Click here for information on NS Power's 2007 Fuel Adjustment Mechanism filing.
Good morning Mr. Chairman and Commissioners.
Thank you for the opportunity to deliver these opening remarks.
Nova Scotia Power is pleased to appear before you today to seek approval to reduce the fuel costs customers will pay in 2010.
The fuel cost reduction will take effect January 1, 2010, and will vary by rate class. Residential customers will see a rate decrease of 1.4 per cent. The reduction that will be implemented by the FAM “AA”, or Actual Adjustment, has been calculated in accordance with the FAM Plan of Administration and with the Cost of Service Study, both of which as previously approved by the Board.
The Fuel Adjustment Mechanism is working for both customers and Nova Scotia Power. The FAM reflects the actual cost of fuel used to make electricity and includes an annual adjustment for over-recovery or under-recovery of actual costs in the previous year. In some years, the AA will need to recover additional fuel costs, but in this first year of the FAM, the AA will return $22 million to customers – including interest.
The Fuel Adjustment Mechanism demonstrates Nova Scotia Power’s commitment to collaboration with stakeholders and transparency for customers.
In this initial FAM implementation year, Nova Scotia Power has filed monthly and quarterly reports with the Board, and provided updates and exchanged ideas with stakeholders and consultants though regular technical conferences. The FAM represents a more frequent and detailed interaction, as well as more transparency, than could exist in other regulatory environments. Customers can have confidence in the Company’s fuel procurement strategy and about fuel costs through the Board’s continuing oversight.
This oversight includes public review through FAM reports and hearings. There has been some misconception that the Fuel Adjustment Mechanism allows fuel costs to be modified automatically without a hearing, but that is simply not the case. Even in circumstances such as this, where Nova Scotia Power is seeking a rate reduction without any material objection from any stakeholder, the FAM process requires a public hearing before the Board. Only the UARB can approve a change in customer rates, including a price reduction.
As I mentioned earlier, this application demonstrates that mechanisms the Board has approved are working well. I would point specifically to Nova Scotia Power’s fuel procurement strategy, which has helped reduce customers’ bills for 2010. As concluded in the 2009 IRP Update, energy efficiency and conservation programs, and the addition of renewable generation such as the Nuttby Mountain Wind Project, should contribute to lower and more stable fuel costs over time than would otherwise be experienced. Through effective fuel management and these regulatory initiatives, Nova Scotia Power is working to help customers reduce their bills now and into the future. The Company remains open to dialogue with the Board and stakeholders about how the fuel strategy can continue to respond to changing market conditions and meet the needs of our customers.
Nova Scotia Power would like to acknowledge the supportive evidence filed by Liberty Consulting Group. We have worked closely with Liberty in establishing the FAM Plan of Administration and throughout this first year of FAM implementation. As Liberty notes, the FAM is a new kind of rate element and we are all adjusting to this approach to cost recovery and regulatory oversight.
In conclusion, Nova Scotia Power is pleased to be here today for a hearing that should give customers confidence that their interests are well-served by the many hours spent sorting out complex regulatory mechanisms on their behalf. The fuel expense recovered from customers is managed wisely, according to well-developed strategy and is subject to careful scrutiny.
And when Nova Scotia Power is able to save on the cost of fuel, savings will flow back to customers.
Thank you. We look forward to your questions.