As FactSet introduces coverage of Canadian rate cases to the Workstation, the following article highlights Nova Scotia, home of the latest shakeup in North American utility regulation. Be sure to check back in for more Insights highlighting new coverage.
In April 2023, Nova Scotia Premier Tim Houston announced the creation of a “Clean Electricity Solutions Task Force” charged with modernizing Nova Scotia’s regulatory environment in order to fulfill the province’s “Clean Growth” goals: 80% of electricity from renewable energy by 2030 and net zero by 2050. Specifically, the Task Force examined the jurisdiction and powers of the Nova Scotia Power System Operator (NSPSO) and the Utility and Review Board (UARB).
In January 2024, the Task Force proposed the adoption of an “Energy Modernization Act” to replace NSPSO entirely and remove utilities from the UARB’s purview. Two new entities would be created: the Nova Scotia Independent Energy System Operator (NSIESO) and the Nova Scotia Energy Board. The provincial legislature introduced the Act (“Bill 404”) in February 2024 and passed it in April, formally commencing the process of creating the new entities.
Nova Scotia Independent Energy System Operator
The NSIESO will assume all functions now provided by the NSPSO: (a) planning & dispatch of electricity within the province, (b) application of electricity market rules, and (c) open competition in the procurement of new infrastructure (i.e., generation, transmission, distribution, and storage).
The key change is that the NSIESO will be independent from Nova Scotia Power, which serves 98% of the province’s electricity load. Because the NSPSO operates as a division of Nova Scotia Power, some customers question whether NSPSO decisions are truly made in the public interest, as opposed to the commercial interest of Nova Scotia Power and its parent company Emera. The Task Force desired to eliminate this tension.
The Task Force concluded most stakeholders believe that bias in favor of Nova Scotia Power is real and affects NSPSO decisions. This bias impairs healthy competition for procurement for new infrastructure and the province’s ability to attract new infrastructure investment reliant on grid interconnection. The Nova Scotia government has made it clear it intends to replace coal-fired generation with renewable resources supplied from open market competition.
The Task Force concluded that consumer confidence in Nova Scotia Power would be enhanced as a result of placing decisions in the hands of an independent system operator at arm’s length from the corporate interest of Nova Scotia Power. An independent system operator will have objectives unconditioned by corporate ownership.
Also, the NSIESO’s independence will become more important as the regional market becomes more accessible to Nova Scotia.
For context, in 2009, Nova Scotia was essentially an electricity energy island. Today, the Maritime Link transmission interconnection joins Nova Scotia’s electricity system with Newfoundland and Labrador. A proposed second intertie to New Brunswick will solidify Nova Scotia’s connection to the North American electricity market, creating wholesale bulk electricity sales opportunities unavailable in 2009. Emera noted in its 4Q23 earnings call that the Maritime Link helped Nova Scotia Power generate 40% of its power from renewables in 2023.
Nova Scotia Energy Board
The most notable difference between the UARB and regulators in other Canadian jurisdictions is the scope of the UARB’s purview (e.g., motor vehicles, insurance, fire safety). In other provinces, few if any non-utility regulation functions are assigned to utility regulators.
Nova Scotia Power has filed just one generate rate case in the past decade, so an argument can be made that the UARB has time to focus on these other matters.
However, this expansive jurisdiction has led many to question whether the UARB is sufficiently focused on the clean energy transition. Most stakeholders interviewed were concerned about a disconnect between the province’s clean energy targets and UARB decisions. Stakeholders complained decisions were not necessarily consistent with government policy on climate change and sustainability.
It is the hope that the new Nova Scotia Energy Board will solve this problem by not having such a broad scope of subject matter jurisdiction. Rather, it will be a standalone energy regulator responsible only for electricity, natural gas, pipelines, and retail gasoline. Furthermore, it will approve Nova Scotia Power’s rates, capital spending, capital structure, and return on equity. The new Energy Board will also be separate from the UARB, which will still exist but be responsible only for non-energy matters. In bifurcating decision-making into two Boards, the Task Force believes the expertise of the UARB will be maintained while the new Energy Board establishes its own subject matter focus and expertise.
Next Steps
Now that Bill 404 is approved, a comprehensive implementation plan developed by the Task Force is slated to have the NSIESO in place by 2025. The NSIESO will be led by a CEO reporting to a board of directors held accountable by the new Nova Scotia Energy Board.
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