expected inflation. The Federal Reserve raised the 13 discount rate on numero...
AI summary The U.S. Federal Reserve increased the federal funds rate in 2022 to address inflation, reaching 5.00 to 5.25 percent by July 2023. It later reduced the rate in 2024, with the rate standing at 4.25 to 4.50 percent as of June 2025. The Fed may make further cuts in 2025 depending on economic data, but uncertainty from tariffs has led to revised forecasts of lower GDP growth and higher inflation.
23 1. Interest Rates 24 Bond yields are the most direct indicator of the cost of capital, as they reflect the level of interest 25 required to compensate debt (but not equity) investors in the current market. Bond yields are a 26 direct in...
AI summary The text discusses changes in Canadian government bond yields over time, particularly for 10-year and 30-year bonds, and how these changes affect interest rates and the cost of capital. It also compares Canadian utility bond yields to government bond yields and references forecasts from Consensus Economics for future bond yields in Canada and the U.S.
3 E. Integration of Canadian and U.S. Capital Markets 4 In a world of increasingly linked economies and capital markets, investors seek returns from a 5 global basket of investment options. Investors distinguish between risks on a country-...
AI summary This section discusses the integration of Canadian and U.S. capital markets, emphasizing how investors evaluate country-specific risks. It references The Economist Intelligence Unit's country risk ratings, which rate Canada and the U.S. equally at AAA, indicating low risk and strong economic, business, and political environments.
9 Figure 13: Country Risk Ratings Canada U.S. Sovereign Risk Rating A AA Currency Risk Rating A A Banking Sector Risk Rating AA A Political Risk Rating AAA AA Economic Structure Risk Rating A A Overall Country Risk Rating A A 10 This asses...
AI summary The document compares Canada and the U.S. based on country risk ratings, showing both countries have high ratings across various categories. Allianz reports confirm that both nations were ranked AA1 as of January 2025, indicating their similar level of risk in a global context.
2 RETURNS FOR OTHER ELECTRIC TRANSMISSION COMPANIES 3 Recognizing that the proxy companies described in Section 5 of our report represent diversified 4 portfolios of assets that have lower risk than NSPML, Concentric reviewed the authorize...
AI summary The document discusses the returns for other electric transmission companies, noting that proxy companies have diversified portfolios with lower risk than NSPML. Concentric reviewed authorized returns and equity ratios for Canadian transmission assets, emphasizing that these provide a helpful perspective but not a substitute for market analysis.
13 Figure 14: FERC Authorized Transmission ROEs – Subsea Cables Project ROE Decision Location Trans Bay Cable 13.50% September 2020 San Francisco Cross-Sound Cable 10.57% March 2024 New York NYPA Propel 11.30% September 2024 New York Neptu...
AI summary Figure 14 lists FERC authorized transmission ROEs for subsea cable projects, including Trans Bay Cable, Cross-Sound Cable, NYPA Propel, and Neptune Regional. The table provides project names, ROEs, decisions, and locations, with some projects having decisions dated as far back as July 2001.
4 Figure 15: Canadian Authorized Returns - Transmission Company Province Ownership ROE Equity Ratio Hydro One (transmission) Ontario IOU 9.36% 40.0% Hydro One (distribution) IOU 9.36% 40.0% ATCO Electric (transmission) Alberta IOU 8.97% 37...
AI summary The authorized return on equity (ROE) for Canadian transmission companies ranges from 8.2% to 9.36%, with deemed equity ratios between 30% and 40%. These returns apply to companies with diverse transmission portfolios, unlike single-asset companies like NSPML.
A. Discounted Cash Flow ("DCF") Model The premise underlying the DCF model is that investors value a given investment according to the present value of its expected cash flow over time. The standard DCF model is shown in Formula [1]: 23 $$...
AI summary The DCF model calculates the present value of expected cash flows to determine an investment's value. It uses formulas to compute stock prices and the cost of common equity, with references to regulatory decisions from BCUC, OEB, and AUC.
1. Constant Growth DCF Model Assumptions The Constant Growth DCF model requires the following assumptions: (1) a constant average growth rate for earnings and dividends; (2) a stable dividend payout ratio; (3) a constant price-to-earnings...
AI summary The Constant Growth DCF model assumes a constant average growth rate for earnings and dividends, a stable dividend payout ratio, a constant price-to-earnings multiple, and a discount rate greater than the expected growth rate. Other DCF models do not require perpetual constant growth.
16 Figure 18: Estimates of Nominal GDP Growth41 Source Canada U.S. Real GDP Growth 1.9% 1.9% Inflation 2.1% 2.3% Nominal GDP Growth 4.04% 4.24% 17 5. DCF Results
AI summary The text presents estimates of nominal GDP growth for Canada and the U.S., with Canada at 4.04% and the U.S. at 4.24%. It also references a section on DCF Results, indicating financial analysis related to the data.
B. Capital Asset Pricing Model ("CAPM") - The CAPM method is based on the relationship between the required return of a security and the - 5 systematic risk of that security. As shown in Equation [4], the CAPM is defined by four - 6 compon...
AI summary The document explains the Capital Asset Pricing Model (CAPM), emphasizing its use of forward-looking estimates to determine the required return on equity. It outlines the components of CAPM, including the risk-free rate, beta, and market risk premium, and discusses the calculation of beta using covariance and variance. The analysis uses forecasted yields and historical spreads to estimate the risk-free rate.
6 Figure 19: Long-term Forecast for 10-Year Government Bond Yields42 2026 2027 2028 Average Canada 3.1% 3.5% 3.5% 3.37% U.S. 4.1% 4.1% 4.1% 4.10% 8 With an average spread between 10-year and 30-year government bond yields of 24 basis point...
AI summary The text presents a long-term forecast for 10-year government bond yields in Canada and the U.S. for the years 2026 to 2028, with an average spread of 24 basis points in Canada and 40 basis points in the U.S. between 10-year and 30-year government bond yields. The forecast shows that the yields for 30-year government bonds are expected to be below current levels as of July 9, 2025.
12 Figure 20: Risk Free Rate Canada U.S. April 2025 Consensus Forecast Average 2026-2028 3.37% 4.10% Forecasts Average Daily Spread between 10-year and 30-year 0.24% 0.39% government bonds (last 10 years) Sum 3.60% 4.49% 13 2. Beta
AI summary The text presents a figure and table discussing the risk-free rate forecasts for Canada and the U.S., with data for 2026-2028 and the average spread between 10-year and 30-year government bonds over the last decade. It also introduces a section on Beta, which is likely related to financial risk analysis.
3 3. Market Risk Premium ("MRP") 4 Estimates of the MRP generally fall into two categories, ex-post (historical arithmetic average) 5 and ex-ante (forward looking). The historical MRP is based on the arithmetic means of the equity 6 market...
AI summary The document discusses the Market Risk Premium (MRP), noting that estimates fall into ex-post (historical) and ex-ante (forward-looking) categories. Historical MRP data is based on equity returns relative to long-term government bonds, with Canadian data from 1919-2024 and U.S. data from 1926-2024. Due to economic integration, the MRP for both countries is highly correlated, supporting a single MRP estimate for Canada and the U.S.
13 Figure 21: Historical Market Risk Premia – Canada and U.S. Canada 5.75% United States 7.31% Average 6.53% 15 We have previously used an average of forward-looking and historical MRPs in Canada, which 16 was the approach taken by the BCU...
AI summary The text discusses the use of historical market risk premia (MRPs) in the CAPM analysis for NSPML, noting that it is a conservative estimate compared to forward-looking MRPs. The approach aligns with recent practices in Canada, as seen in the BCUC's September 2023 decision for FortisBC.
1 C. Flotation Costs and Financing Flexibility 2 It is common practice for Canadian regulators to approve an adjustment for flotation costs and 3 financing flexibility, with 50 basis points being the norm (as discussed below). The adjustme...
AI summary The document discusses the common practice of Canadian regulators approving flotation costs and financing flexibility adjustments, typically 50 basis points, to compensate equity holders and ensure financial flexibility. It also highlights variations in this practice across jurisdictions, with examples from Nova Scotia, Manitoba, Saskatchewan, and British Columbia.
8 Figure 27: Authorized vs. Regulated ROE for NSPML Year Authorized Regulated(1) 2018 9.00% 8.63% 2019 9.00% 8.58% 2020 9.00% 8.25% 2021 9.00% 9.16% 2022(2) 9.00% 7.01% 2023(2) 9.00% 8.63% 2024(3) 9.00% 9.25% Average 9.00% 8.50% - 9 1) Reg...
AI summary Figure 27 compares the authorized and regulated return on equity (ROE) for NSPML from 2018 to 2024. The authorized ROE remains consistently at 9.00%, while the regulated ROE fluctuates between 7.01% and 9.25%. The regulated ROE excludes the impact of donations, sponsorships, and certain costs, which would further reduce return levels if included.
N-6NSPML (Dr. Cleary) RIR 1 to 13 - Redacted
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Historical Data % change on previous year 2021 2022 2023 2024 Gross Domestic Product 6.1 2.5 2.9 2.8 Personal Consumption 8.8 3.0 2.5 2.8 Business Investment 6.0 7.0 6.0 3.6 Pre - Tax Corporate Profits 27.6 7.8 6.9 7.9 Industrial Productio...
AI summary The document presents historical economic data for the United States from 2021 to 2024, including metrics such as GDP, consumer prices, employment rates, and federal budget balances. It also includes projections for 2025 and 2026, along with the current US Fed Funds Rate of 4.375%.
Increase 1.40/ morcusc 1.470 110 Citatige 00.070 DC rease 12.170 Consensus End End End End End End End End Forecasts Jun '25 Sep '25 Dec '25 Mar '26 Jun '26 Sep '26 Dec '26 Mar '27 Mean Average: 4.264% 4.040% 3.790% 3.610% 3.471% 3.415% 3....
AI summary The text presents a table with forecast data and average percentages, likely related to financial or regulatory metrics. The data includes various dates and percentages, suggesting analysis of trends over time.
APRIL 2025 JAPAN Year Annual Average Total Ann To al Years or-Mar) ; Rat 0. Survey Date 1.2 % Une plo me Rate y- nt Bala ade ance tn) Curi Acco (¥t ount Gove Bu neral rnment idget ice (¥tn) Y TII nonth 'en BOR e (%) G Bo Year ovt ond d (%)...
AI summary The text presents a table with economic and financial data related to Japan, including annual average total figures, rates, and budget information. It also mentions the Current Bank of Japan Overnight Call Rate and the probability of a change in the rate on Apr. 30-May 1.
The 2024 budget deficit came out smaller than feared, widening by -5.8% of GDP compared to earlier estimates of -6%. This was largely due to higher-than-expected revenues at the end of the year, which provided a sliver of relief to the gov...
AI summary The 2024 budget deficit was smaller than feared, at -5.8% of GDP, but still exceeds the -3% limit set by the European Commission. Growth forecasts for 2025 have been revised downward to 0.7%, complicating deficit reduction efforts. Increased unemployment payments and potential tax hikes on wealthy earners are expected to further strain the budget.
Monthly CPI Outturns and y-o-y Consensus Forecasts 2023 $\%\ \ OctNovDecJanFebMarAprMayJun\ Jul\ AugSepOctNovDecJan\ FebMarAprMayJun\ Jul\ AugSepOctNovDecJan\ FebMarAprMayJun\ Jul\ AugSepOctNovDecJan\ FebMar\ AprMayJun\ Jul\ AugSepOctNovDe...
AI summary The text discusses monthly CPI outturns and year-over-year consensus forecasts, referencing multiple economic indicators and forecasts from various organizations. It includes visual data representations, such as figures, to illustrate the information.
EURO ZONE APRIL 2025 The EURO ZONE is: Austria, Belgium, Croatia, Cyprus, Α vera ge % Chan ge o n Prev /ious Calen dar \ Year Citigroup 1.0 1.3 1.3 1.2 1.4 1.2 1.4 3.2 na na 2.2 1.8 2.3 1.7 na na na na Econ Intelligence Unit 1.0 1.4 1.2 1....
AI summary The document presents economic forecasts for the Euro Zone in April 2025, with various institutions providing estimates on growth rates and economic indicators. Different organizations such as Citigroup, Morgan Stanley, and S&P Global Mkt Intelligence offer varying predictions, highlighting differences in economic outlooks.
NETHERLANDS APRIL 2025 A۱ /erag je % C hanç ge on I Previo ous C alenc lar Ye ear Annua I Tota al Rates on S urvey Date Oxford Economics 1.3 0.8 1.1 1.4 0.8 3.5 na na 2.9 2.1 3.9 2.7 109.7 106.9 -17.7 -28.6 2.1 1.6 3.1 3.0 Econ Intelligenc...
AI summary The document presents economic forecasts for the Netherlands in April 2025, including data from various institutions such as Oxford Economics, Econ Intelligence Unit, Rabobank Nederland, and Moody's Analytics. It includes statistics on rates, surveys, and other economic indicators.
Italy Current Account Balance (C$ bn) -0.5 -8.7 -18.4 -15.6 -31.4 -39.5 -41.7 -43.3 -40.4 -54.0 -59.6 10 Year Treasury Bond Yield, % 2 1.4 3.3 3.1 3.2 3.0 3 3.1 4 3.5 3.5 3.5 3.5 3.5 Euro ) ZO ne % change over previous year 2021 Histor 202...
AI summary The document presents economic data for Italy, including the current account balance, 10-year treasury bond yield, and various economic indicators such as GDP, private consumption, and inflation rates. It includes historical and forecasted figures from 2021 to 2031-35.
Regional totals and the grand totals for GDP growth and inflation, are weighted averages calculated using 2020 GDP weights, converted at average 2020 US$ exchange rates. These weights and rates were last updated in July 2021. Due to annual...
AI summary The document discusses the methodology used to calculate regional and global GDP growth and inflation forecasts, including the use of weighted averages based on 2020 GDP weights and exchange rates. It also explains the inclusion and exclusion of specific countries and regions in the forecasts, and the sources of data used.
NSPML Responses to Nova Scotia Energy Board Information Requests 1 Request IR-04: 2 3 Preamble: In Figure 14 on page 29 of its' evidence, Concentric lists four US-based utilities 4 that it denotes as "FERC Authorized Transmission ROEs – Su...
AI summary NSPML responded to an information request regarding four US-based utilities listed by Concentric, providing context on allowed ROEs for subsea cables. However, the requested detailed data on ownership structure, regulated assets, revenue, and net income was not available and requires further research. Financial data for some utilities is confidential and redacted.
1 Figure 1: FERC Authorized Transmission ROEs – Subsea Cables (revised) Project Ownership Assets ($000) Revenue ($000) Net Income ($000) Trans Bay Cable NextEra Energy Inc. 751,760 135,130 51,551 Cross-Sound Cable Argo Infrastructure Partn...
AI summary Figure 1 presents FERC authorized transmission ROEs for subsea cable projects, including details on ownership, assets, revenue, and net income for specific projects such as Trans Bay Cable and NYPA Propel.
NSPML Responses to Nova Scotia Energy Board Information Requests 1 Request IR-07: 27 b) The yield on 30-year U.S. Treasury bonds ranged from 4.41% to 5.08% in the 90-day 28 period ending May 31, 2025, so it would have been possible for an...
AI summary NSPML responds to Nova Scotia Energy Board information requests regarding the yield on U.S. Treasury bonds and the use of beta estimates in CAPM analysis. The response discusses the relevance of future interest rates for risk-free rate calculations and references Concentric's use of adjusted betas and a 1970 study by Marshall Blume.
Introduction THE CONCEPT OF RISK has so permeated the financial community that no one needs to be convinced of the necessity of including risk in investment analysis. Still of controversy is what constitutes risk and how it should be measu...
AI summary This paper discusses the concept of risk in investment analysis, focusing on the beta coefficient as a measure of non-diversifiable risk. It explores the statistical properties of beta and its use in the market model, while also addressing its stationarity over time and methods for improving its assessment.
II. THE RATIONALE OF BETA AS A MEASURE OF RISK The interpretation of the beta coefficient as a measure of risk rests upon the empirical validity of the market model. This model asserts that the return from time (t-1) to t on asset i, $\til...
AI summary This section discusses the rationale for using beta as a measure of risk, based on the market model. The model assumes that asset returns are a linear function of a common market factor and unique factors, with beta representing the sensitivity of an asset's return to the market factor.
B. The Equilibrium Approach Using the market model, Sharpe 10 and Lintner, 11 as clarified by Fama, 12 have developed a theory of equilibrium in the capital markets. This theory relates the risk premium for an individual security, $E(\tild...
AI summary This section discusses the equilibrium approach in capital markets, referencing the work of Sharpe, Lintner, and Fama. It introduces the formula that relates the risk premium of an individual security to the market risk premium, with beta as the proportionality constant.
16. King, op. cit. Number Number of Standard of BETAS Fractiles Period Companies Mean Deviation Zero .10 .25 .50 .75 8. 7/26-6/33 415 1.051 0.462 0.498 0.711 1 023 1 252 1 616 7/33-6/40 409 1 036 0.474 • • 0436 200 7001 7.010 11/00/1 1,000...
