On May 16, Hydro President and CEO Jennifer Williams joined Minister Parsons as the Government of Newfoundland and Labrador announced the final details of the Rate Mitigation Plan. Together, with actions taken to date, this plan limits rate increases related to the Muskrat Falls Project (Project) to 2.25% from now through 2030.

We know our customers have been concerned about electricity rates, and that is why we’ve been working closely with the Province for several years to ensure rates wouldn’t double when the Project was finished. Today’s plan will benefit all island customers and we anticipate that our customers will continue to pay the lowest electricity rate in Atlantic Canada on July 1.

Your Questions Answered.

What is Rate Mitigation?

The Muskrat Falls Plant and Labrador Transmission Assets were commissioned in November 2021 and the Labrador Island Link was commissioned in April 2023. Rate Mitigation is designed to allow Hydro to recover a small portion of the costs related to the Project assets from customers while providing certainty for customers, and preventing rates from doubling.

What does this mean for customers?

We recognize that many people are facing challenges and electricity customers continue to be concerned about electricity rates. All island customers will receive this rate mitigation benefit. For most customers, this means Hydro’s annual rate increase is now limited to 2.25% up to and including 2030. Without rate mitigation, rates would have almost doubled (estimated to be 23.6 cents per kWh in 2021).

Example: If your equal payment plan is $300 a month, you’ll pay almost $7 more after July 1, 2024 towards recovering costs related to the Muskrat Falls project. Without action from the Provincial Government and Hydro, this would have been an extra $200 a month. Over the course of the year, this is approximately $2,300 less than had the rate not been mitigated.

What does the Rate Mitigation Plan mean for Hydro?

Since Commissioning of the Project assets, Hydro has been responsible for paying the cost of these Lower Churchill Project assets—approximately $740 million each year. While a small amount ($44M in each of 2022 and 2023) has been collected from customers, the vast majority of costs have been accumulating in a Deferral Account.

The 2022 balance in this account was paid by a $190 million grant from GNL. The 2023 balance of $271 million will be paid down by Hydro over the next three years as part of the Rate Mitigation Plan.

Rate Mitigation allows Hydro to recover some of the costs related to the Lower Churchill Project from customers. Rate Mitigation processes follow normal regulatory processes with the Public Utilities Board, while providing certainty and transparency on rate structure.

Who is paying for Muskrat Falls, and how much?

The exact sources and amounts of funding may vary each year, but essentially the difference will be funded by Hydro.

Beyond the amount recovered from customers and from Federal Funding Sources, between now and 2030, Hydro will invest more than $2 billion to mitigate customer rates.

The portion customers pay in 2024 will be less than 10% of Hydro’s annual cost of Muskrat Falls.

Are we getting electricity from Muskrat Falls? Is the Labrador Island Link working?

We have been seeing great value from our new assets, which have significantly contributed to 92% of our electricity generated from renewable energy sources in 2023—well on our way to being a net zero electricity company by 2035.

In 2023, we estimate the Labrador Island Link had an availability of 96%, better than expected for this early in its operation. Muskrat Falls Plant performance was also better the Canadian average.

How does this rate compare to other provinces?

The average residential customer in the Maritime provinces is forecasted to jump to 18.0 c/kwh in 2024, from 16.6 c/kwh in 2023. The average rate for customers paying the Island Interconnected rate is currently 14.3 c/kwh. After the July adjustment, we anticipate our customers will still pay the lowest rate in Atlantic Canada.

How are Island rates determined?

Determining rates for electricity is a complex process. Newfoundland and Labrador Hydro produces the electricity needed to serve all customers in the province. NL Hydro serves 24,000 customers on the island, one of which is Newfoundland Power. Newfoundland Power in turn distributes the power it receives from NL Hydro to an additional 275,000 customers on the island.

First, the cost to a utility to provide electricity to customers is determined through a very comprehensive General Rate Application Process This process has begun for Newfoundland Power and Hydro’s process will begin next year. That process sets the foundation for determining the rates for all customer classes, residential, commercial and industrial.

