Nova Scotia energy strategy proposal expected this fall

By the OGJ Online Staff

HOUSTON, Sept. 7 -- A proposed energy strategy for Nova Scotia is expected be ready for government consideration later this fall, government sources said Friday.

In comments submitted this week, the parent company of the provincial electric utility and part owner of the Maritimes & Northeast Pipeline called for a "staged" opening of the power markets to competition and for "nurturing" local involvement in the expansion of Nova Scotia's natural gas industry.

Emera Inc. also called on the provincial government to appoint a minister of energy to work with other provinces as well as "insure the right regulatory climate exists to protect the public interest, while encouraging a thriving natural gas industry."

Government can help Emera and other qualified local companies grow and acquire new skills to compete against multinationals who dominate the industry, the company said, by "judiciously" using existing power to insure significant participation by Nova Scotian companies in "this historic opportunity."

Prompted by the discovery of large natural gas deposits offshore, the Canadian province began soliciting comments and recommendations in the spring on a comprehensive strategy. It is expected to cover all aspects of the industry, ranging from oil and gas to coal and from the upstream segments of oil and gas explorations to the still-regulated electric power industry.

"Encouraging a diversity of players reduces the risk of boom and bust cycles, supports long-term economic sustainability, and facilitates local involvement in this new industry," said Emera CEO David Mann.

Go slow approach
The nearly year long process, which included a government team assigned to the project, public forums, and written comments, is about wrapped up, said Bruce Cameron, a team member and director of communications for the Nova Scotia Petroleum Directorate. But he declined to say specifically when the proposals will be presented.

With respect to electricity Emera pointed to the lessons of other jurisdictions, such as California, in recommending a go-slow approach to deregulation. Its wholly owned Nova Scotia Power Inc. is a regulated electric utility that supplies over 95% of the electric generation, transmission, and distribution in Nova Scotia.

Emera said a main consideration should be protecting the "significant" electricity price advantage Nova Scotia enjoys relative to other parts of northeastern North America. The company said the first step should entail opening competition for Nova Scotia Power's wholesale customers, which consist of six municipal electric utilities, serving approximately 7,000 customers and representing about $10 million (Can.) in annual electricity sales.

These customers should be given the option of purchasing electricity from other suppliers, including companies outside the province, Emera said. Opening Nova Scotia's wholesale market is significant because it would demonstrate reciprocity, thereby giving Canadian generators access to US markets. Emera also proposed Nova Scotia Power be permitted to develop transmission tariffs for wholesale customers and exporters of electricity.

During the transition period, Emera proposed Nova Scotia Power would retain responsibility for forecasting load growth, planning adequate generation of electricity, and developing market mechanisms to encourage nonutility-owned generation. It also proposed reserving for the utility the ability to build new generation at market rates of return.

Current regulated rates of return on equity of 10.5-11% are not attractive and provide little incentive for the utility to incur the risk of adding new generating capacity, Emera said. It recommended an energy minister manage the phased approach to opening the electricity markets.