AI summary The text presents a table of beta estimates for different time periods, showing the number of companies, mean beta, standard deviation, and fractiles. It notes that none of the estimated betas were negative, indicating that nearly all stocks move in line with the market, limiting opportunities for diversification through counter-moving stocks.
IV. THE STATIONARITY OF BETAOVER TIME No economic variable including the beta coefficient is constant over time. Yet for some purposes, an individual might be willing to act as if the values of beta for individual securities were constant...
AI summary This section discusses the concept of beta stationarity over time, noting that while beta coefficients are not constant, individuals may act as if they are for portfolio risk assessment. The discussion highlights the difference between evaluating portfolios versus individual securities and the importance of unbiased historical estimates.
TABLE 2 PRODUCT MO~NT ANDRANKORDERCORRELATIONCOEFFICIENTS OF BETAS FOR PORTFOLIOS OF N SECURITIES Number of Securities Per 7126-6/33 and 7/33-6/40 7/33-6/40 and 7/40-6/47 7/40-6/47 and 7/47-6/54 7/47-6/54 and 7/54-6/6 1 7/54-6/61 and 7/61-...
AI summary Table 2 presents product moment and rank order correlation coefficients of betas for portfolios of varying numbers of securities. The correlation coefficients increase with the number of securities in the portfolio, indicating that larger portfolios have higher explanatory power for risk variation based on historical data.
C. A Method of Correction In so far as the rate of regression towards the mean is stationary over time, one can in principle correct for this tendency in forming one's assessments. An obvious method is to regress the estimated values of $\...
AI summary This section discusses a method of correcting for the regression towards the mean by regressing estimated beta values over time. Table 4 illustrates this approach for five periods, showing slope coefficients less than one, indicating the regression tendency.
FOR INDIVIDUAL SECURITIES Regression Tendency Implied Between Periods $\beta_2 = a + b\beta_1$ 7/33-6/40 and 7/26-6/33 $\beta_2 = 0.320 + 0.714\beta_1$ 7/40-6/47 and 7/33-6/40 7/47-6/54 and 7/40-6/47 $ \beta_2 = 0.265 + 0.750\beta_1 \beta_...
AI summary The text discusses regression analysis used to assess the accuracy of risk assessments for securities, emphasizing that these regressions are not tests of the stationarity of risk over time but rather tests of the accuracy of historical estimates. The analysis highlights that the independent variable is measured without error, leading to unbiased coefficients.
TABLE 5 MEAN SQUARE ERRORS BETWEEN ASSESSMENTS AND FUTURE ESTIMATED V ALUES Assessments Based Upon Number of Sec./ Port. 7/33-6/40 unadjusted adjusted 7/40-6/47 unadjusted adjusted 7/47-6/54 unadjusted adjusted 7/54-6/61 unadjusted adjuste...
AI summary The text presents a table comparing mean square errors between assessments and future estimated values for different periods. It discusses the accuracy of alternative methods of assessment by comparing their mean squared errors against estimated risk coefficients in subsequent periods, specifically from July 1940 through June 1947.
10 The Journal of Finance This paper examined the empirical behavior of one measure of risk over time. There was some tendency for the estimated values of these risk measures to regress towards the mean over time. Correcting for this regre...
AI summary This paper analyzed the empirical behavior of a risk measure over time, noting a tendency for estimated values to regress toward the mean. Correcting for this regression improved the accuracy of future risk assessments.
Capital Asset Pricing Model - Historical MRP [1] [2] [3] [4] [5] [6] [7] [8] Average Market Risk Basic CAPM North American Electric T&D Proxy Group Ticker Bloomberg Value Line Average Beta Risk Free Rate Premium Calculation Flotation Cost...
AI summary The text presents a table analyzing the Capital Asset Pricing Model (CAPM) for various North American electric transmission and distribution companies, including metrics like beta, risk-free rate, market risk premium, and calculated CAPM values. The table includes entities like Canadian Utilities Limited, HydroOne Ltd., and Consolidated Edison, Inc.
ey show stable long-term rates. The yield on 10-year Treasuries averages either 4.0% or 4.1% every year from 2026 to 2031; the projected 30-year yield ranges from 4.3% to 4.5% over the same time span. From a short-term cyclical perspective...
AI summary The text discusses the impact of tariffs on economic growth and inflation, noting stable long-term interest rates and expectations of Federal Reserve support. Blue Chip forecasters anticipate slower growth in the third quarter, followed by a gradual recovery, with inflation expected to slow toward the end of the forecast period.
Consensus Forecasts of U.S. Interest Rates and Key Assumptions Cons ensus l Forecas sts-Qua arterly Avg. Average For Week Ending yAverage For Month Latest Qtr 3Q 4Q 1Q 2Q 3Q Interest Rates May 23 May 16 May 9 May 2 Apr Mar Feb 1Q 2025 2025...
AI summary The document presents consensus forecasts for U.S. interest rates across various financial instruments, including Federal Funds Rate, Prime Rate, SOFR, and Treasury bills and notes of different maturities, with data spanning from April 2025 to 2026.
Λr CTC 2 Policy Rates1 History Consensus Forecasts Month Year Months From Now: Latest: Ago: Ago: 3 6 12 U.S. 4.38 4.38 5.38 4.31 4.03 3.51 Japan 0.50 0.50 0.05 0.50 0.51 0.67 U.K. 4.25 4.50 5.25 4.10 3.83 3.58 Switzerland 0.25 0.25 1.50 0....
AI summary The document presents a table comparing central bank policy rates and 10-year government bond yields across various countries, including the U.S., Japan, the U.K., Switzerland, Canada, and Australia, along with foreign exchange rate forecasts. It includes historical data and consensus forecasts for the next 3, 6, and 12 months.
Interest Rate Forecasts Percent Per Annum Average For Quarter _ Avg. For(Q-Q % Change) Blue Chip Short-Terr n Inte ermediate- Term Lo ng-Term- Qtr ( SAAR) Financial Forecasts 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 A. B. C. D. E. Panel Members...
AI summary The text presents interest rate forecasts from various financial institutions, including J.P. Morgan Chase, Naroff Economics LLC, Scotiabank Group, and Bank of America, across different time horizons such as short-term, intermediate-term, and long-term. The data includes rates for federal funds, prime rates, SOFR, treasury bills, bonds, and other economic indicators like GDP and price indices.
Interest Rate Forecasts Perd ent Per Annum - - Average F or Quart er - Avg. For (Q-Q % Change ) Blue Chip Short-Ter m Int emediate-1 erm Lo ng-Term- Qtr ( SAAR) Financial Forecasts 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 A. B. C. D. E. Panel M...
AI summary The document presents interest rate forecasts from various financial institutions, including J.P. Morgan Chase, Scotiabank Group, Bank of America, Barclays, Goldman Sachs & Co., and KPMG. The data includes short-term, intermediate-term, and long-term interest rates, along with economic indicators such as GDP and price indices.
1. a. At what FOMC meeting will the next fed funds rate (FFR) cut occur? Jun 2025 3% Jul 2025 16% Sep 2025 42% Later 39% The next move is more likely to be a hike 0% b. How much will the next cut be? 25 bps 87% 50 bps 13% c. By how much wi...
AI summary The text presents a survey on expectations regarding the Federal Open Market Committee (FOMC) meeting and the Federal Funds Rate (FFR) in 2025. It indicates that the next FFR cut is expected to occur in September 2025, with a 25 basis point (bps) cut being the most likely outcome, and a total FFR target decline of 56 bps expected for the year.
's first quarter. The growth by transfer payments over the 21 quarter span was much faster than the comparably measured growth rates of 6.1% for current-dollar GDP and 5.8% for wage and salary income. In stark contrast, during the 21 quart...
AI summary Transfer payments grew significantly faster than wage and salary incomes over a 21-quarter period, but slowed to match GDP growth rates by the end of 2019. This analysis highlights the divergent trends in government spending and income growth.
JUNE 2, 2025 ◼ BLUE CHIP FINANCIAL FORECASTS ◼ 15 Average For The Year Five-Year Averages 2026 2027 2028 2029 2030 2031 2027-2031 2032-2036 1. Federal Funds Rate CONSENSUS 3.4 3.2 3.2 3.2 3.1 3.1 3.2 3.1 Top 10 Average 3.7 3.5 3.4 3.4 3.4...
AI summary The document presents financial forecasts for various interest rates, including the Federal Funds Rate, Prime Rate, SOFR, and Treasury Bill Yields, from 2026 to 2036. It includes consensus estimates, top and bottom 10 averages for each year, highlighting trends and ranges in interest rates over time.
Databank: 2025 Historical Data 3-Mo. Treasury Bill Rate (%) 5.45 5.44 5.47 5.44 5.46 5.51 5.43 5.30 4.92 4.72 4.62 4.39
AI summary The text presents historical data for the 3-Month Treasury Bill Rate in 2025, showing a range of rates from 4.39% to 5.51% across different months.
N-8NSPML (NSEB) RIR 1 to 44 - Redacted
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NSPML Responses to Nova Scotia Energy Board Information Requests 1 Request IR-03: 2 3 IR-2 to IR-31 Reference Exhibit N-1 Pages 4 -29 4 5 Page 7 6 NSPML states: "The global and local vessel markets are constantly changing in terms of 7 ava...
AI summary NSPML responds to a request regarding risks associated with vessel and equipment availability for submarine cable inspections. NSPML acknowledges limited market power to influence local availability and relies on industry adjacencies and proactive procurement strategies to mitigate costs. Reliance on foreign vessels could lead to higher costs and complexity.
NON-CONFIDENTIAL 1 Request IR-07: 2 3 IR-2 to IR-31 Reference Exhibit N-1 Pages 4 -29 4 5 Page 9 6 NSPML states: "Another current material uncertainty relates to geo-political risks such as 7 unpredictable tariffs which have been impacting...
AI summary NSPML highlights concerns about geopolitical risks, including American tariffs, affecting its European-based contracts and global supply chains. NSPML is not directly impacted but notes potential indirect effects on suppliers. NSPML is not aware of how these risks are being addressed in NS Power's upcoming rate application.
REDACTED For context, NS Power's actual 2024 annual revenue requirement was ~$1.5 billion compared to NSPML's ~$161 million. Approximately 89% of NSPML's annual Assessment is fixed financing related costs, with 11% or ~$22 million represen...
AI summary The text compares NS Power's and NSPML's revenue requirements and O&M costs, highlighting NSPML's reliance on fixed financing and the potential impact of OM&G cost variances. It references a table showing approved and actual O&M costs from 2020 to 2024.
13 2026 Base Month Assessment 2026 FLG2 Total Jan-26 13,250,000.00 13,250,000.00 Feb-26 13,250,000.00 13,250,000.00 Mar-26 13,250,000.00 13,250,000.00 Apr-26 13,250,000.00 13,250,000.00 May-26 13,250,000.00 21,129,903.37 34,379,903.37 Jun-...
AI summary The text presents a table outlining monthly assessments and totals for 2026, with a notable increase in May and November. It also references NSPML's responses to information requests from the Nova Scotia Energy Board, indicating regulatory oversight and transparency measures.
1.1 Definitions In this Agreement, including the recitals and, subject to Section [1.2(h)](#page-88-0) , in the Schedules: " A&R Effective Date " has the meaning set forth in the commencement of this Agreement; " A&R ML-JDA " has the meani...
AI summary This section defines key terms used in the agreement, including Affiliate, Agreement, Annual Maintenance Plan, and Applicable Law. It outlines the scope and meaning of these terms within the context of the agreement and its schedules.
Contractor pursuant to an O&M Contract; " Nalcor Group " has the meaning set forth in Section [12.2](#page-128-3) ; " Nalcor IP " means the Nalcor Background IP and the Nalcor Foreground IP; " Nalcor Rights " has the meaning set forth in S...
AI summary The text defines key terms and entities related to an O&M contract and intellectual property rights in a regulatory proceeding involving Nalcor Group, Emera, and other parties. It outlines the scope of O&M activities, IP rights, and tax-related obligations.
- (e) Currency Unless otherwise indicated, all dollar amounts referred to in this Agreement (including the Schedules) are in lawful money of Canada. - (f) Trade Meanings Terms and expressions that are not specifically defined in this Agree...
AI summary This section outlines the definitions and interpretations of key terms in the agreement, including currency, trade meanings, statutory references, and time calculations. These provisions ensure clarity and consistency in the application of the agreement.
1.6 Inter-Relationship with Original JOA Effective as of the A&R Effective Date, this Agreement amends and restates the Original JOA in its entirety, it being understood and agreed that all liabilities and obligations under the Original JO...
AI summary This section discusses how the amended agreement relates to the original JOA, stating that it restates the original agreement in its entirety and that existing obligations and liabilities from the original JOA remain in effect, with certain obligations defined by Sanction being adjusted as per the new agreement.
omptly reimburse Emera for such Taxes to the extent not so offset; and - (vii) nothing shall obligate or cause a Party to pay or be liable to pay any Tax for which it is exempt under Applicable Law.
AI summary This section outlines the obligations related to the reimbursement of taxes, specifying that Emera should be promptly reimbursed for taxes not offset, and clarifies that no party is obligated to pay taxes for which they are exempt under applicable law.
5.8 Invoicing and Payment (a) Invoices - Unless otherwise provided in this Agreement with respect to specific payments, the calendar month is the standard period for invoicing amounts payable by a Party (the " Payor ") to the other Party (...
AI summary Section 5.8 outlines invoicing procedures between parties, specifying that invoices must be issued by the Payee to the Payor on or before the 15th of each month for the preceding month's charges, along with supporting documentation for verification.
5.9 Not Create Encumbrances Emera shall keep the Maritime Link free and clear of any and all Encumbrances other than Permitted Encumbrances which may arise (i) under paragraphs (e) , (f) and (g) of the definition of Permitted Encumbrances,...
AI summary Emera is required to keep the Maritime Link free of encumbrances, except for permitted ones, and must notify Nalcor and discharge any encumbrances upon becoming aware of them.
7.2 Emera Liability after Transfer Date Prior to the Transfer Date Nalcor shall be granted unlimited access to the Maritime Link for the purposes of audit and inspection. Emera shall not be liable for any undiscovered issues after the Tran...
AI summary This section outlines Emera's liability for Maritime Link O&M costs after the Transfer Date, limiting it to unpaid costs prior to the Transfer Date and costs necessary to ensure the Required Condition, provided Nalcor has given notice and resolved any disputes.
9.2 Coverages, Limits, Deductibles and Exclusions In each case, the insurance shall provide for coverages, limits, deductions and exclusions and other terms and conditions as may be appropriate for the operation of the Transmission Assets,...
AI summary The insurance coverage for Transmission Assets must include appropriate coverages, limits, deductibles, and exclusions, considering factors such as risk values, third-party liabilities, commercial availability, industry practices, and the financial ability of the parties to self-insure.
9.5 Lender Requirements Each Party shall cooperate fully with the other Party and shall assist the other Party in complying with obligations imposed by lenders relating to insurance coverage provided pursuant to this Article 9 .
AI summary This section outlines the requirement for each party to cooperate with the other in meeting lender-imposed obligations related to insurance coverage under Article 9.
11.1 Emera Events of Default Except to the extent excused as a result of an event of Force Majeure in accordance with [Article 8](#page-121-1) , the occurrence of one or more of the following events shall constitute a default by Emera unde...
AI summary This section defines the conditions under which Emera would be in default under the agreement, including failure to pay, breaches of specific sections, legal actions against assets, and insolvency events.
11.2 Nalcor Remedies upon Emera Event of Default - (a) General Upon the occurrence of an Emera Default and at any time thereafter, provided Nalcor is in material compliance with its obligations under this Agreement and provided a right, re...
AI summary This section outlines Nalcor's remedies in the event of an Emera Event of Default, including the right to exercise all available legal remedies, the discharge of encumbrances, and the recovery of losses incurred due to the default. These remedies are cumulative and not limited by the exercise or non-exercise of any one right.
11.4 Emera Remedies upon Nalcor Event of Default (a) General - Upon the occurrence of a Nalcor Default and at any time thereafter, provided Emera is in material compliance with its obligations under this Agreement and provided a right, rem...
AI summary Section 11.4 outlines Emera's remedies in the event of a Nalcor Event of Default. Emera may exercise any available rights, remedies, or recourse under the agreement or at law, and may recover all losses, including legal costs, incurred due to the default.
12.4 Indemnification Procedure - (a) Generally Each Party (each, an " Indemnitor ") shall indemnify and hold harmless the other Party and the other Persons as set forth in Section [12.1](#page-128-2) or [12.2](#page-128-3) , as applicable,...
AI summary This section outlines the indemnification procedure, detailing how parties must notify each other of claims, the right of the indemnitor to participate in or assume the defense of third-party claims, and the timeline for such actions.
