New bill could regulate Nova Scotia utilities based on performance

A new piece of legislation introduced to the Nova Scotia Legislature Wednesday could lead to a new “Performance-Based-Regulation model,” designed to ensure Nova Scotia Power’s earnings are tied to utility reliability.

Bill 263 will be read to the legislature for its first time on Sept. 9, bringing a whole new approach to Nova Scotia Power’s earnings model with it.

The framework of the new bill is the Performance-Based-Regulation (PBR) model, which links a portion of a utility’s earnings to factors related to its effectiveness for the utility customer. Per the province’s PBR explanation release, these factors can include reliability, customer service, operational efficiency, affordability, and clean energy transition.

In a PBR model, a utility provider may face consequences when the performance of a utility falls short of its “established targets,” but may also receive additional rewards for meeting or exceeding these targets.

Prior to the consideration of Bill 263, Nova Scotia has spent decades operating on a cost-of-service model, whereby the utility provider linearly earns revenue based on operating costs, with a built-in expectation the provider will make a profit relative to the cost of providing the utility.

The Performance-Based model is already used for electricity utility jurisdictions around the world, including Ontario, Alberta, New York State, the United Kingdom and New Zealand.

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Nova Scotia Premier and Minister of Energy Tim Houston said the need for the changes derive from a lack of value for money provincial residents have expressed in the past.

“Many Nova Scotians are feeling the pressure of higher electricity costs, but don’t feel they’re getting good value for what they pay. As part of our work to modernize the electricity system and protect Nova Scotians, we want to examine whether changing how Nova Scotia Power earns its income will result in better service and greater accountability for Nova Scotians, our communities and a growing economy.”

Review process

The Nova Scotia Energy Board says it will consider the following factors as it completes a 30-day review process for the new PBR model:

• The protection of ratepayers and the maintenance of reasonable rates
• Performance measures related to sustainable development, energy efficiency and emissions reductions
• Performance measures related to efficiency, cost-effectiveness, safety, reliability, resilience, innovation, customer service, quality of system operations, and management
• Impacts on different classes of customers
• Nova Scotia Power’s opportunity to earn a fair rate of return and how a new model would impact capital spending, cost recovery and risk.

After the board’s review, it will provide recommendations to the provincial government, at which point the government will review its findings and determine the next steps for the bill.

The release by the province clarifies that a new PBR model being introduced would not change the fact that utility-providers pass fuel costs on to ratepayers.

More information on the Performance-Based-Regulation model can be found here.

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