HALIFAX -- Nova Scotia's Utility and Review Board has given conditional approval to a proposed subsea cable that would ship hydroelectricity from Muskrat Falls in Labrador to Nova Scotia, saying Monday the Maritime Link edges out other energy alternatives for the province.
The board made its decision conditional on the project obtaining from Nalcor Energy the right to get the Newfoundland and Labrador Crown utility's best price for surplus energy based on market conditions, a change that Nova Scotia Liberal Leader Stephen McNeil said represents a significant amendment.
The board was asked to decide whether constructing the 170-kilometre cable, known as the Maritime Link, was the cheapest long-term alternative for the province's electricity users and whether it meets requirements on the release of air pollutants.
It says the project represents the lowest long-term cost alternative for electricity ratepayers in Nova Scotia on the balance of probabilities, but it is only the cheapest option by a narrow margin.
"While the board finds that the ML (Maritime Link) project is the lowest long-term cost alternative, it is not on an overwhelming basis," the decision reads. "There are various scenarios, within a range of reasonable assumptions that perform almost on an equivalent basis, or even better in a few cases, than the ML project."
During hearings earlier this year, consumer and small business advocates in Nova Scotia as well as an alliance of industrial customers that included Michelin and Imperial Oil (TSX:IMO) questioned whether the proposal by NSP Maritime Link Inc., a subsidiary of Emera Inc. (TSX:EMA), would benefit electricity customers, who would foot the bill for the $1.5-billion project.
Opponents also doubted assertions from Emera and Premier Darrell Dexter that the project would stabilize electricity rates in the future.
Nova Scotia's NDP government is in the last year of its mandate and the opposition parties have tried to make electricity rates charged by Nova Scotia Power a ballot box issue for voters, with McNeil arguing Monday that power rates have jumped by 30 per cent over the past four years.
McNeil said the utility and review board decision shows the Maritime Link deal as it is currently written means Muskrat Falls isn't the cheapest energy option for the province.
"Premier Dexter and Nova Scotia Power wanted to force Nova Scotians into paying the entire bill for the billion-dollar project, accept all of the risk, and lock our province into higher power rates for decades to come," he said in a statement. "The regulator has confirmed that the deal is not acceptable, unless it is significantly amended to be more favourable for Nova Scotia Power ratepayers."
Nova Scotia Energy Minister Charlie Parker issued a statement saying the board's ruling was sensible and makes the Maritime Link more favourable for the province's power customers.
"The board has outlined what Emera must do to ensure the best deal for the province and like all Nova Scotians, we expect Emera will do the work required to follow those recommendations," Parker said.
Emera president Chris Huskilson issued a statement saying the company needs time to review the decision and the implications of the condition placed on the board's approval.
"The conditions require further analysis and discussion and we will take the time required to do so," he said. "In the meantime we continue to refine final construction estimates and work continues on the project."
Emera has argued that Muskrat Falls would serve about 10 per cent of Nova Scotia's power needs, bringing clean energy into the province.
Under the 35-year deal, Nova Scotia gets access to 20 per cent of the energy from the first phase of Nalcor's hydroelectric development on the Lower Churchill River in exchange for paying 20 per cent of the capital and operating costs of the $7.7-billion venture. Some opponents of the deal have questioned how much it will cost NSP Maritime Link to buy energy from Muskrat Falls if it wants to exceed the 20-per-cent block for which it has negotiated an annual contracted price.
The board says it has reservations about the availability of market-priced energy under the deal. It says the agreement sets a blended price for Nova Scotia electricity customers that reflects the so-called "NS Block" price for the province's involvement in Muskrat Falls with projected costs for market-priced energy -- and goes on to say the blended rate is a "substantial uncertainty" for electricity users until 2041.
"The board concludes that the availability of market-priced energy is crucial to the viability of the ML project proposal as against the other alternatives," it says. "More importantly, the board finds that without some enforceable covenant about the availability of the market-priced energy, the ML project does not represent the lowest long-term cost alternative for electricity ratepayers in Nova Scotia."
For those reasons, it says it attached the condition that the project obtain from Nalcor the right to access market-priced energy or provide some other way of ensuring access to energy at that rate.
"In the board's opinion, such a condition should not create any practical difficulty because it would simply codify what NSPML (NSP Maritime Link Inc.) asserts is the effect of the arrangement in any case," the decision says. "It would also confirm what NSPML already states is Nalcor's view of their future relationship."
Construction of Muskrat Falls is underway in Labrador with the project scheduled to generate power by 2017.
Jamie Baillie, leader of the Nova Scotia Progressive Conservative party, said the board's ruling backs his argument that the Maritime Link deal still needs work.
"Despite today's decision, we still do not know how much electricity from Muskrat Falls will cost or what it will do to our power rates," he said.
