By ANDY WALKER, P.E.I. DIARY, The Chronicle Herald, Halifax, NS, Canada, Sun. Mar 15 – 6:21 AM
PRINCE EDWARD ISLANDERS have long had the dubious distinction of paying the highest electricity rates in the Maritimes. Now, Islanders are going to have to dig deeper into their pockets because those rates are on the move again. After several days of hearings earlier this year, the Island Regulatory and Appeals Commission, the government-appointed agency that oversees electricity and gasoline prices, has agreed to a Maritime Electric request to increase rates by an average of 5.3 per cent annually.
The increase helps to pay for electricity used in 2008, when oil prices were at a record high. At the commission hearings, the company was seeking to pay more of the upfront costs for its power and less in deferral. Oil prices haven’t been the only factor forcing Island prices up. Maritime Electric buys most of its power from New Brunswick. That includes nuclear power from Point Lepreau, which is shut down.
The commission order allowing the 5.3 per cent increase indicates the Island utility will need $19.3 million extra to buy alternate power between January and September of this year. If that amount was collected immediately, the commission indicated that customers would face another 5.5 per cent increase. The utility must submit a plan detailing how that amount will be recovered by the end of this year.
Understandably, Islanders are unhappy with this development, especially given the fact that oil prices have been relatively stable this winter. Another point of contention is the fact that the commission has granted a maximum allowable return of average common equity at 9.75 per cent. The utility argues that it needs the guaranteed rate of return to attract shareholders. The issue has become one of the major points of discussion in cyberspace.
“Why is this company allowed to make a 9.75 (per cent) return in the current economic situation?” Not Impressed From P.E.I. wrote on a Charlottetown newspaper’s website. “We are being gouged for an essential part of living.”
Stephen Pate is a well-known social activist in the province who runs a website called Not Just the News. He called the 9.75 per cent rate of return ridiculous. He suggested the province should buy out the utility, which is part of the Fortis Group of Companies in Newfoundland and Labrador. “Who’s making any money these days? I guess you have to be the monopoly owner of the light company on P.E.I.,” Mr. Pate wrote.
Energy Minister Richard Brown has the task of handling the political fallout from the increase. According to Mr. Pate, the energy minister has been “huffing and puffing” on the issue of power rates but is doing little to lower them. The minister makes no secret of the fact he is not happy with the increase.
He told reporters following the commission’s announcement that the increase will be especially hard on those living on fixed income. When the utility first asked for the guaranteed rate of return, Mr. Brown indicated he would change the legislation governing the utility to wipe out that rate of return.
Whether he will follow through on that threat remains up in the air at this point. What is certain is the fact that the Liberal minister is sure to face plenty of questions from three Conservative MLAs when the legislature reconvenes April 2 for its spring session. The minister is looking at an old idea to lower power rates.
Back in the early 1990s, the Liberal government of Catherine Callbeck threatened to sell the utility to New Brunswick Power. The sales were put on hold and Island electricity prices were tied to those on the other side of Northumberland Strait. Maritime Electric could not charge more than 10 per cent of the rate charged for a similar category of customers in New Brunswick.
The previous Conservative government rescinded that formula at the request of the utility. Maritime Electric maintained the formula would eventually cause the company to drown in a sea of red ink.
Island electrical prices are now 27 per cent higher in most rate categories than in New Brunswick.
( awalker@herald.ca)
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