Electricity rates will go up for Islanders and plans for a new $68-million power generator will be shelved if a new joint proposal by the P.E.I. government and Maritime Electric is approved by the Island Regulatory and Appeals Commission.
The P.E.I. government and Maritime Electric have issued the joint application to IRAC for a new General Rate Agreement.
This agreement proposes to increase electricity rates incrementally over the next three years.
The increase would amount to 2.3 per cent for the average residential customer every year for the next three years – amounting to a total 6.9 per cent increase by 2018.
The utility estimates this will be an increase of about $2.60 a month each year for the next three years.
Energy Minister Paula Biggar says this proposed rate agreement has been struck with the utility to ensure electricity price stability for Island ratepayers.
She noted Maritime Electric had previously applied for a higher rate increase of 2.5 per cent for 2016, so this new agreement lowers that amount for Islanders and locks it in at a predictable rate for three years.
“If we hadn’t come to this three-year agreement, there would be an annual filing for rate increases by Maritime Electric,” Biggar said.
“This would have meant an annual hearing process and no real guarantee on what the rates would be… this will stabilize our rates.”
The rate increase is necessary due to the costs of the new underwater power cable and inflation of production costs for the utility.
The money will also go toward beginning the process of decommissioning the Charlottetown thermal plant on Cumberland Street.
As part of this agreement, Maritime Electric has withdrawn its previous application to IRAC for a rate increase and has also withdrawn its application for a new $68-million combustion turbine generator.
This new diesel-fired generator was thought to be necessary due to growing demand for electricity in P.E.I.
But thanks to a new deal signed between Maritime Electric and New Brunswick, P.E.I.’s transmission capacity from N.B. will be increased from 80 megawatts to 130 megawatts.
This eliminates the need for the CT4 generator.
Fred O’Brien, CEO of Maritime Electric, says this plan has been approved by the New Brunswick System Operator.
“We feel confident this is the right way to go.”
Another aspect of this agreement will see Maritime Electric accept a slightly lower equity return to its shareholders of 9.35 per cent, down from 9.7 per cent.
O’Brien says this is the lower end of the range that would be acceptable for investors in a company of Maritime Electric’s size.
“We felt that (lowering the equity return) was necessary to show our commitment to this agreement and to make the agreement work, so we were willing to do that.”
Biggar acknowledges this agreement does mean to an increase in electricity rates for Islanders. But she explains this will ensure more stability for ratepayers in a market prone to price volatility in light of the soon to be expired P.E.I. Energy Accord.
“There is a need to ensure that we have stable and predictable energy coming to P.E.I. and this was the most economical way to fund that,” Biggar said.
Meanwhile the province is in the midst of developing a provincial energy strategy. An RFP for the work on this strategy closed on Jan. 15.
Biggar said the successful bidder would be announced soon, followed by public consultations. The completed energy strategy is expected in the spring.