11/25/2014 11:24 EST | Updated 01/25/2015 05:59 EST

Regulator quashes Nova Scotia government plan to reduce electricity rates

HALIFAX - The Nova Scotia government has promised to introduce legislation that it says will better protect power customers by changing the relationship between the province's electricity regulator and utility Nova Scotia Power.

Energy Minister Andrew Younger made the announcement after the Nova Scotia Utility and Review Board blocked a government plan aimed at reducing electricity rates in 2015.

The Liberal government had promised rates would drop in the new year as it wanted most Nova Scotia Power customers to stop paying a monthly energy efficiency charge.

But the independent board issued a decision saying the $53 million in fees will remain in place to help cover the utility's rising fuel costs.

Younger said he was left frustrated by the decision, saying the board rejected government proposals that would have reduced electricity rates and eliminated the added fuel costs.

He also said the board issued a partial decision because it had yet to decide on some tax-related issues that could reduce fuel costs by a considerable amount.

"The government didn't remove the efficiency tax so that it could free up room to cover other costs," Younger said in a statement Tuesday.

"We wanted ratepayers to get the much needed and deserved rate relief they've been asking for. Our proposals to the board would have paid down the fuel deferral but would still have ensured some rate relief to Nova Scotians."

The board said it had to take action because Nova Scotia Power customers would be hit with a steep rate increase next year as the utility would be required to pay off about $100 million in fuel costs that were not recovered.

The board's decision says Nova Scotia Power will also use $33 million in projected over-earnings to pay down its fuel bill, which will effectively keep rates stable next year.

Lawyers for the province argued that the government had promised rate relief in 2015, but the board concluded that delaying repayment of fuel costs would add $7.5 million in interest.

"So customers have a choice," the decision says. "They can begin to pay now or pay later recognizing they will have to, by delaying, pay a higher amount."

The board also said that all of the customer groups taking part in recent hearings had asked the board to keep rates stable by charging ratepayers at the same level as the now-defunct energy efficiency fees.

As well, the government's rate-reduction promise has not been enshrined in legislation, the board noted.

"While the board always is, and must be, cognizant of government energy policy, the board has a role as independent regulator to adjudicate utility matters in the best interests of ratepayers," the decision says.

"Unfortunately, that obligation and government policy may not always be completely aligned."