The majority of residents pay Island Interconnected rates. Each year, we apply to the Public Utilities Board (the regulator) to update the rate we charge to Newfoundland Power. That rate will now be set to ensure that Hydro’s impact on customer rates is limited to 2.25%. Newfoundland Power then applies for its rate adjustment, which will continue to vary. If approved by the regulator, that becomes the rate ALL residential customers on the Island. Hydro then files its rate schedule for all customer classes to the regulator for approval. Full rate schedules are updated and posted the first week of July each year.

There are separate applications for Island and Labrador Industrial customer rates. Rates for Labrador Interconnected Customers are only adjusted during a General Rate Application. Customers under the Northern Strategic Plan will continue to receive subsidized rates. We will continue to work with the regulator to implement rates and review our cost to provide service.

What happens after 2030?

While this plan provides certainty through 2030, together with Government, Hydro is committed to continued rate mitigation for our customers. What that might look beyond 2030 will be reviewed again into the future

Rates for our Island Interconnected, L’Anse au Loup and Isolated Rural customer rates are changing, effective July 1, 2023. Rates will increase between 3.4% and 6.7% for residential customers and between 7.0% and 8.4% for commercial customers.

Rates for customers in Hydro’s L’Anse au Loup and Labrador Diesel Systems are adjusted for the Northern Strategic Plan. There is no change to rates for Labrador Interconnected customers.

We know customers continue to be concerned about electricity rates. Our priority is to provide safe, cost-conscious and reliable services while meeting our commitment to a net-zero electricity system.

Why are rates increasing?

These rate changes are primarily related to fuel costs incurred from previous years that have not yet been collected by existing customer rates. The Rate Stabilization Plan was created to ensure that customer rates reflect the actual cost of electricity generation from year to year, including fuel costs.

The increase in customer rates is not related to the commissioning of Muskrat Falls or the Labrador Island link.

How were the new rates determined?

Rate changes for our retail customers are implemented in accordance with Hydro’s Rules and Regulations, Policies for Automatic Rate Changes. Changes in rates must be approved by the Board of Commissioners of Public Utilities.

When Newfoundland Power changes its electricity rates, Hydro is required to automatically adjust rates for many of its customer classes. This means either matching our rates to those of Newfoundland Power customers or adjusting rates by the comparable average rate change.

An increase to the wholesale rate we charge to Newfoundland Power was approved effective July 1. This required a 3.9% increase to the average customer bill charged by Newfoundland Power. Newfoundland Power also required an additional 3.0% average customer bill increase, reflecting its Rate Stabilization Clause and Municipal Tax Adjustment. The average rate increase varies by customer class.

For more information visit: https://nlhydro.com/electricity-rates/

This week, Hydro filed an application with the Newfoundland and Labrador Board of Commissioners of Public Utilities (PUB) related to the Rate Stabilization Plan (RSP). The Application for July 1, 2023 Utility Rate Adjustment, filed annually, provides the projected rate adjustment that will come into effect July 1.

Hydro’s application proposes an increase in the wholesale rate to Newfoundland Power of 5.5% which is estimated to increase average rates charged by Newfoundland Power by 3.9%. Based on Newfoundland Power’s preliminary numbers and expected application, we anticipate an additional 3% rate increase. Newfoundland Power will make a separate rate application for July 1 reflecting updates to its Rate Stabilization Clause and Municipal Tax Adjustment.

As a result of the two applications, most rates are anticipated to increase on average 6.9%, effective July 1, 2023. The final rate change is subject to review and approval by the PUB.

The increase is related to fuel costs incurred in prior years that were not collected through customer rates and does not reflect any additional costs associated with Muskrat Falls or the Labrador Island link.

With the Labrador Island Link now commissioned, we are working towards the final rate mitigation plan. As a result, the Government of Newfoundland and Labrador and Hydro felt the projected rate increase was high enough without requesting customers to pay even higher rates through an increase in the recovery of Muskrat Falls project costs. The evidence provided to the PUB supports that approach.

Hydro’s application is subject to review and approval by the PUB. The final July electricity rate adjustment will be known later in June and communicated broadly to customers at that time.
We know customers continue to be concerned about electricity rates and through these efforts, Hydro and the Provincial Government are working to provide stable rates for the coming year.

For more information, click here.

Rates for Newfoundland and Labrador Hydro’s (Hydro) Island Interconnected, L’Anse au Loup and Isolated Rural customer rates will remain stable, with most rates decreasing between 0.1% and 0.3%, effective July 1, 2022.

