05/08/2012 09:36 EDT | Updated 07/08/2012 05:12 EDT

Nova Scotia utility applies for six per cent rate increase over two years

HALIFAX - Nova Scotia Power customers could be in for a three per cent increase in their power bills in 2013 and 2014 under a rate increase application filed to the province's regulator.

Rene Gallant, the private utility's vice-president of regulatory affairs, said Tuesday about $3.50 would be added to an average household's power bill in each year if the rate increase is approved.

Gallant said the plan is aimed at stabilizing rate increases as the company adjusts to the rising costs of producing electricity.

He said it is the first time Nova Scotia Power has filed a multi-year rate increase to the Nova Scotia Utility and Review Board.

"We know people won't be happy about these rate increases," Gallant said. "But setting rates the traditional way would mean much larger electricity price increases for Nova Scotians."

The utility said the proposed rate increases were needed because two of its largest customers — two struggling paper mills — have greatly reduced their power bills.

It also said the transition from coal-fired generation to renewable energy has been costly. But Premier Darrell Dexter said most of the proposed rate increase is due to the shutdown of the NewPage Port Hawkesbury mill — and not because of the province's increased renewable energy targets.

"That is an unfortunate reality of the way that our system is built," Dexter said. "We can't fix that in a couple of years."

Liberal Leader Stephen McNeil said the increases were unreasonable on the heels of a series of increases over the last decade.

"We've asked this government a number of times to do a performance value audit ... so that this company would go inside and look for savings and not constantly come back to ratepayers looking for more money," said McNeil.

Progressive Conservative Leader Jamie Baillie said power bills need to be based on affordability and consumption.

"We wouldn't need to be making up today for the loss of those two mills because they pointed to power prices as one of the big factors in their shutdown," said Baillie.

Gallant said the company's plan would see about $120 million in costs for expenditures such as fuel and pensions deferred until 2015, at which point the company would be able to recover them.

The cost of the three per cent bill increases over the next two years would be $70.6 million, $37.6 million of which will come from residential customers, the utility said.

If approved, the new rates would take effect Jan. 1.