13.1 Limitations and Indemnities Effective Regardless of Cause of Damages Except as expressly set forth in this Agreement, the indemnity obligations and limitations and exclusions of liability set forth in [Article 12](#page-128-1) and [Ar...
AI summary This section outlines that indemnity obligations and liability limitations from Articles 12 and 13 apply to all claims, regardless of the cause of damages, except as specifically stated in the agreement.
13.2 No Consequential Loss Notwithstanding any other provision of this Agreement, in no event shall Nalcor or any other member of the Nalcor Group be liable to Emera or any other member of the Emera Group, nor shall Emera or any member of...
AI summary Section 13.2 of the agreement limits liability for consequential, incidental, indirect, or punitive damages between Nalcor and Emera groups, except for damages awarded to third parties, which are deemed direct. Lost revenues or profits from energy or capacity transactions are excluded from consequential damages but must be established under applicable law.
- (e) O&M Owned IP Held in Trust - Each of Emera and Nalcor shall hold the O&M Owned IP owned by such Party, at any given time, in trust for the mutual benefit of Emera and Nalcor, and such Party shall have no right to license the O&M Owne...
AI summary This section outlines the licensing and trust arrangements for O&M Owned IP between Emera and Nalcor, ensuring mutual benefit and restricting unauthorized use or licensing to third parties without agreement.
1.1 Definitions In this Agreement, including the recitals: " Affiliate " means, with respect to any Person, any other Person who directly or indirectly Controls, is Controlled by, or is under common Control with, such Person, provided howe...
AI summary This section defines key terms in the agreement, including 'Affiliate,' 'Agreement,' and 'Applicable Law.' It establishes that the NL Crown is not considered an affiliate of Nalcor and outlines the scope of the agreement and legal framework governing it.
erring to the Regular Business Hours of Nalcor, and 9:00 a.m. through 5:00 p.m. local time on Business Days in Halifax Regional Municipality, NS, when referring to the Regular Business Hours of Emera; " Regulatory Approval " means any appr...
AI summary The text defines key terms used in the regulatory proceeding, including 'Regulatory Approval,' 'Tax,' 'Term Sheet,' 'third party,' and 'Voting Shares.' These definitions provide clarity on the legal and regulatory context of the agreement and proceedings.
1.2 Construction of Agreement (a) Interpretation Not Affected by Headings, etc. - The division of this Agreement into articles, sections and other subdivisions, the provision of a table of contents and the insertion of headings are for con...
AI summary This section outlines the construction and interpretation of the agreement, emphasizing that headings and subdivisions are for convenience and not for legal interpretation. It provides definitions and rules for interpreting terms, including singular/plural usage, the meaning of 'including', and statutory references.
4.1 General - (a) Dispute Resolution Procedure The Parties agree to resolve all Disputes pursuant to the dispute resolution procedure set out in Schedule "[ ]" to the Assigned Agreement (the " Dispute Resolution Procedure "). - (b) Undispu...
AI summary This section outlines the dispute resolution procedure and payment obligations under the Assigned Agreement. It states that all disputes will be resolved according to the procedure in Schedule '[ ]' and that undisputed amounts must be paid in full by the party with the payment obligation.
5.1 Notices Notices, where required herein, shall be in writing and shall be sufficiently given if delivered personally or by courier or sent by electronic mail or facsimile transmission, directed as follows: To Assignor: [] To Assignee: [...
AI summary This section outlines the requirements for delivering notices in writing, specifying acceptable methods such as personal delivery, courier, email, or facsimile. It also defines when notices are considered delivered and allows parties to update their contact information by providing notice to the other parties.
5.8 Severability If any provision of this Agreement is determined by a court of competent jurisdiction to be wholly or partially illegal, invalid, void, voidable or unenforceable in any jurisdiction for any reason, such illegality, invalid...
AI summary This section outlines the severability clause of the agreement, stating that if any provision is deemed illegal or unenforceable, the rest of the agreement remains valid, and the parties must negotiate a replacement provision with similar effects.
d orders of and the terms of all judgments, orders and decrees issued by any Authorized Authority by which such Person is bound or having application to the property, transaction or event in question; " Authorized Authority " means, in rel...
AI summary The text defines key terms including 'Authorized Authority' and 'Authorized Purpose' in the context of regulatory oversight. It also introduces 'Available Energy' as Nalcor Generated Energy excluding New Generation Development Energy, which is excess to the Energy quantities required by Nalcor and its Affiliates.
Master Agreement " means the Emera Master Agreement or the Nalcor Master Agreement, as required by the context; " Effective Date " has the meaning set forth in the commencement of this Agreement; " Emera " has the meaning set forth in the...
AI summary This text defines key terms and provisions of a Master Agreement involving Emera, including definitions related to Emera's rights, defaults, and hydrology events, as well as references to specific sections of the agreement.
to Sectio[n 3.6](#page-23-0) ; " PPA " has the meaning set forth in Section [5.7(b)(i)](#page-30-0) ; " Parties " means the parties to this Agreement and " Party " means one of them; " Peak Hours " means the hours of a day that are deemed...
AI summary The text defines key terms and acronyms used in a legal or regulatory agreement, including definitions related to energy delivery, rates, and operational procedures. It includes references to sections of the document and specific entities involved.
2.7 NSPI Third Party Solicitations Nothing in this Agreement will prevent NSPI from issuing solicitations and entering into contracts with third parties instead of, or in addition to, issuing NSPI Solicitations. In conducting any such soli...
AI summary NSPI is allowed to solicit third parties for energy services without restriction, and Nalcor is not required to respond to these solicitations unless they are part of a compliant NSPI Solicitation as outlined in the Agreement.
at its option and in its sole discretion, postpone and reschedule the delivery of Energy that it is otherwise obligated to deliver to NSPI pursuant to this Agreement in accordance with the following:
AI summary The text outlines a provision allowing a party to postpone and reschedule energy delivery to NSPI at its sole discretion, in accordance with specific terms outlined in the agreement.
5.2 Resolution Process If any Settled Forecast predicts that the actual amount of Energy to be made available to NSPI over the Term will be less than the Commitment (such shortfall amount, in MWh, as adjusted annually based on each success...
AI summary This section outlines the resolution process for handling variances in energy availability forecasts. If a shortfall is predicted, Nalcor and Emera must follow specific sections to address the variance, with the date of acceptance or final determination referred to as the Variance Trigger Date. The Annual Variance Amount is calculated based on the forecasted variance and remaining contract years.
- (ii) If a subsequent Settled Forecast predicts that future Annual Variance Amounts will be reduced from the then-current Annual Variance Amount, then, notwithstanding the predicted reduction, Emera may elect to remain obliged to continue...
AI summary The text outlines provisions regarding variance amounts between Nalcor and Emera in relation to NSPI. It specifies conditions under which Emera may continue to provide variance amounts despite forecast reductions and defines Nalcor's responsibility for any excess variance amounts. The delivery points for energy supplied under these variance amounts are also detailed.
10.2 Remedies upon Nalcor Event of Default - (a) General - Upon the occurrence of a Nalcor Default and at any time thereafter, provided Emera or NSPI, as applicable, is in material compliance with its obligations under this Agreement and p...
AI summary This section outlines the remedies available to Emera or NSPI in the event of a Nalcor Event of Default. It states that they may exercise all available rights, remedies, or recourse, and that these rights are cumulative. Additionally, they may recover all losses incurred due to the default, including legal costs.
10.3 Emera Events of Default Except to the extent excused by a Forgivable Event, the occurrence of one or more of the following events shall constitute a default by Emera under this Agreement (an " Emera Default "): - (a) Emera fails to pa...
AI summary This section outlines the conditions under which Emera may be in default under the Agreement, including failure to pay, breach of terms, false representations, cessation of business, and insolvency events. Curing periods and exceptions are specified.
10.4 Remedies upon Emera Event of Default - (a) General - Upon the occurrence of an Emera Default and at any time thereafter, provided Nalcor or NSPI, as applicable, is in material compliance with its obligations under this Agreement and p...
AI summary This section outlines the remedies available to Nalcor or NSPI in the event of an Emera Event of Default. It states that they may exercise any available rights, remedies, or recourse, and that these rights are cumulative. Additionally, they may recover all losses incurred due to the default, including legal costs.
10.5 NSPI Events of Default Except to the extent excused by a Force Majeure, the occurrence of one or more of the following events shall constitute a default by NSPI under this Agreement (a " NSPI Default "): - (a) NSPI fails to pay or adv...
AI summary This section outlines the conditions under which Nova Scotia Power Inc. (NSPI) would be in default under the agreement, including failure to pay, breach of terms, false representations, cessation of business, and insolvency events.
10.6 Remedies upon NSPI Event of Default - (a) General - Upon the occurrence of a NSPI Default and at any time thereafter, provided Nalcor or Emera, as applicable, is in material compliance with its obligations under this Agreement and pro...
AI summary This section outlines the remedies available to Nalcor or Emera in the event of a NSPI Event of Default. It allows them to pursue all available legal and equitable remedies, and permits the recovery of all losses, including legal costs, incurred due to the default.
consent shall not be unreasonably withheld), the Indemnitor shall not make any admission of liability regarding or enter into any settlement or compromise of or compromise any Third Party Claim that would lead to liability or create any fi...
AI summary This section outlines the indemnification procedure, specifying that neither party can admit liability, settle, or compromise a third-party claim without the other's consent. It also defines the maximum liability of the indemnitor in relation to a third-party claim if the indemnified party fails to consent to a settlement offer.
13.2 No Consequential Loss Notwithstanding any other provision of this Agreement, in no event shall Nalcor or any other member of the Nalcor Group be liable to Emera or any other member of the Emera Group, or to NSPI or any other member of...
AI summary This section limits liability for consequential, incidental, indirect, or punitive damages between the Nalcor Group, Emera Group, and NSPI Group. It clarifies that lost revenues or profits from energy transactions are not considered consequential damages, but must still be proven under applicable law.
18.2 Prior Agreements This Agreement supersedes all prior communications, understandings, negotiations and agreements between the Parties, whether oral or written, express or implied with respect to the subject matter hereof (including the...
AI summary This section states that the current Agreement replaces all prior agreements between the Parties, including the Initial EAA, which has terminated as of the Effective Date. The Parties confirm they have not relied on any other agreements or representations outside of what is explicitly stated in this Agreement.
18.5 Expenses of Parties Except as otherwise provided herein, each Party shall bear its own costs and expenses in connection with all matters relating to this Agreement, including the costs and expenses of its legal, tax, technical and oth...
AI summary This section outlines that each party is responsible for their own costs and expenses related to the agreement, including legal, tax, technical, and other advisory costs.
18.12 No Waiver Any failure or delay of any Party to enforce any of the provisions of this Agreement or to require compliance with any of its terms at any time during the Term shall not affect the validity of this Agreement, or any part he...
AI summary This section of the agreement outlines that failure or delay in enforcing provisions does not constitute a waiver of rights. Any consent or approval given by a party is limited to its express terms and does not alter the obligations of the parties involved.
ARTICLE ONE: GENERAL DEFINITIONS Add, amend or replace the following definitions, as applicable, as follows: - 1.3 "Bankrupt" is amended by adding the phrase, "which is not demonstrated to be without merit and is not vacated within three (...
AI summary The document amends definitions in Article One, including 'Bankrupt', 'Business Day', 'Claims', 'Contract Price', 'Credit Rating', 'Interest Rate', and 'Letter(s) of Credit', with specific changes to legal and financial terms.
ARTICLE FIVE: EVENTS OF DEFAULT; REMEDIES . - 5.1(a) "Events of Default" the phrase "three (3) Business Days" is changed to "five (5) Business Days". - 5.1(b) "Events of Default" the word "intentionally" is added before "false or misleadin...
AI summary This section modifies the definition of 'Events of Default' by extending the grace period from three to five Business Days, adding language regarding intentional or willful blindness, and introducing a new provision for a Letter of Credit Default. It also amends the declaration of an Early Termination Date to include additional remedies for the Non-Defaulting Party.
- 1.24 "Gains" means, with respect to any Party, an amount equal to the present value of the economic benefit to it, if any (exclusive of Costs), resulting from the termination of a Terminated Transaction, determined in a commercially reas...
AI summary This section defines key terms related to financial and contractual obligations, including 'Gains,' 'Losses,' 'Interest Rate,' and 'Letter(s) of Credit.' It outlines the calculation of economic benefits and losses, interest rates based on published rates, and requirements for letters of credit, including credit rating thresholds and cost responsibilities.
ARTICLE TWO: TRANSACTION TERMS AND CONDITIONS - 2.1 Transactions. A Transaction shall be entered into upon agreement of the Parties orally or, if expressly required by either Party with respect to a particular Transaction, in writing, incl...
AI summary Article Two outlines the terms and conditions for transactions between the Parties, including how transactions are entered into, governed, and confirmed. It specifies that transactions can be oral or written, and that the Master Agreement forms an integrated agreement with tariffs and other arrangements.
- (b) Credit Assurances. If Party A has reasonable grounds to believe that Party B's creditworthiness or performance under this Agreement has become unsatisfactory, Party A will provide Party B with written notice requesting Performance As...
AI summary This section outlines credit assurance and collateral requirements under the agreement. If Party B's creditworthiness is deemed unsatisfactory, Party A may request performance assurance, and failure to comply may trigger an event of default. Additionally, Party A may request collateral adjustments based on the Termination Payment and Party B's Independent Amount.
ARTICLE SIX: PAYMENT AND NETTING Section 6.2 ("Timeliness of Payment") is amended by deleting the words "later of the twentieth (20th) day of each month, or tenth (10th)" and inserting in their place the words "twentieth (20th)".
AI summary Section 6.2 of Article Six is amended to change the timeliness of payment from the later of the 20th day of each month or the 10th day to simply the 20th day.
(d) Balancing Fee (i) For each Balancing Year in respect of which Emera elects a Nominated Rate greater than zero MW, Emera shall pay to Nalcor a fee in respect of the Nominated Rate (the " Balancing Fee ") calculated as follows:
AI summary The text outlines the requirement for Emera to pay a Balancing Fee to Nalcor for each Balancing Year when Emera elects a Nominated Rate greater than zero MW.
Nominated Rate \ X where X equals $87,600 multiplied by the Escalation Factor. If the Effective Date of this Agreement is not January 1, resulting in a partial initial and final Balancing Year of the Term, the Balancing Fee shall be prorat...
AI summary The nominated rate is calculated as $87,600 multiplied by an escalation factor. The Balancing Fee is prorated for partial years and paid monthly, with adjustments based on the Consumer Price Index (CPI). If CPI data is unavailable, the most recent available data is used, with subsequent adjustments made upon CPI publication.
4.3 Time and Method of Payment Except with respect to a payment to be made pursuant to Section 2.2(d)(ii) , which Emera shall make in accordance with that Section, within 30 days after its receipt of a properly prepared invoice, accompanie...
AI summary Section 4.3 outlines the time and method of payment, requiring the Payor to pay the Payee within 30 days of receiving a properly prepared invoice, less any disputed amounts or required withholdings, using electronic funds transfer or another mutually agreed method.
4.5 Resolution of Objections The Parties shall make good faith efforts to resolve any disputed amounts by mutual agreement within 60 days after the Payee's receipt of a notification of disputed amounts pursuant to Section 4.2 . If the disp...
AI summary Parties must attempt to resolve disputed amounts within 60 days through mutual agreement. If unresolved, the dispute may be submitted for resolution under the Dispute Resolution Procedure, with the Payor required to pay any determined amount within five business days after receiving an invoice.
4.7 Interest on Overdue Amounts Any amount not paid by either Party when due, including any charge disputed by the Payor pursuant to Section 4.2 and subsequently determined to be valid, which shall be considered to have been due on its ori...
AI summary This section outlines the interest rate applied to overdue payments, including disputed charges and overpayment refunds, at the Prime Rate plus three percent per annum, calculated daily from the due date until payment.
5.9 Withholding Tax If required by the Applicable Law of any country having jurisdiction, a Party shall have the right to withhold amounts, at the withholding rate specified by such Applicable Law, from any compensation payable pursuant to...
AI summary This section outlines the requirements for withholding tax under the agreement. If required by applicable law, a party may withhold amounts from compensation and must provide documentation to the other party regarding such withholdings and their payment to the appropriate authority.
7.1 Emera Events of Default Except to the extent excused by a Forgivable Event, the occurrence of one or more of the following events shall constitute a default by Emera under this Agreement (an " Emera Default "): - (a) Emera fails to pay...
AI summary This section outlines the conditions under which Emera may be in default under the agreement, including failure to pay, breach of terms, false representations, cessation of business, and insolvency events. The default may be cured within specified timeframes depending on the nature of the breach.
7.2 Nalcor Remedies upon Emera Event of Default - (a) General - Upon the occurrence of an Emera Default and at any time thereafter, provided Nalcor is in material compliance with its obligations under this Agreement and provided a right, r...
AI summary This section outlines Nalcor's remedies in the event of an Emera Event of Default, including the right to recover losses, seek equitable relief, and utilize dispute resolution procedures with specific directions for future disputes.
