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Frequently Asked Questions

What is causing electricity rates to increase on the island in 2019?

The rate change is driven primarily by increased fuel costs. While there are many factors that contribute to the cost of generating and delivering electricity, the majority of the proposed rate increase for customers in 2019 on the island is related to the cost of fuel. Today we rely heavily on oil to generate electricity for customers at our Holyrood plant.

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.

As requested by the Board, the rate changes also include costs from the annual Rate Stabilization Plan (RSP) adjustment, which is normally implemented on July 1 each year, but this year will be combined with the GRA rate adjustment. The RSP is used to adjust rates to reflect the actual price and amount of oil used each year at the Holyrood Thermal Generating Station. This further adds to the fuel costs included in the current proposed rate adjustment.

Why is Hydro forecasting a fuel price of $106?

Hydro uses a long-standing approach, approved by the PUB, to forecast the price of No. 6 fuel. Hydro provides the PUB with two fuel price forecasts each year – one for March and another for September. Given the March 2019 fuel price forecast is the most up-to-date forecast on record, the proposed October 1, 2019 rates are based on this forecast.

Hydro uses a third-party oil market expert to provide the base price forecast in US dollars. In order to ensure Holyrood operates reliably for our customers, Hydro also has a very specific fuel requirement which commands a premium on the open market. As a result, a premium of $4.13/barrel is added to the base forecast price. In addition, fuel prices are typically traded in US dollars, which must be converted to Canadian when Hydro pays its fuel bill.

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

Details of the additional fuel price forecasts provided to the PUB can be found on their website, here.

What specific type of fuel is used at the Holyrood Plant?

Hydro uses No. 6 fuel oil with a 0.7% sulfur content to produce electricity at Holyrood. In 2014, Hydro engaged a consultant (Stantec) to recommend a No. 6 fuel oil specification to ensure the reliable operation of the Holyrood plant. Due to this specific fuel requirement, a premium of $4.13 USD/barrel is added to the base forecast price that Hydro pays for fuel for Holyrood.

The recommended fuel specification details are available here.

How much fuel do you expect to use at the Holyrood plant?

We continue to rely heavily on fuel to generate electricity at Holyrood and manage our provincial electricity system safely and reliably for customers. Hydro’s rates are set based on a forecast of more than 1.8 million barrels of No. 6 fuel, at a total cost of approximately $194 million (which is included in customer rates with no mark-up).

Hydro is forecasting a price of $106, but how much is fuel costing you today?

In August 2019 Hydro’s cost of No. 6 fuel was $94.08 Canadian per barrel.

Is Hydro increasing its fuel price forecast to make more money?

No. Hydro does not make any profit on the cost of fuel to serve customers. These costs are a direct flow-through, with no mark-up.

What happens if actual fuel prices are lower than Hydro’s forecast?

Every month, the Rate Stabilization Plan compares Hydro’s actual cost of fuel to what cost customers paid. If customers pay more than the cost of No. 6 fuel, these extra funds are set aside with interest and returned to customers the following year through the RSP, usually on July 1.  Here are the RSP rate adjustments we’ve seen the last several years:

2018 – increase of 4.2%
2017 – increase of 8.1%
2016 – decrease of 9.5%
2015 – decrease of 9.7%
2014 – increase of 4.0%
2013 – decrease of 8.0%

To get information on how to be more energy efficient and save money on your electricity bill each month, visit takechargenl.com