There is no change to rates for Labrador Interconnected customers.

 

Why are rates decreasing?

As Newfoundland Power changes its rates, Hydro is required to automatically adjust rates for some customers so they pay the same rates as Newfoundland Power customers or their existing rates are adjusted by the average rate of change granted Newfoundland Power.

The Public Utilities Board approved Newfoundland Power’s Utility Rate Adjustments Application for July 1, 2022, followed by Hydro’s Application, on an interim basis, which resulted in an average decrease of 0.3% in electricity rates for residential and commercial customers effective July 1, 2022.

Labrador interconnected customers are not impacted by the change in rates for Newfoundland Power customers.

Rates are implemented in accordance with Section 16 of Hydro’s Rules and Regulations, Policies for Automatic Rate Changes.

For more information visit click here: https://nlhydro.com/electricity-rates/

Each year, Hydro is required to file an application with the Newfoundland and Labrador Board of Commissioners of Public Utilities (PUB) related to the Rate Stabilization Plan (RSP). The Application for July 1, 2022 Utility Rate Adjustment provides the projected rate adjustment that will come into effect July 1. There is no expected increase to customer’s electricity rates in July as a result of this application. The 2022 filing also includes a Project Cost Recovery Rider.

Today’s filing includes a request to recover some of the costs incurred to date related to completion of the Muskrat Falls Generating Plant and Labrador Transmission Assets. In its application to the PUB, Hydro has proposed increasing the wholesale rate to Newfoundland Power to recover some Muskrat Falls costs and ensure customer rates remain stable.

Although island customers have received power from Muskrat Falls since November 2021, costs have not been passed along. Since November, the cost of supplying this energy has been accumulating in a deferral account as approved by the PUB. Consistent with its policy that electricity rates be maintained at a manageable level, the Provincial Government requested that Hydro file its Rate Stabilization Plan to keep retail electricity rates as close to current levels as possible for this year’s July 1 adjustment.

Under the normal regulatory process, customers were expected to receive an average decrease of 6.4 per cent in July, primarily as a result of fuel costs being offset by electricity supplied by the Muskrat Falls Project and the subsequent reduced production at the Holyrood Thermal Generating Station.

Hydro’s application is subject to review and approval by the PUB. The final July electricity rate adjustment will be known later in June and communicated broadly to customers at that time.

We know customers continue to be concerned about electricity rates and through these efforts, Hydro and the Provincial Government are working to provide stable rates for the coming year.

For more information, click here.

 

Newfoundland and Labrador Hydro today announced the finalization of the $1 billion federal loan guarantee and capital restructuring for Muskrat Falls (MF) and the Labrador Transmission Assets (LTA). This is part of the $5.2 billion Rate Mitigation Plan to ensure electricity rates will not double as a result of Muskrat Falls.

Following signing of the term sheets this past February, a Request for Financing was issued to obtain the best financing solution that optimizes the value of Canada AAA credit rating provided through the additional federal loan guarantee. This is the same structure used for the 2013 and 2017 financing process.

The 2022 financing process has now concluded and Hydro has secured $1.0 billion in additional financing that was underwritten by CIBC through a series of 21 bonds. These bonds benefit from a direct, absolute, unconditional and irrevocable guarantee by the Government of Canada. The effective average interest rate for the bond issuance was 3.38%.

Quotes
“We know customers are concerned about electricity rates, and our priority is to provide safe, reliable service to customers at the lowest possible cost as we manage the provincial electricity system. The financial restructuring secured through this bond issuance with CIBC is yet another critical step forward in the rate mitigation process, which ensures customer rates will not double. “Jennifer Williams
President and CEO, Newfoundland and Labrador Hydro

– 30 –

Learn More
https://www.gov.nl.ca/releases/2022/exec/0214n02/

Rates for Newfoundland and Labrador Hydro’s (Hydro) Island Interconnected, L’Anse au Loup and Isolated Rural customers decreased, effective March 1, 2022.

Why are rates decreasing?

The settlement agreement relating to Newfoundland Power’s 2022/2023 General Rate Application resulted in an average decrease of 1.1% in electricity rates for residential and commercial customers effective March 1, 2022.