7.4 Emera Remedies upon Nalcor Event of Default - (a) General - Upon the occurrence of a Nalcor Default and at any time thereafter, provided Emera is in material compliance with its obligations under this Agreement and provided a right, re...
AI summary Section 7.4 outlines Emera's remedies in the event of a Nalcor Event of Default. It states that Emera may exercise any available legal or equitable remedies and recover all losses incurred due to the default, including legal costs.
9.3 Indemnification Procedure - (a) Generally - Each Party (each, an " Indemnitor ") shall indemnify and hold harmless the other Party and the other Persons as set forth in Section 9.1 or 9.2 , as applicable, (individually and collectively...
AI summary This section outlines the indemnification procedure between parties, requiring prompt notice of claims and specifying that failure to provide notice does not relieve the Indemnitor of its obligations unless it is materially prejudiced.
10.2 No Consequential Loss Notwithstanding any other provision of this Agreement, in no event shall Nalcor or any other member of the Nalcor Group be liable to Emera or any other member of the Emera Group, nor shall Emera or any member of...
AI summary Section 10.2 of the agreement limits liability for consequential, incidental, indirect, or punitive damages between Nalcor and Emera groups. It specifies that such damages awarded to a third party are considered direct, actual damages between the parties. Lost revenues or profits are excluded from consequential damages.
12.2 Emera Assignment Rights (a) General - Emera shall not be entitled to assign all or any portion of its interest in this Agreement, any Claim or any other agreement relating to any of the foregoing (collectively, the " Emera Rights ") w...
AI summary Section 12.2 outlines the conditions under which Emera can assign its rights under the agreement. Emera must obtain Nalcor's prior written consent to assign its rights, except when assigning to an affiliate, provided certain conditions are met. A change in control of an affiliate may also require Nalcor's consent. Any unauthorized assignment is void.
"Assignee" means, an Affiliate of the Assignor; "Assignor" means applicable]; [Nalcor/Emera/NSPI or an Affiliate of Nalcor/Emera/NSPI, as " Authorized Authority " means, in relation to any Person, property, transaction or event, any (a) fe...
AI summary The text defines key terms such as 'Assignee' and 'Assignor', and provides a comprehensive definition of 'Authorized Authority', encompassing various governmental and regulatory bodies with jurisdiction over persons, property, transactions, or events.
" Nova Scotia Block " means: - (a) the Energy entitlement of Emera from the Muskrat Falls Plant to be taken on a calendar year basis (and pro-rated during the first and last calendar years of the Initial Term if necessary to reflect the da...
AI summary The document defines key terms related to the Nova Scotia Block, including Energy entitlement, Supplemental Energy, loss adjustments, and capacity entitlements, as well as schedules and definitions for Off-Peak and Peak Hours, and the meaning of 'Parties' and 'Person'.
- (e) Currency Unless otherwise indicated, all dollar amounts referred to in this Agreement (including the Schedules) are in lawful money of Canada. - (f) Trade Meanings Terms and expressions that are not specifically defined in this Agree...
AI summary This section outlines definitions and interpretive rules for the agreement, including currency, trade meanings, statutory references, schedule-defined terms, time calculations, and actions on non-business days.
1.6 Inter-Relationship with Original ECA Effective as of the A&R Effective Date, this Agreement amends and restates the Original ECA in its entirety, it being understood and agreed that all liabilities and obligations under the Original EC...
AI summary This section outlines how the amended agreement relates to the original ECA, noting that existing liabilities and obligations under the original ECA prior to the A&R Effective Date remain in effect, with certain obligations defined in relation to Sanction being adjusted as per the new agreement.
2.2 Title, Ownership Risk and Responsibility - (a) Title and ownership relating to the Energy sold by Nalcor to Emera hereunder will pass from Nalcor to Emera at the Delivery Point. - (b) Nalcor shall indemnify Emera pursuant to Article 13...
AI summary This section outlines the transfer of title and ownership of energy from Nalcor to Emera at the delivery point, and specifies indemnification responsibilities for both parties in case of claims related to energy generation, sale, delivery, and transmission.
red by Applicable Law to remit or pay Taxes which are Nalcor's responsibility hereunder, Emera shall first offset the amount of Taxes so recoverable from other amounts owing by it to Nalcor under this
AI summary This section outlines the procedure for handling taxes under the agreement, specifying that Emera must first offset recoverable taxes against other amounts owed to Nalcor before remitting or paying them.
3.2 Determination of Value for Tax Compliance Purposes - (a) Subject to the right of final determination as provided under Section 3.2(b) , the Parties agree to co-operate in determining a value for any property or service supplied pursuan...
AI summary This section outlines the process for determining the value of property or services provided under the Agreement for tax compliance purposes. It emphasizes cooperation between the Parties and specifies that the supplying or acquiring Party must determine a value in Canadian dollars for tax calculations when non-cash consideration is involved.
3.6 Cooperation to Minimize Taxes Each Party shall use reasonable efforts to implement the provisions of and to administer this Agreement in accordance with the intent of the Parties to minimize all Taxes in accordance with Applicable Law,...
AI summary The parties agree to cooperate in minimizing taxes under the agreement, using reasonable efforts and prudent strategies. Any rebates, refunds, or recoveries obtained must be shared between the parties to ensure fairness.
5.3 Provisions to be Included in Insurance Policies All insurance procured by Nalcor pursuant to this Article 5 shall: - (a) name Emera, its affiliates as appropriate, and their respective directors, officers and employees as additional in...
AI summary This section outlines the insurance policy provisions that Nalcor must include when procuring insurance under Article 5. It ensures Emera and its affiliates are named as additional insureds, specifies insurance cost responsibility, notice requirements, policy duration, and includes a waiver of subrogation.
5.5 Evidence of Insurance If requested by Emera, Nalcor shall provide satisfactory evidence of insurance pursuant to this Article 5 in the form of a certificate of insurance when obtained and thereafter annually upon renewal of such insura...
AI summary This section requires Nalcor to provide satisfactory evidence of insurance to Emera upon request, in the form of a certificate of insurance, when obtained and annually upon renewal.
8.1 Nalcor Events of Default Except to the extent excused by a Forgivable Event, the occurrence of one or more of the following events shall constitute a default by Nalcor under this Agreement (a " Nalcor Default "): - (a) Nalcor fails to...
AI summary This section outlines the conditions that constitute a Nalcor Default under the agreement, including failure to pay, breaches of terms, false representations, cessation of business, insolvency events, and government actions. These defaults are subject to cure periods and exceptions like Forgivable Events.
8.2 Emera Remedies upon Nalcor Event of Default - (a) General Upon the occurrence of a Nalcor Default and at any time thereafter, provided Emera is in material compliance with its obligations under this Agreement and provided a right, reme...
AI summary This section outlines Emera's remedies in the event of a Nalcor Event of Default, including the right to recover losses, dispute resolution procedures, and adjustments for compensation paid by NL. It emphasizes that Emera's rights are cumulative and not limited by the exercise of any one remedy.
8.4 Nalcor Failure to Deliver - Curable - (a) Compensation for Failure to Deliver If Emera is in material compliance with its obligations under this Agreement, the Maritime Link Transmission Service Agreements and the NS Transmission Utili...
AI summary This section outlines the compensation mechanisms for Nalcor's failure to deliver Block B Undelivered Energy to Emera. It includes compensation through energy delivery, GHG credits, and monetization of compensation energy if delivery is not feasible. It also defines dispute resolution procedures and confirms these remedies as Emera's sole recourse.
8.6 Nalcor's Failure to Deliver – Not Curable - (a) Compensation Event If Nalcor does not comply with its obligations to deliver the Nova Scotia Block to Emera in accordance with this Agreement for all or the remainder of the Initial Term,...
AI summary This section outlines the conditions under which Nalcor's failure to deliver the Nova Scotia Block to Emera constitutes a Compensation Event, including scenarios such as non-compliance, Government Action, breaches of the NLDA, and discontinuation of MFP Development Activities.
8.8 Emera Events of Default Except to the extent excused by a Forgivable Event, the occurrence of one or more of the following events shall constitute a default by Emera under this Agreement (an " Emera Default "): - (a) Emera fails to pay...
AI summary This section outlines the conditions that would constitute an Emera Default under the agreement, including failure to pay, breach of terms, false representations, cessation of business, insolvency events, and defaults under specific agreements. These defaults are subject to cure periods, except in cases of insolvency.
8.9 Nalcor Remedies upon Emera Event of Default - (a) General Upon the occurrence of an Emera Default and at any time thereafter, provided Nalcor is in material compliance with its obligations under this Agreement and provided a right, rem...
AI summary This section outlines Nalcor's remedies available in the event of an Emera Event of Default. It specifies that Nalcor may recover all losses incurred due to such defaults, including legal costs, and that dispute resolution procedures should include methodologies for expediting future similar disputes.
8.10 Suspension and Deemed Delivery of the Nova Scotia Block - (a) Emera Cross Default and Set Off If Emera or an Affiliate of Emera is in default, after any applicable cure period, under either of the Maritime Link Transmission Service Ag...
AI summary This section outlines the conditions under which Nalcor may suspend the delivery of the Nova Scotia Block if Emera or its affiliate is in default. The Retained Nova Scotia Block will be deemed delivered, and Nalcor will have no further obligations. The value of the Retained Block is calculated based on the Cross Default Amount and average market prices.
9.1 Invoices Unless otherwise provided in this Agreement with respect to specific payments, the calendar month is the standard period for invoicing amounts payable by a Party (the " Payor ") to the other Party (the " Payee ") hereunder. On...
AI summary This section outlines the invoicing process between the Payor and Payee under the agreement, specifying the calendar month as the standard invoicing period and requiring the Payee to provide invoices and supporting documentation by the 15th of each month.
9.7 Interest on Overdue Amounts Any amount not paid by either Party when due, including any charge disputed by the Payor pursuant to Section 9.2 and subsequently determined to be valid, which shall be considered to have been due on its ori...
AI summary The section outlines that overdue amounts, including disputed charges and overpayment refunds, will accrue interest at the Prime Rate plus 3% annually from their original due date until paid, with interest calculated daily and payable on demand.
11.2 Emera Assignment Rights - (a) General Emera shall not be entitled to assign all or any portion of its interest in this Agreement, any Claim or any other agreement relating to any of the foregoing (collectively, the " Emera Rights ") w...
AI summary Section 11.2 outlines the conditions under which Emera may assign its rights under the agreement, requiring Nalcor's prior written consent except in cases involving assignments to affiliates. A change in control of an affiliate may also trigger the need for Nalcor's consent. Unauthorized assignments are void.
11.3 Change of Ownership or Control – Nova Scotia Block Notwithstanding anything else in this Agreement, if any of the Nalcor assets required to deliver the Nova Scotia Block become beneficially owned or beneficially Controlled by any Pers...
AI summary This section outlines that if Nalcor's assets related to the Nova Scotia Block are acquired by another entity, Emera will still receive the Nova Scotia Block as per the agreement, and guarantees for Nalcor's obligations remain in effect.
11.5 Nalcor Option If any of the assets or arrangements contemplated by the Formal Agreements held by Emera or any Affiliate of Emera become beneficially owned or beneficially Controlled by any government or government-Controlled electrica...
AI summary This section outlines Nalcor's right to acquire ownership of the Maritime Link if Emera or its affiliates are acquired by a government or government-controlled electrical utility competitor of Nalcor. The transfer would occur following notice from Nalcor and negotiation of terms.
12.2 Procedure for Inter-Party Claims (a) Notice of Claims - Subject to and without restricting the effect of any specific Notice requirement in this Agreement, a Party (the " Claiming Party ") intending to assert a Claim against the other...
AI summary This section outlines the procedure for inter-party claims under the agreement, requiring prompt notification of claims, a 20-business-day investigation period, and resolution through agreement or dispute resolution procedures if unresolved.
13.1 Nalcor Indemnity Nalcor shall indemnify, defend, reimburse, release and save harmless Emera and its Affiliates and their respective directors, officers, managers, employees, agents and representatives, and the successors and permitted...
AI summary Nalcor is required to indemnify Emera and its affiliates against claims arising from the gross negligence or wilful misconduct of any member of the Nalcor Group in connection with Nalcor's obligations under the agreement.
14.2 No Consequential Loss Notwithstanding any other provision of this Agreement, in no event shall Nalcor or any other member of the Nalcor Group be liable to Emera or any other member of the Emera Group, nor shall Emera or any member of...
AI summary Section 14.2 of the agreement limits liability for consequential, incidental, indirect, or punitive damages between Nalcor and Emera groups. It specifies that lost revenues or profits from energy or capacity transactions are not considered consequential damages but must be established under applicable law.
14.3 Liquidated Damages To the extent that any damages required to be paid under Article 8 of this Agreement are expressly stated to be liquidated damages, the Parties have computed, estimated and agreed upon the amount of such damages as...
AI summary This section outlines the agreement between the parties regarding liquidated damages under Article 8. The damages are computed as a reasonable forecast of anticipated losses, not a penalty, and are intended to protect both parties from uncertainties.
17.2 Prior Agreements Except for the Assignment of Energy and Capacity Agreement dated January 28, 2013 among Emera, NSP Maritime Link Incorporated and Nalcor, this Agreement supersedes all prior communications, understandings, negotiation...
AI summary This section outlines that the current agreement supersedes all prior communications and agreements between the parties, except for the Assignment of Energy and Capacity Agreement dated January 28, 2013. It emphasizes that no other representations, warranties, or conditions affect this agreement beyond what is explicitly stated.
CALCULATION OF SUPPLEMENTAL ENERGY - 1. Supplemental Energy, if any, is a component of the Nova Scotia Block and is calculated in accordance with the provisions of this Schedule 4 . - 2. Prior to each submission to the UARB made before Fir...
AI summary This section outlines the calculation of Supplemental Energy as part of the Nova Scotia Block, including the methodology for determining unit energy costs, the role of financial models, and the timeline for final determination. Adjustments to amortization periods and financial inputs are specified, along with procedures for scheduling and delivering Supplemental Energy.
IN WITNESS WHEREOF , the Parties have executed this Agreement as of the date first above written. Assignor By: Name: Title: By: Name: Title: I/We have authority to bind the [company]/[corporation] Assignee By: Name: Title: By: Name: Title:...
AI summary The text presents a form for the execution of an agreement, including sections for Assignor, Assignee, and Consenting Party, with placeholders for names, titles, and company information. It also includes a note indicating the need to add Nalcor or Emera in the event of prior assignments.
NSPML Responses to Nova Scotia Energy Board Information Requests 1 Concentric agrees that many electric transmission companies recover their revenue 10 economic growth in the first quarter was stronger than expected and short-term business...
AI summary NSPML responds to Nova Scotia Energy Board information requests regarding economic growth and model assumptions. The response indicates that the July Monetary Policy Report does not significantly alter assumptions in Concentric's models, which are more influenced by long-term government bond yields than short-term economic data. Inflation remains a concern, with CPI Trim-mean at 3.0% in July 2025.
N-11Evidence - Sean Cleary BCC
26 passages
NOVA SCOTIA ENERGY BOARD (M12394) IN THE MATTER OF: THE PUBLIC UTILITIES ACT and the MARITIME LINK ACT and the MARITIME LINK COST RECOVERY PROCESS REGULATIONS - and - IN THE MATTER OF: AN APPLICATION by NSP MARITIME LINK INCORPORATED for a...
AI summary This proceeding involves NSP Maritime Link Incorporated's application for approval of its 2026 revenue requirement and cost assessment under the Public Utilities Act and the Maritime Link Cost Recovery Process Regulations.
1.2 Purpose of Testimony My evidence is prepared in my role as a consultant and expert witness for Board Counsel to the NSEB. In this capacity, I have been asked to prepare expert testimony in relation to the application by NSPML (M12394)....
AI summary The expert witness provides testimony for the Nova Scotia Energy Board in the application by NSPML (M12394), emphasizing the duty to present fair, objective, and non-partisan opinion evidence.
3.3 DCF Estimates In addition to the sampling issues noted above, the short-term earnings per share (EPS) growth rates used by Concentric in its DCF analysis are based upon the average of Value Line, Zacks, S&P Capital IQ Pro and Seeking A...
AI summary The text discusses concerns with Concentric's DCF estimates, noting that the growth rates used are based on upwardly biased sell-side analyst forecasts. It also highlights that the growth rates exceed expected nominal GDP growth, which the Alberta Utilities Commission has previously rejected as unreasonable for utilities in mature markets.
asts of 3.6% for Canada and 4.5% for the U.S. are close to the September 29, 2025 yields on 30-year Canada and U.S. bonds of 3.63% and 4.71%, so the difference in this particular situation is minimal. Concentric proceeds to estimate an app...
AI summary The text discusses Concentric's use of the CAPM model to estimate appropriate betas for its North American proxy group, which includes U.S. utilities. The author argues that U.S. utilities are not suitable comparators for Canadian utilities due to higher business risk and betas. Adjusted betas are criticized as being upwardly biased, and the use of historical beta estimates is deemed important for accuracy.
