The Public Utilities Board says its recommended rate mitigation options would see power rates rise to about 20 cents per kilowatt hour in 2021, far exceeding the Liberal government’s target of 13.5 cents a kilowatt hour.
That conclusion was contained the PUB’s final report on rate mitigation, which was made public Friday evening. The projection does not include any help from Ottawa, as talks between the provincial and federal governments are continuing.
Even if Ottawa does provide the equivalent of $200 million in annual help, rates would still rise to 16 or 17 cents a kilowatt hour, also above the government’s target rate.
“When the Muskrat Falls Project was sanctioned in December 2012 the average domestic customer rate on the Island Interconnected system was projected to be 15.1 cents/kWh in 2021,” the PUB wrote in its report.
“In June 2017 this forecast rate had risen to 22.89 cents/kWh, an increase of approximately 75% from the current average domestic rate of 13.06 cents/kWh. An increase of this magnitude is well above the 10% threshold normally considered to cause ‘rate shock.’
“Even if all of the recommended sources of mitigation identified during the review are applied it is estimated that this rate increase would still be over 50% and the average domestic rate would be approximately 20 cents/kWh in 2021.
“During the course of this review Government announced its intention to keep rates at or below 13.5 cents/kWh in 2021. This would require mitigation of over $600 million. Applying the mitigation sources recommended by the Board would still leave a gap of over $400 million in 2021.
“It is not clear whether the target rate of 13.5 cents/kWh will be maintained in subsequent years or will escalate over the period to 2030. It is clear however that, even with the application of all identified rate mitigation opportunities, the rates would remain well above 13.5 cents/kWh for a number of years.
“To close this substantial gap it would be necessary to apply additional sources of mitigation. Based on the information provided, the primary additional source of mitigation relates to Muskrat Falls Project financing. This opportunity was addressed in the Board’s interim report but was not subsequently examined on the basis of Province’s announcement that it was in negotiations with the Government of Canada.
“Assuming that the available additional mitigation associated with this opportunity is approximately $200 million, it is estimated this would reduce rates by approximately 3 cents/kWh to between 16 cents/kWh and 17 cents/kWh. This would still leave a gap of approximately $200 million.”