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Frequently Asked Questions

Why does Hydro adjust electricity rates based on the price of fuel?

Although we expect to use less fuel in the future, today we rely heavily on oil to operate our Holyrood plant and reliably serve customers – this has a direct impact on electricity rates. But the price of fuel is volatile and constantly changing, so Hydro normally adjusts rates every July 1st based on the price of oil used to generate electricity at Holyrood, the amount of electricity used by customers, and the annual amount of water we use for hydroelectric generation.

How does the price of fuel impact electricity rates?

There are many factors that contribute to the cost of generating and delivering reliable electricity service for customers – things like the type of generation we use (thermal or hydro), investments we have made in the electricity system, and our day-to-day operating and maintenance costs. The biggest of these is fuel costs, which makes up almost half of the total cost of providing electricity to customers.

What is the forecasted fuel price for 2021-22?

Hydro provides the provincial regulator, the Board of Commissioners of Public Utilities (or PUB), with two fuel price forecasts each year – one for March and another for September. The most recent fuel price forecast for 2021-22 (prepared in March 2021) is $68.84 USD/barrel.

How much will this fuel price forecast impact electricity rates in 2021?

Any rate adjustments are subject to review and approval by the PUB. We plan to file an application for the RSP rate adjustment with the PUB in spring 2021 and expect to know the final electricity rate changes in June, following their review and approval. We will communicate final rate changes to customers at that time.

How does Hydro forecast the price of fuel?

Hydro uses a long-standing approach, approved by the PUB, to forecast the price of No. 6 fuel.

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.

The following table provides a breakdown of Hydro’s most recent fuel price forecast (for the period from July 1, 2021 through June 30, 2022):

Forecast Price of No.6 Fuel $64.71 USD/bbl
Fuel Specification Premium $  4.13 USD/bbl
Total Forecast Price of No. 6 Fuel $68.84 USD/bbl
March 2021 USD/CAD Exchange  Rate 1.2560
No. 6 Fuel Price Forecast $86.45 CAD/bbl

*Note: Because fuel prices are typically traded in US dollars, they must be converted to Canadian when Hydro pays its fuel bill.

What type of fuel is used at Holyrood?

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.

How much fuel do you expect to use at Holyrood for 2021-22?

We expect to use much less fuel at Holyrood in future. For 2021-22, we estimate that we will burn approximately 450,000 barrels of No. 6 fuel oil. In the past, we would use about four times that amount in a given year, on average.

What happens if fuel prices are higher or lower than expected?

Every month, we compare our actual cost of fuel to the cost customers paid. If customers pay more than the cost of fuel, these extra funds are set aside with interest and returned to customers the following year through the Rate Stabilization Plan (RSP), usually on July 1. Hydro does not make any profit off the price of fuel.

Here are the RSP rate adjustments we’ve seen over the past last several years:

2020 – no change (due to pandemic, one-time bill credit applied on customers’ bills – see below)
2019 – increase of 7.6% (includes rate change resulting from most recent General Rate Application)
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%

Why didn’t rates change on July 1, 2020?

As a result of the pandemic’s impact on the province last year, residential and business customers who would normally see their electricity rates adjusted on July 1st each year, instead received a one-time credit on their electricity bill for 2020.

The credit was based on Hydro’s expected fuel savings at the Holyrood thermal generating plant. The decrease in oil prices worldwide in 2020 meant it would cost us less to produce electricity – those savings were passed directly onto our customers.

For 2020, the one-time bill credit replaced the annual July 1st electricity rate adjustment that normally occurs through the Rate Stabilization Plan. The credit provided customers with our expected savings upfront – providing relief on electricity bills at the time, rather than spreading out the forecasted fuel savings over the usual 12 month-period.

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