4.1.1 GDP Growth and Inflation Figure 1 below shows real GDP growth (%) and total inflation as measured by the Consumer Price Index (" CPI ") over the 1962 to 2024 period. The graph shows that real GDP growth has generally been in the 2-6%...
AI summary The text discusses real GDP growth and inflation in Canada from 1962 to 2024, highlighting a general range of 2-6% GDP growth with exceptions during recessions and the 2020 pandemic. It notes a decline in average GDP growth to 2.3% post-1991, aligning with the Bank of Canada's 2% inflation target. Volatility also decreased over time, as reflected in reduced standard deviation.
papers for Figure 2 are appended as Attachment C to my evidence. A-UTILITY YIELDS (January 1, 2003-August 29, 2025) 4 5 6 7 8 FIGURE 2 Source: Bloomberg. A-Utility Yield Gov't Yield Spread Following a year of strong performance during 2021...
AI summary The text discusses the performance of Canadian and U.S. stock markets from 2021 to 2024, highlighting returns, average annual returns, and P/E ratios. It references Bloomberg as the source for the data and includes references to working papers and figures.
The Bank of Canada discusses several factors affecting global economic growth in its July 2025 MPR, with global trade uncertainties being the most important. For example, on page 34 of the Report, the Bank notes: Global growth has slowed s...
AI summary The Bank of Canada's July 2025 MPR highlights ongoing trade policy shifts and US tariffs as major factors affecting global economic growth. Despite high tariffs and trade uncertainties, the global economy has remained resilient, with financial conditions improving and confidence rising. The Bank forecasts that tariff-related uncertainty will ease by 2026.
4.2.2 Canada's Outlook Under its "current tariff scenario," the Bank predicts real GDP growth in Canada during 2025 of 1.3% (down from 1.8% in its January 2025 MPR). Table 3 shows that the Bank further expects real GDP growth of 1.1% in 20...
AI summary The Bank of Canada forecasts real GDP growth in Canada to be 1.3% in 2025 and 1.1% in 2026 under its current tariff scenario, with growth expected to rise to 1.8% in 2027. This outlook is influenced by ongoing trade uncertainty and tariffs, which are expected to keep economic activity on a permanently lower path.
TABLE 4 CPI FORECASTS – CANADA (2025-2027) 2025 2026 2027 RBC 2.1 2.0 CIBC World Markets 2.2 1.7 BMO Capital Markets 2.3 2.0 Desjardins 2.1 2.1 TD Bank 2.2 2.1 Scotiabank 2.1 2.1 OECD 2.1 2.1 IMF 2.0 2.1 Average 2.14 2.03 Max 2.3 2.1 Min 2...
AI summary Table 4 presents CPI forecasts for Canada from 2025 to 2027, with estimates provided by various financial institutions and organizations such as RBC, CIBC, BMO, and the OECD. The Bank of Canada's projections are also included, showing a range of expectations for inflation over the forecast period.
4.3.2 Interest Rate Levels Figure 8 shows 10-year and long-term bond yields in Canada since January of 2004, which have moved in tandem for the most part, with a correlation coefficient of 0.97 over the period. The graph also shows the spr...
AI summary The text discusses historical and forecasted bond yield trends in Canada, focusing on 10-year and 30-year yields, their correlation, and the break-even inflation rate (BEIR). It notes the narrowing spread between the two rates and the BEIR's alignment with the Bank of Canada's inflation targets. Forecasts from financial institutions are compared to actual yields as of September 2025.
TABLE 5 10-YEAR AND 30-YEAR GOVERNMENT OF CANADA YIELD FORECASTS 10-year yields 30-year yields Q4-25 Q2-26 Q4-26 Q4-25 Q2-26 Q4-26 RBC 3.4 3.45 3.5 3.6 3.65 3.7 CIBC World Markets 3.2 3.35 3.75 3.6 3.7 3.9 BMO Capital Markets 3.4 3.3 3.25...
AI summary Table 5 presents 10-year and 30-year government of Canada yield forecasts from various financial institutions, including RBC, CIBC, BMO, Desjardins, TD Bank, and Scotiabank, with averages and ranges provided for each quarter.
TABLE 6 CAPITAL MARKET SUMMARY STATISTICS – (1938-2024) 1938-2024 (%) CPI Cdn. Stocks Long Canadas T-bills(91-day) U.S. Stocks (in CAD) Average 3.64 11.09 5.91 4.46 13.11 Median 2.73 11.08 4.03 3.66 13.83 Std. Dev. 3.30 16.11 9.44 4.14 17....
AI summary Table 6 provides a summary of capital market statistics from 1938 to 2024, including average, median, standard deviation, and geometric mean for various financial indicators such as CPI, Canadian stocks, long canadas, T-bills, and U.S. stocks. The data sources include the Canadian Institute of Actuaries, Bloomberg, and CANSIM, with the 2024 CPI estimate provided by the Bank of Canada.
5.1 Some Notes on Allowed ROEs This section provides evidence demonstrating that allowed ROEs have not declined adequately in response to the reduction in the cost of capital that utilities' have experienced, as long-term government bond y...
AI summary This section shows that allowed ROEs for utilities have not decreased sufficiently in response to the drop in long-term government bond yields and A-rated utility bond yields over the past two decades. The spreads between allowed ROEs and these measures have increased significantly, with NS Power's ROE-RF and ROE-A yield spreads rising by 22% and 18%, respectively, since 2004.
5.2.2 Estimating the Risk-Free Rate (RF) Technically, the CAPM is a one-period model, and the government T-bill rate should be used as the appropriate RF, since it is virtually guaranteed and does not fluctuate. However, it is common pract...
AI summary The text discusses estimating the risk-free rate (RF) using the Capital Asset Pricing Model (CAPM), noting that while T-bill rates are technically appropriate, long-term government bond yields are more commonly used for multi-period estimates. The author uses a 3.63% long-term government yield as of September 29, 2025, citing its accuracy compared to forecasts.
4 TABLE 7 5 HISTORICAL AND FORECAST EQUITY RETURNS Source Horizon Canada U.S. World / Developed Markets (excl. U.S.) HISTORICAL RETURNS 1. Historical Data (Cleary Evidence, Table 6, Section 4.3.3) Historical: 1938- Real: 6.3% GA 2024 7.5%...
AI summary Table 7 presents historical and forecast equity returns for Canada, the U.S., and global developed markets (excluding the U.S.). Historical real returns for Canada range from 5.6% to 7.5%, with an average of 6.6%. Forecast nominal returns vary, with sources suggesting ranges from 3.45% to 8.6% over different time horizons.
verage of 0.35, or even 0.45, rather than toward 1.0, as is done with published adjusted betas provided by services such as Bloomberg and Value Line. Ibid., pages 14-15. For example, Appendix C shows that Mr. Hevert's historical average Ca...
AI summary The text discusses estimating beta for utility companies, comparing Canadian and U.S. beta estimates, and referencing historical data from Alberta's 2018 GCOC decision. It suggests a reasonable range for beta estimates between 0.30 and 0.60, with a central tendency around 0.35 to 0.45.
TABLE 8 BETA ESTIMATES – December 31, 2024 Firm Weekly Betas Monthly Betas Dec 31 / 24 2017-2024 Dec 31 / 24 2017-2024 CANADIAN SAMPLE Average Average Algonquin Power & Utilities Corp. 1.132 0.656 0.536 0.373 Canadian Utilities Ltd. 0.596...
AI summary Table 8 provides beta estimates for Canadian and US utility firms as of December 31, 2024, showing weekly and monthly betas for different time periods. The data is sourced from Bloomberg and referenced in Attachment L.
TABLE 9 CAPM ESTIMATES – 2025 Estimate RF (%) MRP (%) Beta Spread Adjust. (%) Debt Cost Spread (%) Financial Flex. (%) Ke (%) CAPM Best Estimate 3.63 5.5 0.45 -0.14 0.40 0.50 6.9%
AI summary Table 9 presents CAPM estimates for 2025, including key parameters such as the risk-free rate, market risk premium, beta, spread adjustment, debt cost spread, financial flexibility, and the cost of equity. The best estimate for the cost of equity (Ke) is 6.9%.
en using DCF models. For example, a study by Easton and Sommers[34](#page-54-1) estimates the "optimism" bias in analysts' growth forecasts inflates final DCF cost of equity estimates by an average of Source: Easton, Peter D., and Gregory...
AI summary The text discusses the impact of overly optimistic analyst forecasts on DCF models used in utility cost of equity estimates, citing studies by Easton, Sommers, and Woolridge. It highlights that these forecasts often lead to unrealistic growth assumptions for mature utilities, exceeding expected GDP growth rates.
TABLE 10 DCF INPUT ESTIMATES – 2018-2024 FIGURES Panel A (Canadian Sample)_ 2018-2024 Avg DY 2018-2024 Avg Payout 2018-2024 Avg ROE Average 5.17 76.55 7.51 Median 5.41 78.65 7.06 Max 6.70 88.69 12.30 Min 3.91 62.60 -0.07 Panel B (U.S. Samp...
AI summary Table 10 presents DCF input estimates for 2018-2024, comparing Canadian and U.S. samples with averages, medians, maximums, and minimums for dividend yield, payout ratio, and return on equity.
4 TABLE 11 5 SINGLE STAGE DDM ESTIMATES Implied g Implied Ke (2018-24) (2018-24 g and 7-year DY) PANEL A: Canadian Sample Average 1.76 7.02 Median 1.51 7.00 Mid-Point of Average and Median Mid-Point g = 1.64% Ke = 7.01% PANEL B: U.S. Avera...
AI summary Table 11 presents single-stage DDM estimates for Canadian and U.S. samples, showing average and median growth rates (g) and cost of equity (Ke). The table uses dividend yield and growth estimates to calculate Ke using the dividend discount model formula.
5.4 Bond Yield Plus Risk Premium (BYPRP) Estimates The BYPRP approach adds a risk premium (generally in the 2-5% range) to the yield on a firm's outstanding publicly-traded long-term bonds. This risk premium is not to be confused with the...
AI summary The document discusses the Bond Yield Plus Risk Premium (BYPRP) method for estimating the cost of equity, explaining that it adds a risk premium to a company's bond yield. It contrasts this with the CAPM and highlights the method's advantages, such as overcoming technical issues with beta estimates and its use by a significant percentage of financial analysts and Canadian CFOs.
Using Actual Yields versus Economists' Forecasts I have consistently argued that using Consensus yield forecasts to as a proxy for future 30-year Canada yields has led to an upward bias relative to the subsequent actual yields that prevail...
AI summary The text argues that using Consensus yield forecasts for future 30-year Canada yields leads to an upward bias compared to actual yields. It suggests that using the prevailing 30-year rate at the start of the period, such as the actual yield on September 30th or November 30th, provides a more accurate starting point for the risk-free rate. The use of 10-year yield forecasts is also criticized due to the need for additional estimates of the spread between 10 and 30-year yields, which can vary and introduce errors.
TABLE A1.1 STATISTICS FOR LONG-TERM CANADA BOND YIELD FORECASTS (2011-2023) Difference using Sept. 30 Actual Yields Difference using Nov. 30 Actual Yields Difference using September Consensus Forecast Difference using November Consensus Fo...
AI summary Table A1.1 presents statistical analysis of long-term Canada bond yield forecasts from 2011 to 2023, comparing differences using actual and consensus forecasts from September and November. The table includes metrics such as average, median, maximum, minimum, standard deviation, and mean squared error, with t-tests indicating statistical significance at the 1% level.
at the following statistics for Charts 20 and 21 are correct: Chart 20 (weekly data): Average – 0.38 / Median – 0.43 / Max – 0.71 Chart 21 (monthly data): Average – 0.34 / Median – 0.37 / Max – 0.61 Notice that the reported averages here o...
AI summary The text discusses historical beta estimates for Canadian and U.S. utilities over a 22-year period, showing that beta values rarely approach 1.0. It references evidence from Dr. Villadsen (2016) and Mr. Hevert (2018), and cites Sikes (2022) and Michelfelder and Theodossiou (2013), who argue that adjusting betas toward 1.0 is inappropriate for utility companies.
Discounted Cash Flow (DCF) Growth Estimates During every proceeding that I have been involved in, utilities' experts have relied upon analyst growth estimates despite the well-known concerns about the overly optimistic nature of such forec...
AI summary The text discusses the over-optimism in analyst growth estimates used by utilities, citing research by Easton and Sommers and evidence from Mr. Coyne's Alberta GCOC 2018 rebuttal. It highlights that sell-side analyst forecasts are generally overly optimistic, while buy-side analysts provide more realistic and lower growth estimates.
N-17Alberta Utilities Commission
Decision 27084-D02-2023
30 passages
1 Decision summary - 1. In this generic cost of capital (GCOC) decision, the Alberta Utilities Commission adopts a formulaic approach, utilizing the equity risk premium (ERP) methodology, to calculate the fair rate of return on equity (ROE...
AI summary The Alberta Utilities Commission (AUC) adopts a formulaic approach using the equity risk premium (ERP) methodology to determine the fair rate of return on equity (ROE) for Alberta's electric and gas utilities in 2024 and beyond. The deemed equity ratios from the 2018 GCOC decision remain unchanged, and a mandatory five-year review of cost-of-capital parameters is instituted.
- Explore potential formula-based approaches for determining the ROE and identify a preferred formulaic method. This approach was intended to enhance transparency and predictability, ultimately saving both customers and Alberta utilities s...
AI summary The document outlines objectives for exploring formula-based approaches to determine the Rate of Return on Equity (ROE) to enhance transparency and reduce costs associated with litigated proceedings. It also mentions participation by various utilities and organizations in the proceeding.
3 Fair return standard 17. The legislation that governs the Commission requires that it fix just and reasonable rates for the utilities it regulates. 9 The Commission is guided in this task by well-developed case law on the meaning of just...
AI summary The document discusses the legal framework governing the fixing of just and reasonable rates for utilities, emphasizing the fair return standard. It references key legal cases, including Northwestern Utilities v Edmonton (City) , and relevant legislation such as the Public Utilities Act and Electric Utilities Act .
4 Relevant changes in macroeconomic and capital market conditions since the 2018 GCOC decision - 28. In this section, the Commission considers changes in economic and market conditions, both global and domestic, since the 2018 GCOC decisio...
AI summary The Commission discusses macroeconomic and capital market changes since the 2018 GCOC decision, noting the impact of the COVID-19 pandemic on global and domestic conditions. It highlights central bank policies, including quantitative easing and tightening, and observes ongoing economic and market instability.
4.1 Inflation - 38. Three utility witnesses (D. D'Ascendis, Dr. Villadsen and J. Coyne) identified high inflation as a primary risk to the economy in general, and to utility capital costs in particular. In their argument, ATCO-Fortis-Apex...
AI summary The document discusses the impact of high inflation on utility capital costs, with three utility witnesses highlighting inflation as a major risk. They note that inflation peaked in 2022 and remains above the Bank of Canada's target range, leading to increased interest rates and quantitative tightening, which contributes to market instability and higher capital costs for utilities.
4.3 Bond yields - 46. All witnesses agreed that as the BoC policy interest rate has increased, so too have bond yields – both corporate and government. There was also agreement among witnesses that the spread between A-rated utility bond y...
AI summary Witnesses agreed that bond yields have increased with the BoC policy interest rate. They also noted a wider credit spread between A-rated utility bonds and government bonds in the U.S. and Canada since 2018, with some attributing this to investor concerns and economic uncertainty.
4.4 Capital markets - 48. Over the course of the pandemic and into the recovery from it, Canadian and U.S. capital markets experienced volatility and, at times, counterintuitive results. - 49. The utility witnesses argued that capital mark...
AI summary The text discusses the impact of the pandemic and its aftermath on Canadian and U.S. capital markets, highlighting volatility and investor uncertainty. Utility witnesses and experts like D. D'Ascendis and Dr. Villadsen provide analyses on changes in volatility indices, while Dr. Cleary notes that current market indicators suggest a return to normalcy.
5.1 The need for a formulaic approach to setting ROE 51. Over the past two decades, the Commission and its predecessors have employed various methodologies to set the approved ROE and deemed equity ratios. Prior to 2004, the 44 Exhibit 270...
AI summary The document discusses the need for a formulaic approach to setting the rate of return on equity (ROE) over the past two decades, noting that the Commission and its predecessors have used various methodologies, often determining parameters on a case-by-case basis for each utility.
ital hearings. 70 - 71. Based on the submissions of parties, the Commission adopts an ERP-based two-factor formulaic approach similar to the one utilized by the OEB. Specifically, the Commission approves the following two-factor formula to...
AI summary The Commission adopts a two-factor formulaic approach for calculating the Rate of Return on Equity (ROE) for 2024 and future test periods. The formula incorporates adjustments for changes in long-term Government of Canada bond yields and utility bond yield spreads. The base ROE is set at 9.0%, with equal weighting for each adjustment factor.
