Federal $500M bailout for Muskrat Falls power delays to keep N.S. rate hikes in check

Ottawa is negotiating a $500-million bailout for Nova Scotia’s privately owned electric utility, saying the money will be used to prevent a big spike in electricity rates.

Federal Natural Resources Minister Jonathan Wilkinson made the announcement Monday in Halifax, saying Nova Scotia Power Inc. needs the money to cover higher costs resulting from the delayed delivery of electricity from the Muskrat Falls hydroelectric plant in Labrador.

Wilkinson said that without the money, the subsidiary of Halifax-based Emera Inc. would have increased rates by up to 19 per cent over a few years.

“Nova Scotians already pay higher energy bills than many provinces in the country. Immediate cost recovery of these costs in 2025 could have resulted in a potential near-term increase” in power rates, the minister said during a news conference.

“The action we are announcing today is anticipated to reduce the annual increase very, very significantly.”

The Nova Scotia utility helped pay for construction of the underwater transmission link between Nova Scotia and Newfoundland that carries electricity generated by the Muskrat Falls hydroelectric project in central Labrador.

But the massive dam and generating station has been inconsistent in delivering electricity over the past five years.

While the 180-kilometre undersea link — known as the Maritime Link — was completed on time and on budget, Muskrat Falls has suffered through power production difficulties and software glitches within the Labrador-to-Newfoundland transmission system.

As a result, Nova Scotia homeowners and businesses didn’t receive all of the expected hydro power they expected, and Nova Scotia Power was forced to purchase more expensive and polluting fuels to boost production from their existing generating stations.

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Nova Scotia Power CEO Peter Gregg said the deal, once approved by the province’s energy regulator, will keep rate increases limited “to be around the rate of inflation,” as the higher fuel costs are spread over a number of years.

In 2021, Ottawa restructured its financial assistance for the Muskrat Falls project and Newfoundland’s power company to avoid a forecast 75 per cent increase to Newfoundland and Labrador’s power rates. By then, the project’s initial, projected cost in 2012 of $7.4 billion had almost doubled.

Its mounting costs prompted a $5.2-billion bailout from Ottawa.

In December 2023, Nova Scotia’s Progressive Conservative government asked for Ottawa’s help with the potential higher costs resulting from Muskrat Falls.

Wilkinson said the federal Liberals were pleased they could make a deal, saying it’s essential provinces without access to hydroelectricity find green sources of power. He said without this power, companies may move elsewhere to obtain electricity that doesn’t generate carbon emissions.

The announcement Monday comes in the wake of Wilkinson visiting the province in July to announce $192 million in funding for six clean electrical energy projects. That announcement was for three 50-megawatt battery storage systems to be operated by the utility and for three wind farm projects.

Despite the steady flow of money to Nova Scotia in recent weeks, on the weekend Premier Tim Houston repeated his government’s calls for Ottawa to foot the entire bill to protect the Chignecto Isthmus — a vital strip of land connecting the province to New Brunswick — from climate-change related storms.

Kody Blois, the leader of the federal Liberal Atlantic caucus, said he finds it difficult to understand why Houston is taking an antagonistic approach.

“I look at the Facebook page of the premier and it’s almost every other day he wants to create a fight with the government of Canada,” Blois, a Nova Scotia MP, said during Monday’s news conference.

“That’s fine. There’s always going to be times we disagree … but I just hope the premier will recognize the significant contribution this (Liberal) government has made in the province of Nova Scotia.”

Sean Fraser, the federal minister of infrastructure, said the roughly $325 million Ottawa has approved for improving the dikes that protect the Isthmus is the largest amount approved to date under the federal Disaster and Mitigation Adaptation Fund.

He questioned the decision by Nova Scotia and New Brunswick to continue a court battle to have Ottawa shoulder all of the costs, saying the legal fees would be better spent on the project itself.

This report by The Canadian Press was first published Sept. 16, 2024.