Energy Plan - Government of Newfoundland and Labrador

POLICY
ACTIONS
Rate Setting
The Government of
Newfoundland and Labrador will:
• Maintain least-cost power
as the primary objective in
electricity rate setting in the
province.
• Ensure isolated diesel
customers continue to
have their basic household
requirements and preferential
rates for specified facilities.
• Negotiate with both existing
and new industrial developers
in Labrador to ensure that
the electricity rates paid are
in the best interests of the
province.
As Lower Churchill power becomes available for use within the province, it
should serve to simplify the rate-setting process. We need to ensure that the
regulatory process appropriately accommodates this new circumstance. The
regulatory process must also be reviewed to ensure that we are in compliance
with North American standards.
Rate Setting
The two key issues for the PUB in setting rates in the province are determining
the appropriate costs to provide electricity service and determining how to
allocate these costs to the various customers.
The primary principle in setting rates is to provide power at the lowest possible
cost. This will be maintained as an objective, however, we must also have the
flexibility to encourage other important priorities such as energy conservation
and environmental considerations.
The other issue for the PUB in setting rates is to determine how costs are
allocated. Rates are currently set separately for Labrador customers, Island
customers and isolated diesel customers. In Labrador, the phase-in of a new
rate structure is underway and is expected to be completed by 2011. At that
time, there will be one rate system for customers on the Labrador transmission
system. Any additional generation or transmission costs required in Labrador
will be recovered through this rate structure.
The Island transmission system will continue to be treated as a separate system
for cost allocation purposes even in the event of a transmission link between
Labrador and the Island. Isolated diesel customers will continue to have their
basic household requirements and preferential rates for specified facilities
subsidized by other consumers.
Electricity costs for existing major industries in Labrador are generally exempt
from regulation by the PUB; historically they have been set through contractual
arrangements. The generation components of Labrador industrial rates will
continue to be exempt from regulation. In the future, the province will negotiate
with both existing and new industrial developers in Labrador to ensure that the
electricity rates paid are in the best interests of the province. The principles of
these negotiations will be:
• Consideration of the market value of energy resources;
• The extent to which the power rate will leverage viable industrial
development; and
• Long-term power supply arrangements will only be considered where the
opportunity for escalation of the power rates exists.
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In conjunction with development of the Lower Churchill, the Energy Corporation
is in discussions with various parties on potential power sale arrangements.
For existing customers, this may require that the province assess the costs and
benefits of continuing these historical arrangements, considering a combination
of existing and future generation sources. These arrangements will be designed
to balance the realities of market conditions with the need to encourage support
of industries which significantly contribute to the provincial economy.