5.4 Periodic reviews of formulaic approach 81. Employing a formulaic approach to determine annual changes in the ROE requires periodic evaluation to ensure that the ROE produced by the formula continues to be in alignment with the standard...
AI summary The document discusses the periodic evaluation of a formulaic approach to determine annual changes in the Rate of Return on Equity (ROE), emphasizing the need to ensure alignment with standards for achieving a fair return.
6.1 Overview 97. The Commission must determine a fair return for the utilities under its jurisdiction as part of fixing just and reasonable rates. In Section 5 of this decision, the Commission determines that it will adopt a formulaic appr...
AI summary The Commission outlines its approach to determining a fair return for utilities under its jurisdiction, focusing on the formulaic method for setting the rate of return on equity (ROE) starting in 2024. The notional ROE serves as an input to the approved formula, and will be used to inform cost-of-capital parameters and other factors in the calculation.
5 The Commission specifically noted that parties could present evidence that certain companies in the comparator group should not be given any weight at all. 96 - 102. The Commission is not persuaded by the argument that certain of the rep...
AI summary The Commission rejected the argument that certain representative utilities in the comparator group are not comparable due to their parent corporations' involvement in unregulated sectors, noting that a screening criterion already excludes utilities with less than 80% of assets tied to rate-regulated activities.
6.3 Measure of the risk-free rate - 105. The risk-free rate is an important component of ERP models, such as the CAPM, and the formulaic approach approved by the Commission in Section 5. ERP-based models are based on the fundamental assump...
AI summary The document discusses the risk-free rate as a key component in ERP models like CAPM, emphasizing its role in determining the rate of return on equity. The Commission has accepted a 3.10% risk-free rate, derived from long-term government bond yields, and its use in adjusting ROE and estimating notional ROE. Parties agree on using 30-year Canada bond yields as the standard measure.
Witness (sponsoring party) Recommendation Data source Yield Dr. Villadsen (ATCO/Apex/Fortis) Use projection of the 10-year Canada bond yield plus the long-term average maturity premium between 10-year and 30-year Canadian bonds.100 Consens...
AI summary The document presents various recommendations from witnesses on how to calculate the 30-year government bond yield for regulatory purposes. Each witness provides a different method, including using historical averages, forecasts, and current yields, with varying results and data sources.
100 Exhibit 27084-X0469, PDF page 71. 101 Consensus Economics publishes long-term [10-year] interest rate projections twice a year, in April and in October. Transcript, Volume 2, page 114, lines 2-6. 102 Exhibit 27084-X0469, PDF page 41. 3...
AI summary The document references various exhibits and evidence related to interest rate projections, including long-term 10-year and 30-year Canadian government bond yields, and the use of these rates in estimating the notional ROE and implied ERP. Multiple parties provided empirical and capital market resources supporting the alignment of asset useful life with the term to maturity of the risk-free rate.
6.4.1 The CAPM - 120. The CAPM is based on the relationship between the returns investors expect to receive on their investments in an asset and the systematic (or non-diversifiable) risk faced by that asset. The model is premised on a rel...
AI summary This section explains the Capital Asset Pricing Model (CAPM), which relates expected returns on investments to systematic risk, measured by beta. The CAPM formula is presented, and it outlines the variables involved, including the risk-free rate, market return, and beta. The text mentions that various data sources and forecasting methods can be used to estimate these variables.
Table 3. CAPM recommendations by party Witness (sponsoring party) Risk-free rate (%) MERP (%) Beta Flotation allowance (%) ROE (%) 2.88 7.64 0.61 0.50 8.38 (Canadian utility group) D. D'Ascendis (AltaLink/EPCOR)122 4.03 7.80 0.79 0.50 10.8...
AI summary Table 3 presents recommendations from various parties regarding the Capital Asset Pricing Model (CAPM), including risk-free rates, MERP, Beta, flotation allowance, and ROE. Different entities provided varying values for these parameters, with some citing specific utility groups for their ROE calculations.
Beta - 125. Beta captures the sensitivity of a stock's returns to the market's returns. It is a measure of systematic risk – general risk that cannot be diversified away. In effect, beta measures the contribution made by an individual stoc...
AI summary The text discusses the calculation of beta, a measure of systematic risk, and how it is used in the context of this proceeding. Academic and empirical evidence is cited, with utilities using betas from data providers like Value Line and Bloomberg. Specific exhibits and decisions are referenced, including beta values and adjustments such as the A-rated Canadian utility bond yield spread.
Market equity risk premium - 133. Parties to the proceeding used a variety of approaches to quantify the MERP. - 134. D. Madsen's MERP of 6.08 per cent is an average of three MERP estimates: the implied MERP provided by Kroll of 6.0 per ce...
AI summary The document discusses various methods used by parties in the proceeding to quantify the market equity risk premium (MERP), including D. Madsen's average of 6.08%, Dr. Cleary's adoption of 5.0%, and Dr. Villadsen's use of historical averages from Duff & Phelps.
Current stock price Dr. Villadsen (ATCO/Apex/Fortis) 152 Concentric (ENMAX) 153 147. To estimate the current stock price input to the DCF model, most parties calculated the average closing price over a period ranging from 15 to 90 trading...
AI summary The document discusses the estimation of the current stock price for use in a DCF model, with most parties using an average closing price over 15 to 90 trading days ending in late 2022 and early 2023. The Commission accepts this approach, provided the averaging period does not exceed 90 days and the quarterly dividend is adjusted by the chosen growth rate.
Dividend 149. The experts adopted slightly different approaches to how they calculated dividends. Most took the annualized dividend at year-end 2022 for each utility and then increased it quarterly or semi-annually by a fixed percentage of...
AI summary Experts used different methods to calculate dividends, with most using annualized dividends from 2022 and adjusting them quarterly or semi-annually based on forecast growth rates. Dr. Cleary provided multiple dividend yield calculations, including trailing 12-month and average five-year and seven-year yields.
Dividend growth rate - 150. Several of the experts relied on analysts' forecasts of company-specific dividend and earnings per share (EPS) growth rates. 160 D. Madsen also considered data from other sources and both he and Dr. Cleary 161 c...
AI summary The document discusses debates around the use of dividend growth rates in discounted cash flow analysis, with experts like D. Madsen and D. D'Ascendis disagreeing on whether these rates can exceed GDP growth. The Commission has historically rejected rates above GDP but acknowledges that utility earnings growth can sometimes exceed it, though factors like market barriers may limit this.
Dividend growth rate 160. Most of the experts calculated the multi-stage DCF in a similar manner, and many of the variables are calculated in the same way as for the constant growth DCF calculations, other than the dividend growth rate. As...
AI summary The document discusses various methods used by experts to calculate the multi-stage DCF model, focusing on differences in forecasting dividend growth rates. Approaches include using the FERC method, the H-Model, and adjusting growth rates based on current and forecast EPS. Experts have raised concerns about certain methodologies, such as Dr. Cleary's H-Model, due to issues with sustainable growth rates and real utility growth.
- 187. Ideally, the values for these adjustment factors should be determined through an empirical exercise based on the strength of the relationship between interest rates and ERPs observed by analysing historical data. To that effect, the...
AI summary The Commission discusses the determination of adjustment factors for changes in GoC bond yield and utility bond yield spread. It notes that statistical analyses were inconclusive, with most parties deferring to OEB's 0.5 adjustment factors, while Concentric recommended 0.5 based on their regressions. Dr. Cleary suggested 0.75, but the Commission is not persuaded by this.
6.5.3 Base and test year values for utility bond yield spread - 195. In general terms, the utility bond yield spread is calculated as a difference between the utility bond yield and GoC bond yield of the same maturity. - 196. Consistent wi...
AI summary The utility bond yield spread is calculated as the difference between the yield on 30-year A-rated Canadian utility bonds and the 30-year GoC bond yield. Dr. Villadsen recommended using a broad bond index, such as the Bloomberg 30-year A-rated Canadian Utility Bond Index, and suggested using an average yield over a historical period to account for pricing fluctuations. The base spread at the end of November 2022 was 1.63 per cent.
Parameter Parameter values Parameter values applied in this applied in this decision – taxable decision – taxable distribution transmission utilities utilities Parameter values applied in 2018 GCOC decision – taxable distribution utilities...
AI summary The Commission updated parameters by reviewing actual parameters from 2022 and 2021, as detailed in the 2023 and 2022 Rule 005 filings submitted in this proceeding. Key parameters include embedded average debt rate, ROE, income tax rate, depreciation, and CWIP.
238. In Table 10 below, the Commission presents additional calculations based on the information presented in Table 9. There is no simple average or weighted average for gas transmission utilities presented separately in Table 10 because t...
AI summary The Commission provides additional calculations in Table 10 based on data from Table 9, focusing on gas transmission utilities, with ATCO Pipelines being the only gas transmission utility. The table includes details on invested capital, debt cost, depreciation, and mid-year CWIP for various utilities and years.
Embedded average debt rate 241. The simple average of the embedded average debt rates is 4.17 per cent based on the 2022 Rule 005 reports, and 4.15 per cent based on the 2023 Rule 005 reports. The simple average of the distribution utiliti...
AI summary The Commission determines that using 4.20% as the embedded average debt rate is reasonable, despite being slightly higher than the overall average from 2023 Rule 005 reports, as it leads to lower EBIT and FFO coverage ratios, ensuring a conservative approach.
0 bps in order to offset the removal of $10 million from Fortis's revenue requirement is compensating Fortis indirectly for what the Commission does not have the authority to do directly, that is, to compensate Fortis for costs attributabl...
AI summary The text discusses the Commission's decision to deny FortisAlberta the recovery of costs from its customers related to rural electrification associations (REAs) using FortisAlberta's distribution system. The Court of Appeal upheld this decision, stating that FortisAlberta's customers should not subsidize REA members.
Appendix 3 – Summary of Commission directions This section is provided for the convenience of readers. In the event of any difference between the directions in this section and those in the main body of the decision, the wording in the mai...
AI summary The Commission directs ATCO Utilities to calculate the average utility bond yield spread for February 2023 using Dr. Villadsen's methodology and submit it by October 18, 2023, for use in the approved formula as the base utility bond yield spread.
N-21UARB APPROVAL SHEET Replace L6513/Upgrade Line Terminals
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This project was originally submitted to the NSUARB on on January 13, 2015. The NSUARB provided its Decision on August 28, 2015 and did not approve it at that time. NS Power is resubmitting this project for the Board's approval as part of...
AI summary The project was initially submitted to the NSUARB in January 2015 but was not approved. NS Power is now resubmitting it as part of the General Rate Application for the Board's approval.
Original Submission $22,067,148 Current Amount $18,626,428 Variance ($3,440,719) Submitted on behalf of NOVA SCOTIA POWER INCORPORATED Approved on behalf of NOVA SCOTIA UTILITY AND REVIEW BOARD January 21, 2022 Authorized Signatory Lia Mac...
AI summary The document shows a variance between the original submission of $22,067,148 and the current approved amount of $18,626,428 for a regulatory proceeding, with a difference of $3,440,719. It includes signatures from Nova Scotia Power and the Nova Scotia Utility and Review Board.
This project was originally forecasted as a subsequent submission in the 2014, 2015, 2016, and 2017 ACE Plans. It was referenced in the 2018 ACE Plan with an updated budget of $19,251,601. It is now being submitted for approval as part of...
AI summary The project, initially planned in multiple ACE Plans from 2014 to 2017, was referenced in the 2018 ACE Plan with an updated budget and is now being submitted for approval as part of the Company's General Rate Application. It is now complete with final costs.
This project was originally submitted to the NSUARB on April 24, 2015. The UARB provided its Decision on September 24, 2015 and did not approve it at that time. NS Power is resubmitting this project for the Board's approval as part of the...
AI summary The project was initially submitted to the NSUARB in 2015 but was not approved. NS Power is now resubmitting the project as part of its General Rate Application for the Board's approval.
Original Submission $3,957,530 Current Amount $2,691,017 Variance ($1,266,513) Submitted on behalf of NOVA SCOTIA POWER INCORPORATED Approved on behalf of NOVA SCOTIA UTILITY AND REVIEW BOARD January 21, 2022 Authorized Signatory DATE DATE...
AI summary The document shows a variance between the original submission of $3,957,530 and the current amount of $2,691,017, with a difference of $1,266,513. It includes a table with signatures from Nova Scotia Power Incorporated and the Nova Scotia Utility and Review Board.
This project was originally submitted to the NSUARB on November 14, 2014. The NSUARB provided its Decision on April 27, 2015 and did not approve the Project at that time. NS Power is resubmitting this project for the Board's approval as pa...
AI summary This project was initially submitted to the NSUARB in 2014 but was not approved. NS Power is now resubmitting it as part of its General Rate Application for the Board's approval.
COST OF CAPITAL PREPARED FOR: NOVA SCOTIA POWER INC. BEFORE THE: NOVA SCOTIA UTILITY AND REVIEW BOARD SEPTEMBER 2025 © 2025 Concentric Energy Advisors, Inc. All rights reserved. [www.ceadvisors.com](http://www.ceadvisors.com/)
AI summary This document is prepared for Nova Scotia Power Inc. before the Nova Scotia Utility and Review Board in September 2025, focusing on the cost of capital. It is produced by Concentric Energy Advisors, Inc.
B. John P. Trogonoski - 5 My name is John P. Trogonoski, and I am employed by Concentric as an Assistant Vice President. 6 My business address is 293 Boston Post Road West, Suite 500, Marlborough, MA 01752. - 7 I provide expert testimony b...
AI summary John P. Trogonoski is an expert witness in finance, economics, and public policy for utility regulatory agencies. He has testified over 30 times in U.S. and Canadian jurisdictions on topics like rate of return, revenue requirement, and rate design. He previously worked for the Colorado Public Utilities Commission.
C. Executive Summary We have prepared this report on behalf of Nova Scotia Power Inc. ("NSPI" or the "Company"), a wholly-owned subsidiary of Emera Inc. Specifically, we have been asked to provide an estimate of the cost of capital for NSP...
AI summary This executive summary outlines the preparation of a report by Nova Scotia Power Inc. on behalf of Emera Inc. to estimate the cost of capital for rate-making purposes, focusing on return on equity and capital structure. The report relies on standard analytical tools and past regulatory decisions.
A. The Fair Return Standard 5 The principles surrounding the concept of a "fair return" for a regulated company (Fair Return 6 Standard) were established by the Supreme Court of Canada in Northwestern Utilities v. City of Edmonton (1929) S...
AI summary The Fair Return Standard, established by the Supreme Court of Canada in Northwestern Utilities v. City of Edmonton and reaffirmed in Ontario (Energy Board) v. Ontario Power Generation Inc. , ensures that regulated utilities can recover their operating and capital costs through rates, allowing them to earn a return equivalent to what investors could earn from comparable investments.
3 C. Central Bank Policies 4 The policies of central banks directly impact interest rates, inflation, and the pace of economic 5 growth. All of these factors influence the cost of capital for utilities. In 2022, central banks in both 6 the...
AI summary Central bank policies in 2022, particularly in the U.S. and Canada, led to tighter monetary policies due to high inflation and strong employment. These policies followed extreme accommodation during the pandemic and have had mixed effects on inflation and economic growth.
ing price stability for Canadians. [17](#page-49-0) In its January 2025 Monetary Policy Report, the BOC underscored several key messages about the outlook for the Canadian economy: [18](#page-49-1) - 1) In�lation in Canada has been around...
AI summary The Bank of Canada's January 2025 Monetary Policy Report highlights that inflation has stabilized around 2%, with shelter prices remaining elevated but easing. The economy shows signs of modest growth, and inflation is expected to stay near the 2% target. The labour market remains soft, and wage growth has slowed.
14 1. Interest Rates Bond yields are the most direct indicator of the cost of capital, as they reflect the level of interest required to compensate debt (but not equity) investors in the current market. Bond yields are a direct input to th...
AI summary The text discusses changes in Canadian government bond yields, particularly for 10- and 30-year bonds, and their impact on the cost of capital. It notes that yields increased significantly after July 2020, with spreads between bond terms reflecting economic and inflation uncertainty. The UARB approved a settlement agreement in NSPI's previous GRA in February 2023, and utility bond yields have remained relatively stable since then.
22 Bloomberg series BVCAUA30 and GCAN30YR as of March 31, 2025 (BVAL Yield Curve 30 Year replaces C29530Y Index, which was discontinued on 2/2/24). 1 Figure 10: Long-Term Forecast for 10-Year Government Bond Yields[23](#page-54-1) 2026 202...
AI summary The document presents a long-term forecast for 10-year government bond yields in Canada and the U.S. for the years 2026 to 2034, with projected rates ranging from 3.2% to 3.8%. The data is sourced from Bloomberg series BVCAUA30 and GCAN30YR as of March 31, 2025.
3 The yield curve measures the difference between long-term and short-term interest rates. It is 4 not a direct input to the models, but the cost of capital for utilities is more determined by long-5 term rates, so it is an indicator. A fl...
