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.