12/21/2012 10:11 EST | Updated 02/20/2013 05:12 EST

Nova Scotia board approves two, three per cent electricity rate hikes

HALIFAX - Nova Scotia's Utility and Review Board has approved a plan that will see electricity rates rise by three per cent in 2013 and another three per cent the following year.

The rate increases take effect on Jan. 1 of each year, the board's decision released Friday says.

"The board is satisfied that the (rate application) is in the public interest and that it should be approved," it says. "In the view of the board, the (rate application) provides for rates that are just and reasonable."

The board says that without Nova Scotia Power's so-called rate stabilization plan, customers would have faced much larger rate increases, particularly in 2013.

The province's consumer advocate also supported the plan, saying it will even out rate increases.

According to the utility's application, the hike will cover only a portion of its increased costs in each of the next two years.

The utility, owned by Emera (TSX:EMA) Inc., said it will make up that revenue shortfall beginning in 2015.

It has said the rate increase would add about $3.50 per month to the average household power bill in each year.

The board's decision also criticizes Nova Scotia Power for its opposition to an audit by Liberty Consulting Group that ruled the utility had overspent on fuel by roughly $22 million over the past two years.

The utility had repeatedly dismissed the audit and rejected its recommendations.

The board says it was "disappointed" with the utility's response and imposed a penalty that will take the form of a $2 million drop in profits for shareholders that will be returned to ratepayers over time.

"NSPI's course of action distracted and misdirected all parties in this proceeding from addressing some of the other important issues in the hearing," the decision says.

"NSPI's course of action had the effect of wasting scarce resources, in terms of time, money and human resources, for all parties."

Rob Bennett, Nova Scotia Power president and CEO, said the utility "could have done a better job replying to the audit."

"We still believe standing up for the reputation of our employees and our company was the right thing to do," Bennett said in a statement. "We appreciate that the board has recognized that our employees are 'both competent and professional,' and that the fuel adjustment mechanism is functioning properly."

Liberal energy critic Andrew Younger said he's discouraged that electricity rates will rise, but commended the board for penalizing the utility "for its attack on Liberty."

"We felt those penalties ... should be returned to ratepayers immediately, which would have reduced the rate increase," said Younger. "Unfortunately, ratepayers aren't going to see any relief in this decision."

Progressive Conservative Leader Jamie Baillie called the board's penalty "unprecedented."

"I'm pleased that they did that, but what we really need is to put in place tighter regulations on unregulated Emera so that ratepayers are protected and electricity rates can be frozen."

In a news release, the Canadian Federation of Independent Business said the rate increase is a "tough pill for small business owners to swallow."

"What we heard loud and clearly is that while small businesses were making these extraordinary efforts, there wasn’t the sense the utility was doing the same to protect its customers," said Leanne Hachey, vice-president of the federation's Atlantic division.