AI summary The text discusses the yield curve, its relationship to long-term and short-term interest rates, and its implications for utility cost of capital. It explains how a flat or inverted yield curve often precedes a recession, while a steepening curve indicates economic expansion. The analysis includes bond spread data from January 2023 to March 2025 for Canada and the U.S.
3 3. Business/Investor Confidence 4 One indicator of market risk is investor confidence. Greater confidence ordinarily translates to a 5 greater willingness to invest and a lower cost of capital. In Canada, the Richard Ivey School of 6 Bus...
AI summary The document discusses business and investor confidence as an indicator of market risk, noting that higher confidence typically leads to increased investment and lower capital costs. It references the Richard Ivey School of Business's Purchasing Managers Index (PMI) in Canada, which shows business confidence trends, and mentions recent tariff announcements and their potential impact.
8 [Figure 1](#page-57-0)3 summarizes the country risk ratings for Canada and the U.S. as of August 2021. 9 Figure 13: Country Risk Ratings Canada U.S. Sovereign Risk Rating A AA Currency Risk Rating A A Banking Sector Risk Rating AA A Poli...
AI summary Figure 13 compares the country risk ratings of Canada and the U.S. as of August 2021, showing they are highly comparable. Allianz reports from January 2025 also rank both countries similarly at AA1, reinforcing this assessment.
15 F. Capital Market Conclusions Interest rates on government and utility bonds have remained about the same as when the UARB approved the settlement in NSPI's previous GRA. This indicates that despite the uncertainties in the economy, the...
AI summary The document discusses the stability of interest rates on government and utility bonds since the UARB approved the settlement in NSPI's previous GRA. It highlights long-term challenges for the utility industry, including climate change, decarbonization, and grid modernization, as well as emerging load growth from electrification and data centers. Economic forecasts and modeling approaches such as CAPM, Risk Premium, and DCF are referenced.
2. Dividend Yield As shown in equation [3], the dividend yield component of the DCF model is calculated as follows: [3] $$Y = D_0(1+0.5g)^1$$ One half year's growth rate is applied to the annual dividend rate to account for increases in qu...
AI summary The dividend yield component in the DCF model is calculated using an equation that applies half the annual growth rate to the dividend rate, ensuring that the expected dividend yield reflects the average over the next twelve months. Dividend yields for companies in proxy groups were calculated by dividing the annualized dividend by the average stock price over 90 trading days ending January 31, 2025, and adjusted by half the growth rate.
1 Figure 17: Utility Earnings, Dividend and GDP Growth Comparisons [1] Avg. EPS [2] Avg. DPS [3] [4] [5] Growth Growth CAGR Avg. EPS Growth Historical Historical GDP Growth Forecast Nominal GDP 2009-2024 2009-2024 2009-2024 Growth Forecast...
AI summary Figure 17 compares utility earnings, dividend, and GDP growth rates for Canadian and U.S. proxy groups from 2009 to 2024, showing average earnings per share (EPS), dividend per share (DPS), GDP growth, and forecasted growth rates.
1 Figure 18: Estimates of Nominal GDP Growth[43](#page-69-2) Source Canada U.S. Real GDP Growth 1.9% 1.9% Inflation 2.1% 2.2% Nominal GDP Growth 4.04% 4.14% 2 5. DCF Results
AI summary The text presents estimates of nominal GDP growth for Canada and the U.S., along with real GDP growth and inflation rates. It also references DCF results, suggesting the analysis of financial projections related to economic performance.
2026 2027 2028 Average Canada 3.2% 3.4% 3.5% 3.37% U.S. 3.7% 3.7% 3.7% 3.70% 9 With an average spread between 10-year and 30-year government bond yields of 30 basis points in Canada and 44 basis points in the U.S.,[45](#page-71-3) 10 the c...
AI summary The text presents inflation rate projections for Canada and the U.S. for the years 2026 to 2028, with an average spread between 10-year and 30-year government bond yields of 30 basis points in Canada and 44 basis points in the U.S.
12 Figure 21: Risk Free Rate Canada U.S. October 2024 Consensus Forecast Average 2026-2028 3.37% 3.70% Forecasts Average Daily Spread between 10-year and 30-year 0.30% 0.44% government bonds (last 10 years) Sum 3.67% 4.14% 13 2. Beta
AI summary Figure 21 presents the risk-free rate forecasts for Canada and the U.S., showing consensus forecasts and bond spreads for the years 2026-2028. The data highlights differences in expected rates between the two countries.
1 beta to revert toward the market mean of 1.0 over time. The betas used in our CAPM analyses for 2 the proxy groups are shown i[n Figure 22](#page-72-0) . 3 Figure 22: Value Line and Bloomberg Betas Value Line Bloomberg Canadian Group 0.8...
AI summary The text discusses the adjustment of betas in CAPM analyses, explaining that betas should revert toward the market mean of 1.0 over time due to statistical errors and empirical evidence. Adjustments are necessary to improve forecast accuracy and reflect investors' expectations of future risk.
3. Market Risk Premium ("MRP") Estimates of the MRP generally fall into two categories, ex-post (historical arithmetic average) and ex-ante (forward looking). The historical MRP is based on the arithmetic means of the equity market returns...
AI summary The document discusses the Market Risk Premium (MRP), distinguishing between ex-post and ex-ante estimates. It notes that historical MRP data for Canada and the U.S. are based on long-term government bond returns and equity market returns, and highlights the high correlation between the two countries' risk premiums due to economic integration.
Canada 5.68% United States 7.17% Average 6.43% We have previously used an average of forward-looking and historical MRPs in Canada, which was the approach taken by the BCUC in its September 2023 decision for FortisBC. In order to be consis...
AI summary The text discusses the use of forward-looking and historical Marginal Rate of Return (MRR) averages in Canada, referencing a decision by the British Columbia Utilities Commission (BCUC) in September 2023. It emphasizes consistency with recent approaches used elsewhere in Canada.
9 It is common practice for Canadian regulators to approve an adjustment for flotation costs and financing flexibility, with 50 basis points being the norm (as discussed below). The adjustment for flotation costs compensates the equity hol...
AI summary The document discusses the practice of Canadian regulators approving a 50-basis point adjustment for flotation costs and financing flexibility. This adjustment compensates equity holders for costs associated with issuing new equity and ensures financial flexibility for utilities to access capital markets under various conditions.
Jurisdiction Adj. Docket/Proceeding Notes Alberta 50 bps 2018 GCOC Decision 22570-D01-2018 and 2024 GCOC Decision 27084- D02-2023 Adjustment of 50 bps is normally included in the allowed return to account for administrative and equity issu...
AI summary The document outlines various adjustments to the allowed return on equity (ROE) across different provinces, including 50 basis points (bps) for administrative and equity issuance costs, flotation costs, and financing flexibility. Nova Scotia's 2023 rate application was resolved through a settlement agreement without specifying flotation costs or financing flexibility. Adjustments vary by jurisdiction, with some provinces using lower or higher values.
A. NSPI's Deemed Common Equity Ratio 4 In February 2023, the Board approved the settlement agreement which included an increase in 5 the deemed common equity ratio for NSPI from 37.5 percent to 40.0 percent for the purposes of 6 establishi...
AI summary The Nova Scotia Utility and Review Board approved an increase in the deemed common equity ratio for Nova Scotia Power Inc. (NSPI) from 37.5% to 40.0% in February 2023, affecting rate-setting and earnings calculations based on a five-quarter average equity thickness.
B. Risk Analysis Concentric examines risk from two primary perspectives: (1) financial risk; and (2) business risk. Financial risk primarily relates to the risk associated with the way in which a company has financed its business, as evide...
AI summary Concentric evaluates risk for NSPI by analyzing financial and business risks, including comparisons to other utilities and the 2021 GRA filing. Financial risk relates to capital structure, while business risk includes operational and regulatory factors.
a. Definition of Financial Risk 3 Financial risk exists to the extent a company incurs debt obligations in financing its operations. 4 These fixed obligations increase the level of income which must be generated to cover interest 5 payment...
AI summary Financial risk is defined as the risk a company faces when it incurs debt obligations, which increase the income needed to cover interest payments before common stockholders receive returns. This reduces financial flexibility and the ability to respond to economic and market disruptions, such as those in 2008/2009 and 2020.
a. Definition of Business Risk 5 Business risk for a regulated utility results from variability in cash flows and earnings that impact 6 the ability of the utility to recover its costs including the fair return on, and of, its capital in a...
AI summary Business risk for a regulated utility involves variability in cash flows and earnings that affect the utility's ability to recover costs and achieve a fair return on its capital. This includes operating and regulatory risks.
b. Business Risk Analysis In order to assess NSPI's business risk, Concentric examined the following factors: - 1) the generation ownership of NSPI relative to other investor-owned electric utilities, and in particular the percentage of th...
AI summary Concentric assesses NSPI's business risk by evaluating factors such as generation ownership, macroeconomic trends, operating risks, cost recovery, and competition from alternative fuels. Changes since the previous GRA filing are also considered.
c. Generation Ownership Unlike most other regulated electric utilities in Canada, NSPI owns substantial regulated generation assets. In 2024, NSPI derived 63.9 percent of its power supply from Company-owned generation facilities, while pur...
AI summary NSPI owns a significant portion of its power supply through regulated generation assets, unlike most other Canadian utilities. This ownership structure influences its business risk profile, as noted by credit rating agencies like Moody's, which assess utilities with generation assets as having higher business risk.
- 7 [Figure 34](#page-95-0) compares Nova Scotia to Canada on a number of key macroeconomic indicators over 8 the period from 2024-2045. 9 Figure 34: Key Economic Indicators – 2024-2045[86](#page-95-1) Economic Indicator NS Canada Real GDP...
AI summary Figure 34 compares Nova Scotia's macroeconomic indicators with Canada's from 2024-2045, showing weaker growth in most areas except retail sales. Nova Scotia's slower population growth is expected to limit growth opportunities for the electric utility.
20 3. Comparison to other Canadian Investor-Owned Electric Utilities Concentric also compared the business risk of NSPI to six other Canadian investor-owned electric utilities: ATCO Electric; FortisAlberta; FortisBC Electric; Hydro OneNetw...
AI summary The document compares the business risk of Nova Scotia Power Inc. (NSPI) to six other Canadian investor-owned electric utilities, considering factors such as regulated generation ownership, fuel and purchased power cost recovery, volume/demand risk, regulatory environment, and capital cost recovery.
a. Regulated Generation Ownership 4 As discussed in the previous section, NSPI generated approximately 64 percent of its power 5 supply from Company-owned generation resources in 2024. By comparison, electric utilities in 6 Alberta and Ont...
AI summary NSPI generates about 64% of its power from company-owned resources, compared to utilities in Alberta and Ontario that do not own regulated generation assets, resulting in lower risk profiles. NSPI has greater risk due to its ownership of generation assets compared to other Canadian investor-owned utilities.
5 d. Regulatory Environment 6 UBS ranks regulatory jurisdictions in the U.S. and Canada for purposes of determining whether 7 to apply valuation discounts or premiums to the utility stocks it covers. Specifically, UBS places 8 regulatory j...
AI summary Nova Scotia's regulatory environment is ranked in tier three by UBS, with low credit supportiveness according to S&P Global and DBRS Morningstar. The regulatory environment is considered less supportive of credit, with declines in ratings for Political Interference and Rate Freeze since 2020.
a. Regulated Electric Utility Operations NSPI derives 100 percent of its operating income and revenues from regulated electric utility service. As shown in Exhibit CEA-11, the companies in the U.S. Electric utility proxy group derive appro...
AI summary NSPI generates all its operating income and revenues from regulated electric utility service, similar to U.S. electric utility companies in the North American Electric proxy group, which are more representative of NSPI's operations than Canadian proxy group companies.
b. Credit Rating Agency View on U.S. Regulatory Framework Some have argued in the past that U.S. utilities are riskier because the regulatory environment is more favorable in Canada than in the U.S. from the perspective of debt and equity...
AI summary The text discusses how credit rating agencies like Moody's and Scotiabank have shifted their views on the U.S. and Canadian regulatory environments for utilities, finding them increasingly comparable. Moody's noted improved U.S. regulatory trends, while Scotiabank observed that Canadian and U.S. utilities are now valued similarly, with Canadian utilities trading at a discount.
c. Comparison to U.S. Electric Utility Proxy Group As a preliminary matter, Concentric notes that from investors' perspective, both short-term and long-term risk are important. Regulation generally is better at addressing short-term risk,...
AI summary This section compares Nova Scotia Power Inc. (NSPI) to the U.S. Electric Utility Proxy Group in terms of business risk and ratemaking mechanisms. NSPI has significant coal-fired generation assets, unlike most U.S. companies, and has fewer risk-insulating ratemaking mechanisms available compared to the proxy group.
1 2027. Absent approval of this proposal, NSPI has higher risk relative to the proxy groups 2 on this factor. why would this make NSP risk higher relative to other Utilities (check above)? 3 • The financial risk of NSPI is greater than tha...
AI summary Concentric concludes that increasing NSPI's deemed common equity ratio to 45.0 percent would be reasonable, aligning it with Newfoundland Power and reflecting its risk profile. However, NSPI prefers maintaining its current 40.0 percent ratio. A supportive regulatory environment is crucial for NSPI to access capital during its transition toward meeting environmental goals.
Canadian Regulated Utilities US Electric Utilities North American Electric Utilities CAPM – Historical MRP 9.71% 10.69% 10.32% Multi-Stage DCF 9.60% 9.35% 9.29% Risk Premium 9.54% 10.45% 10.00% Average 9.62% 10.16% 9.87% 8
AI summary The text presents a comparison of various cost of capital metrics across Canadian regulated utilities, US electric utilities, and North American electric utilities, including CAPM – Historical MRP, Multi-Stage DCF, Risk Premium, and Average.
COST OF CAPITAL REPORT PREPARED FOR NOVA SCOTIA POWER INC. 1 the additional financial risks. If the deemed common equity ratio for NSPI is maintained at the 2 current level of 40.0 percent, our ROE recommendation of 9.9 percent is understa...
AI summary The report discusses the financial risks associated with maintaining the current deemed common equity ratio of 40.0 percent for Nova Scotia Power Inc. (NSPI). It argues that the recommended ROE of 9.9 percent is understated compared to market data for comparable companies, particularly at the requested ROE of 9.0 percent.
Appendix 13A – Non-standard Meter Service (AMI) Opt-out Fee 1 Proposed Fee for Non-standard Meter Service 3 2 Findings included in the Board's Decision under M10431 5 2.1 Options for Minimization or Elimination of Opt-Out Fees 6 2.1.1 Opt-...
AI summary The document discusses the proposed fee for non-standard meter service (AMI) opt-out, including findings from the Board's decision under M10431, options for minimizing or eliminating the fee, economic comparisons of in-house versus outsourced meter readings, and the justification for the proposed fee based on actual experience and cost considerations.
Opt-Out Charge Assumptions 2026 2027 Customer Opt-Out Percentage 2.9 2.0 Opt-Out Total Customer 16,340 11,089 Total Meter Reads Per Year 36,301 25,798 Time Required (Hours) 5,482 3,891 Expected Annual Cost ($ Million)1 Total O&M $0.73 $0.6...
AI summary The table outlines assumptions for the Opt-Out Charge in 2026 and 2027, including customer opt-out percentages, meter reads, time required, and expected annual costs and revenue requirements. The data shows a decrease in opt-out percentages and associated costs from 2026 to 2027.
CAD to USD conversion 1.4188 CAD to OSD conversion 1.4188 Region Utility Opt-out Meter Type Initial Fee Monthly Fee Other Fees Additional Information Reference BC Hydro Radio-off Meter $ 22.60 $ 20.00 Eligibility limited to customers who n...
AI summary The text provides a table comparing meter options and associated fees from various utilities in Canada, including BC Hydro, Fortis BC, Hydro Quebec, and EPCOR. It outlines initial and monthly fees for different meter types, eligibility criteria, and additional information such as exit fees and reference links.
Opt-Out Meter Reading via External Contractor Resources NS Power provided a full update on the RFP as part of its General Rate Application (GRA) M10431, [4](#page-131-0) and has provided further details to address each of the findings outl...
AI summary NS Power provided an update on its RFP as part of its GRA M10431 and addressed findings from the Board's M10431 Decision in Appendix 13A of its Direct Evidence in the 2026-2027 GRA.
N-22Decision Ontario Energy Board EB-2024-0063
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DECISION AND ORDER EB-2024-0063 A generic proceeding commenced by the Ontario Energy Board on its own motion to consider the cost of capital parameters and deemed capital structure to be used to set rates BEFORE: Michael Janigan Presiding...
AI summary The Ontario Energy Board has initiated a proceeding to review the cost of capital parameters and deemed capital structure for setting rates. The proceeding is presided over by Michael Janigan, with Lynne Anderson and Pankaj Sardana as commissioners.
This is a Decision and Order of the Ontario Energy Board (OEB) regarding a generic proceeding initiated on its own motion to consider the cost of capital and other matters for electricity transmitters, electricity distributors, natural gas...