As Newfoundland Power changes its rates, Hydro is required to automatically adjust rates for some customers so they pay the same rates as Newfoundland Power customers or their existing rates are adjusted by the average rate of change granted Newfoundland Power.
Rates are implemented in accordance with Section 16 of Hydro’s Rules and Regulations, Policies for Automatic Rate Changes.

 

 

Update:

Annual electricity rate adjustments related to fuel costs were approved for Hydro customers by the Public Utilities Board on June 30, 2021. Effective July 1, 2021, rates are increasing for most customers by 2.4% (or an extra $2.40 for every $100 on a customer’s bill). The average rate increase for all residential and business customers as a result of this year’s adjustment is 2.5%.

For more information about why rates are changing, click here.

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Previous:

June 11, 2021 – Hydro has filed its yearly, required application with the Newfoundland and Labrador Board of Commissioners of Public Utilities (PUB) for the annual July 1 electricity rate adjustment related to fuel costs. Due to the impacts of fuel, rates are projected to increase by 2.5% (or $2.50 for every $100 on a customer’s bill), effective July 1, 2021. This filing is currently being reviewed by the PUB.

Our electricity system continues to rely heavily on oil to provide customers with the electricity they need. Because the price and quantity of fuel used is constantly changing, each year Hydro is required to file an application with the PUB to adjust rates – this ensures that customer rates reflect the actual cost of electricity generation from year to year.

This routine, annual adjustment is called the Rate Stabilization Plan (RSP). It is based on the amount of fuel used at our Holyrood plant to produce electricity over the past year, and the forecast price of fuel we expect to pay over the coming year. Any rate changes resulting from the RSP directly cover the cost of fuel to generate electricity; Hydro does not earn any profit from these changes or charge any markup on its cost of oil.

Although the forecasted fuel price continues to be lower than recent years, over the past 12 months Hydro used more fuel than expected at the Holyrood plant to reliably serve customers. As a result, we estimate most customers on the island and in L’Anse au Loup will see rates increase by 2.5% effective July 1, 2021. This average rate increase includes the effect of both Hydro’s and Newfoundland Power’s rate stabilization adjustments.

“We make every effort to minimize the amount of fuel used to generate electricity while maintaining reliable service. I want to assure customers that this increase strictly recovers only Hydro’s changes in fuel cost to provide reliable electricity on the island” said Jennifer Williams, President of Hydro. “As a Crown corporation we’re committed to our shareholders, the people of Newfoundland and Labrador; our priority is to provide safe, reliable service at the lowest possible cost to customers as we manage the provincial electricity system.”

A final decision on the filing is expected from the PUB later this month and we will communicate final rate changes to customers at that time.

For more information about the RSP and how oil prices impact electricity rates, visit our FAQ section.

 

On May 14, 2020, the Government of Newfoundland & Labrador announced two initiatives to help electricity customers deal with the financial impacts of COVID-19:

One-Time Electricity Bill Credit: Residential and general service customers including businesses and other organizations whose rates are based on Holyrood fuel costs will receive a one-time credit on their bill, at a date to be determined by the Public Utilities Board. The credit is expected to vary based on customers’ usage.

Interest Relief: For customers who have been unable to keep up with their electricity bill payments, government is providing up to $2.5 million to waive the interest on overdue accounts for eligible residential and general service customers throughout the province. This includes residents, businesses and other organizations that are struggling as a result of COVID-19 and will be for a period of 15 months commencing June 1, 2020. Customers will be required to continue to make regular monthly payments to their account, as agreed upon with their utility.

Detailed information about the bill credit and interest relief program, including eligibility and other conditions, will be available in the coming weeks. Please visit our website regularly and follow us on social media for updates.

To read the news release about these programs, visit the provincial government website here.

Learn more about additional steps Hydro has taken to support customers throughout the COVID-19 pandemic here.

Earlier this week it was brought to Hydro’s attention that a billing issue occurred impacting our residential customers in Labrador isolated diesel communities. Some customers’ bills are inaccurate, and we sincerely apologize to customers for this error. We have taken immediate steps to correct the error and we are in the process of issuing corrected bills for impacted customers, which will include a credit for energy which was billed incorrectly.

Our customers in Labrador isolated diesel communities have a rate structure whereby the first block energy rate (1000 killowatt hours) is charged at a lower rate, with electricity use beyond the first block charged at progressively higher rates.

Unfortunately, delayed meter readings resulted in some electricity bills being estimated too low – when meters were read for February bills and a true-up was completed, the additional energy usage was inappropriately charged in the higher rate blocks – resulting in the higher than normal bills for customers.

We are reviewing our metering practices in an effort to ensure accurate meter readings. Wherever possible, we read meters on a monthly basis. In the event of extreme weather conditions, our meter readers may not be able to get meter readings on a regular basis. In such cases, readings will be estimated based on past usage and, if necessary, bills are adjusted when future readings are taken. You can find more about meter reading on our website – https://nlhydro.com/customer-service/meter-reading/

We encourage customers who have any questions regarding the accuracy of their bill to call our customer service team at 1-888-737-1296 and we apologize to our customers for any concerns these inaccurate bills may have caused.

Customers on the Labrador Interconnected System (which includes Labrador City, Wabush, Happy Valley Goose Bay, North West River, Sheshatshiu and Mud Lake) are eligible for a one-time bill credit due to adjustments made from Hydro’s 2017 General Rate Application.

Those customers who were active during the period January 1, 2018 – September 31, 2019 are eligible for a 4.3% credit based before tax billings for that period.

Customers are not required to apply for this credit – the bill credit will be automatically applied.   Inactive customers, who were active customers during the period January 1, 2018 – September 31, 2019 may be eligible to receive a cheque for the amount owing.

Please call Hydro’s customer service team at 1-888-737-1296 to learn more.

 

Increased oil costs resulting in higher cost of providing electricity

On September 25, 2019, electricity rate changes for all customers were approved by the Newfoundland and Labrador Board of Commissioners of Public Utilities (the Board).  New electricity rates will go into effect on October 1, 2019.

For customers on the island, the primary driver of the October 1 rate change is increasing fuel costs for the Holyrood generating plant.  Since rates last changed in 2018, there has been a 23% increase in the forecast price of oil used at the plant. Further, there is an increase in the expected volume of oil that is used at Holyrood to reliably operate the province’s electricity system.

In Labrador, increased customer usage and growth is resulting in a rate decrease for most residential customers (on the interconnected system in Upper Lake Melville and Labrador West).

This approval by the Board is the final step in the rate setting process and marks the conclusion of Hydro’s General Rate Application (GRA), which was originally filed in 2017.

Key Points for our Customers:

• The following rate changes for customers will be implemented October 1, 2019:

Island Customers (Hydro and Newfoundland Power):
Most residential customers on the island will see rates increase by approximately 0.8 cents/kilowatt hour (6.4%). This equals about $6.40 for every $100 on an electricity bill.

Labrador Interconnected Customers:
Residential customers on the interconnected system (Upper Lake Melville and Labrador West) will see electricity rates decrease by approximately 0.1 cents/kilowatt hour (3.1%), or a reduction of $3.10 for every $100 on an electricity bill. The average rate for these customers today is 3.1 cents/kilowatt hour.

*Detailed information about rate changes for all customer classes is available here.

• The rate change on the island is driven primarily by increased fuel costs. Today we rely heavily on oil to generate electricity for customers at our Holyrood plant and the forecast price of oil has increased significantly since rates last changed in 2018, from $86 CDN/barrel in 2018 to $106 CDN/barrel for 2019. Detailed information about Hydro’s fuel costs, how the oil price is forecasted, and specific oil requirements to reliably operate the Holyrood plant, are available on our website at nlhydro.com/electricity-rates/oilcosts.

• The following table provides a breakdown of Hydro’s most recent fuel price forecast (for the period from July 1, 2019 through June 30, 2020):
  

  Forecast Price of No.6 Fuel	$75.10 USD/bbl
  Fuel Specification Premium	$  4.13 USD/bbl
  Total Forecast Price of No. 6 Fuel	$79.23 USD/bbl
  March 2019 USD/CAD Exchange Rate	1.3368
  No. 6 Fuel Price Forecast	$105.90 CAD/bbl

• Hydro does not make any profit on the cost of fuel to serve customers. These costs are a direct flow-through to customers, with no mark-up, through a long standing process approved by the Public Utilities Board.

• If Hydro’s fuel cost forecast (both the amount we use and the price) are less than anticipated, rates will be adjusted and customers will receive the benefit.