AI summary The Ontario Energy Board (OEB) has issued a decision and order revising the methodology for determining cost of capital parameters for electricity and gas utilities, effective January 1, 2025. The new parameters include a return on equity of 9.00%, deemed long-term and short-term debt rates, and an annual ROE adjustment formula for future rate applications. The capital structure remains unchanged, and the new framework will be reviewed in five years.
2 CONTEXT AND PROCESS When the OEB reviews a cost-based rates application by a rate-regulated utility, many costs are included in that review. The cost of capital is one of those costs. In any given year, about 10-20% of Ontario's rate-reg...
AI summary The Ontario Energy Board (OEB) reviews cost-based rates applications, including the cost of capital, which is a significant factor. The OEB last updated its cost of capital methodology in 2009 and reaffirmed it in a 2016 staff report. In 2024, the OEB initiated a generic proceeding to reassess the methodology for determining cost of capital parameters and capital structures for various utilities.
3.1.1 Current Cost of Capital Framework Schedule H includes a detailed description of the OEB's 2009 Cost of Capital Framework. The OEB concurs with the Staff Report from 2016 which concluded that the 2009 Cost of Capital Framework worked...
AI summary The OEB confirms the effectiveness of the 2009 Cost of Capital Framework, which met the Fair Return Standard (FRS) since its implementation. The FRS includes three components: comparable investment standard, financial integrity standard, and capital attraction standard. The OEB is establishing a new Cost of Capital Framework in line with the FRS.
hat a significant risk to Enbridge Gas due to the energy transition is one of declining demand, while still being obligated to operate and maintain a safe and reliable natural gas distribution system. CCC agreed that the potential for decl...
AI summary The document discusses the risks Enbridge Gas faces due to declining demand from the energy transition, while still needing to maintain a safe and reliable natural gas distribution system. CCC and VECC highlight the potential for stranded assets and the need to balance risk assessments between gas utilities and electricity distributors. VECC suggests that if ROE or capital structure changes are made for Enbridge Gas, similar adjustments should be applied to electricity companies.
Regulatory and Rate-Setting Mechanisms OEB staff agreed with LEI and Dr. Cleary that any regulatory mechanism that can significantly impact the stability of future cash flows must be considered part of regulatory risks. OEB staff concluded...
AI summary The OEB staff, LEI, and Dr. Cleary agree that regulatory mechanisms significantly impacting cash flow stability are part of regulatory risk. The OEB's mechanisms since 2009 have moderately reduced utility risk. The OEA acknowledges this but cautions that business risk remains unchanged due to new risks like climate change. CCC and others emphasize that regulatory policies have substantially decreased risk and should influence the current ROE setting.
Other Risks and Regulatory and Rate-Setting Mechanisms Utilities have argued that in addition to energy transition, other risks are increasing such as cyber security, changes in sales volumes, extreme weather events, and changes in governm...
AI summary The OEB acknowledges increased risks for utilities due to factors such as cybersecurity and extreme weather, but argues that regulatory mechanisms have reduced utility risk since 2009. The OEB also notes that no generic adjustments are being made for Enbridge Gas or OPG in this proceeding, and will monitor trade tariffs and market conditions for potential future reviews.
Debt Investors' Perspective Debt investors are primarily concerned with the stability and predictability of a utility's revenue stream, given the essential nature of utility services. They expect a fixed return, typically at a lower rate t...
AI summary Debt investors prioritize stable and predictable revenue streams for utilities, expecting a fixed return. They may demand higher returns if perceived risks increase, such as regulatory uncertainty or changes in business models. The debt proportion in a utility's capital structure affects its cost of capital and financial risk.
rsely, setting the ROE too high could lead to unnecessarily high rates for consumers and potentially increase regulatory scrutiny by requiring adjustments to mitigate concerns about excessive returns. While Nexus correctly notes that some...
AI summary The text discusses the potential consequences of setting the Return on Equity (ROE) too high, including increased consumer rates and regulatory scrutiny. It also references data from the Ontario Energy Board (OEB) showing that some electricity distributors underachieve their allowed ROEs, while others exceed them.
Expert Report Proposals LEI stated that the OEB's existing methodology implicitly accounts for differences in sources of funding when approving rate applications. LEI recommended that this aspect of the OEB methodology be retained. Consist...
AI summary The document discusses the OEB's methodology for determining the cost of capital, emphasizing that it should not depend on a utility's ownership structure. LEI and Dr. Cleary support maintaining the current approach, while Concentric argues that the cost of capital should be based on the use of funds rather than the source of funds.
Findings Whether a utility finances its operations through capital markets, municipal debt, or government lending, the fundamental risk associated with the utility's activities (such as the regulatory environment, business model, and marke...
AI summary The Ontario Energy Board (OEB) emphasizes that the cost of capital for utilities should be based on risk profiles and use of funds, not ownership structure or financing sources. This approach ensures fairness and consistency in rate-setting, preventing disparities among utilities. The OEB maintains a stable, transparent framework aligned with financial theory and regulatory principles.
energy transition, climate change, and cybersecurity have not increased the business risk of Ontario utilities, nor have financing concerns, to justify a large increase in the deemed cost of capital. SEC submitted that the arguments and re...
AI summary The SEC argues that the current return on equity and equity ratio are too high and unfairly burden ratepayers, contradicting the FRS which requires utilities to earn only their cost of capital. The SEC claims that the evidence shows the current ROE is too generous to utilities and not fair to customers.
Multiple Methodologies In OEB staff's view, it was neither necessary nor advisable for the OEB to pick one of the four expert recommendations in this case, or to make a finding on which methodology (e.g., CAPM, DCF or Risk Premium) or whic...
AI summary OEB staff recommends using multiple methodologies (CAPM, DCF, Risk Premium) to determine ROE, rather than selecting one. EDA and OEA agree that no single method is sufficient, with EDA criticizing averaging ROE figures and OEA emphasizing the value of a multi-model approach.
the Canadian investor to invest in Canadian utilities is a factor in giving less weight to U.S. comparators. These differences cannot be ignored in the OEB's efforts to set parameters to meet the FRS. 29 LEI incorporated US utility data as...
AI summary The OEB acknowledges the use of U.S. utility data in its 2009 Report but recognizes structural and risk differences between U.S. and Canadian utilities. Expert reports from EDA and OEA have considered these comparabilities, but the OEB's updated regulatory framework raises questions about the relevance of U.S. data for setting return expectations.
from ratepayers. OEB staff agreed with LEI that a 50 basis point adder "is likely to overcompensate utilities" and that there were two ways this could be remedied (with the first option recommended): - 1. Utilities would be able to include...
AI summary OEB staff recommended reducing the 50 basis point adder for transaction costs to 25 basis points, as it may overcompensate utilities. EDA argued that transaction costs should be included in the deemed cost of capital regardless of ownership, while Pollution Probe supported the reduction but suggested utilities could request higher adders with evidence in future proceedings.
ing case. The OEA also disagreed with the recommendations regarding Enbridge Gas and Hydro One made by Dr. Cleary. Several ratepayer groups supported Dr. Cleary's recommendations regarding Hydro One. The OEA generally supported Concentric'...
AI summary The OEA supported Concentric's proposals but emphasized the need to adjust the deemed capital structure and base ROE to meet the FRS. The SEC suggested reducing the equity thickness for electricity distributors, but OEB staff and the OEA disagreed, citing insufficient evidence. Ratepayer groups supported Dr. Cleary's recommendations for Hydro One.
In summary, the OEB concludes that the current deemed capital structure for electricity distributors, transmitters, OPG, and natural gas utilities remains appropriate and continues to satisfy the FRS. The OEB also acknowledges several part...
AI summary The OEB concludes that the current deemed capital structure for electricity distributors, transmitters, OPG, and natural gas utilities remains appropriate and satisfies the FRS. It acknowledges suggestions to lower Hydro One's equity ratio and allows for modifications in future rebasing applications with proper evidence.
ir specific operational and financial circumstances. Further, maintaining the deemed capital structure safeguards ratepayers from distortions that could arise from excessive equity or debt financing. Implications of variances from the deem...
AI summary The OEB maintains the use of a deemed capital structure to prevent distortions from excessive equity or debt financing, ensuring fair returns for ratepayers and utilities. Using actual capital structures could lead to inefficiencies, and the current approach of applying actual weighted average cost of debt remains appropriate and aligned with regulatory best practices.
Table 1 – Summary of Suggested Approaches for the DLTDR Expert LCBF Utility Bond Spread Status Quo (2009 Report) 10-year Government of Canada bond yield forecasts (from Consensus Forecasts) plus yield spread of 30-year Government of Canda...
AI summary The document outlines various suggested approaches for calculating the Deemed Long-Term Debt Rate (DLTDR), including methods involving bond yield forecasts, average spreads between utility and government bonds, and weighted averages of forecasts from investment banks. All experts agree on using Bloomberg's BVCAUA30 BVLI Index for calculating spreads over LCBF.
Expert Report Proposals LEI recommended that transaction costs be considered as operating expenses, as this approach is more suitable for the nature of the expense, which may fluctuate from year to year. LEI also noted the irregularity in...
AI summary LEI recommends treating transaction costs as operating expenses due to their fluctuating nature, while Concentric, Nexus, and Dr. Cleary argue that these costs should be recovered through the embedded cost of long-term debt, as per OEB's current practice, and that LEI's approach may not comply with IFRS.
Findings The DSTDR for 2025 will be 3.91% on a final basis.[68](#page-79-1) The OEB will set a DSTDR each year starting with the 2025 rate year as part of this Decision. The DSTDR will be set using the September 30 data point sourced from...
AI summary The Office of the Energy Board (OEB) sets the Deemed Short-Term Debt Rate (DSTDR) for 2025 at 3.91%, using the Bloomberg BVCAUA3M BVLI Index (3-month) data point from September 30. The OEB finds the method of using this index simple and effective, avoiding the need for credit spreads from surveys. The DSTDR will be determined annually using similar approaches, with adjustments for extraordinary market changes.
Confirmation of Meeting the FRS LEI, Concentric, and Dr. Cleary stated that the OEB should continue to annually confirm that the FRS is being met. Concentric stated that periodic rate hearings remain the only reliable method for determinat...
AI summary LEI, Concentric, and Dr. Cleary recommend that the OEB continue annual confirmation of the FRS. Concentric emphasizes periodic rate hearings as the only reliable method for determining utility ROEs consistent with the FRS and suggests monitoring recommendations to detect deviations between full reviews. Concentric also recommends continuing the 300-basis point trigger mechanism with earnings-sharing mechanisms.
Specific Items Monitored OEB staff agreed with LEI and Dr. Cleary that consistent with the OEB's existing policy, the OEB should continue to monitor the cost of capital parameters and test their reasonableness in the context of prevailing...
AI summary The OEB staff agrees with LEI and Dr. Cleary on the need to monitor cost of capital parameters annually but disagrees with quarterly reporting. Ratepayer groups and SEC support public disclosure of reports. The OEA and others debate the need for tracking debt and equity issuances and credit rating reports, with differing views on administrative burden and utility transparency.
Expert Report Proposals Consistent with the OEB's existing policy, LEI stated that the OEB should continue to publish its annual cost of capital parameter updates in October or November, but using 12-month trailing data as of the end of Se...
AI summary The OEB is considering updating its annual cost of capital parameter schedule, with LEI recommending the use of 12-month trailing data, while Concentric suggests using 90-day averages and Dr. Cleary proposes using October data instead of September data for the ROE adjustment formula.
able, except for Concentric's recommendation about using different rates for Group 1 and Group 2 DVAs. However, OEB staff submitted that option (2) has the advantage of being administratively simpler. OEB staff disagreed with Concentric th...
AI summary OEB staff argue against applying WACC to Group 2 DVAs, citing administrative simplicity and financial implications. OEA supports Concentric's proposal, while SEC and CCC oppose it, citing potential perverse incentives and deterrence from approving new DVA accounts.
4 COST AWARDS The following parties (collectively the Eligible Participants) applied for and were granted cost award eligibility: - Association of Major Power Consumers in Ontario (AMPCO) - Association of Power Producers of Ontario (APPrO)...
AI summary The Office of the Energy Board (OEB) has approved interim cost awards for several Eligible Participants, including industry associations and consumer groups. These costs will be recovered from rate-regulated companies and allocated using the OEB's Cost Assessment Model. The OEB will conduct a full review of all cost claims at the conclusion of the proceeding.
Cost Awards 9. Cost-eligible intervenors that applied for and received interim cost awards are required to submit an incremental cost claim for work performed after September 6, 2024 by April 7, 2025 , if incremental costs are being claime...
AI summary The document outlines the timeline and procedures for submitting cost claims in the proceeding, including deadlines for interim and total cost claims, objection procedures, and submission guidelines through the OEB's online filing portal. It also specifies communication and distribution requirements.
B. Short-Term Debt Rate - 4. Should the short-term debt rate for electricity transmitters, electricity distributors, natural gas utilities, and OPG continue to be set using the same approach as set out in the OEB Report?[86](#page-117-0) -...
AI summary The document raises two questions regarding the short-term debt rate for various utility sectors, including electricity transmitters, distributors, and natural gas utilities, and whether the current approach outlined in the OEB Report should continue.
C. Long-Term Debt Rate - 6. Should the long-term debt rate for electricity distributors, natural gas utilities, and OPG continue to be set using the same approach as set out in the OEB Report and as set out in the Staff Report for electric...
AI summary The section addresses questions about the long-term debt rate for utilities, including whether the current approach should continue, how transaction costs should be considered, and the implications of variances from the deemed capital structure.
E. Capital Structure - 12.How should the capital structure be set for electricity transmitters, electricity distributors, natural gas utilities, and OPG to reflect the FRS? - 13.Should the OEB take a different approach for setting the capi...
AI summary The document raises questions about setting the capital structure for electricity transmitters, distributors, natural gas utilities, and OPG in alignment with the FRS, and whether the OEB should apply different approaches for single versus multiple asset transmitters.
Table 2 – Summary of Revised Methodology – Cost of Capital Electricity Natural Gas Distributors Deemed Capital Structure 40% equity, 56% long-term debt, 4% short term debt 45% equity, 55% debt90 The capital structure shall be determined at...
AI summary Table 2 outlines the revised methodology for the cost of capital, specifying deemed capital structures for electricity and natural gas distributors, with variations based on service territories and the requirement to determine capital structures at future cost-based rates applications.
REVISED METHODOLOGY TO UPDATE THE PRESCRIBED INTEREST RATES March 27, 2025
AI summary The document introduces a revised methodology to update the prescribed interest, focusing on rates and related financial considerations as of March 27, 2025.
CWIP CWIP will reflect the FTSE Canada Mid Term Bond Index All Corporate yield, taken under contract from PC Bond Analytics, a business unit of FTSE. The formula for the quarterly update of the prescribed interest rate for CWIP is: CWIP =...
AI summary The document defines CWIP as reflecting the FTSE Canada Mid Term Bond Index All Corporate yield, obtained from PC Bond Analytics. A formula is provided for the quarterly update of the prescribed interest rate for CWIP.
Where: FTSE Canada Mid Term Bond Index All Corporate is the FTSE Canada Mid Term Bond Index All Corporate yield, with the data point as at the end of the month that is one month prior to the start of the quarter, taken and under contract f...
AI summary The text outlines the method for determining prescribed interest rates, referencing the FTSE Canada Mid Term Bond Index All Corporate yield and specifying that rates are rounded to two decimal places. It also notes that these rates are applied according to Section 3.7 of the Decision.
The Fair Return Standard The OEB confirmed six key regulatory principles with respect to its cost of capital policy in the 2009 Report, with one of those being the FRS.[100](#page-136-6) All three requirements of the FRS – comparable inves...
AI summary The OEB confirmed six key regulatory principles in its 2009 Report, including the Fair Return Standard, which requires that the overall ROE be determined based on a company's cost of equity capital. The FRS requires that all three of its requirements—comparable investment, financial integrity, and capital attraction—be met.
Variances from Deemed Capital Structure The OEB sets rates using a deemed capital structure. The OEB sets the equity ratio at 40% and the short-term debt ratio at 4% for electricity distributors and transmitters. Although both of EPCOR Nat...
AI summary The OEB sets deemed capital structures for utilities, including equity and short-term debt ratios. EPCOR Natural Gas has different equity ratios in its service territories, and notional debt is discussed as the difference between deemed and actual debt. Different rates, such as DLTDR and DSTDR, have been used for notional debt in the past.
Prescribed Interest Rates The OEB's current practice is to set the prescribed interest rates applicable to DVAs and CWIP quarterly. These rates are only updated if the formulaic approach results in a change in interest rates of 25 basis po...
AI summary The OEB sets prescribed interest rates for DVAs and CWIP quarterly, using formulas that may include BA or T-bill rates with a 25-basis point spread. These rates are updated only if changes exceed 25 basis points. Since Q4 2024, the methodology has shifted from BA to T-bill rates, reflecting the phase-out of BA rates as outlined in the Decision.