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The Nova Scotia Utility and Review Board has directed Nova Scotia Power Inc., an electric utility, to design and submit time-of-day (TOD) rates based on energy costs for all classes of customers except residential users. At the same time it denied a call for less emphasis on resource planning, and disallowed half the costs incurred for an executive compensation incentive program.
The Board rejected a proposal by the utility to redesign rates to reflect time of use by implementing seasonal rates, using on-peak demand levels for billing purposes. It found that the seasonal demand charges advocated by the company as part of its integrated resource planning (IRP) and rate design efforts "are not an effective cost-reducing rate design" because they do not encourage load-shifting that will improve the load factor and reduce the average level of excess capacity.
It also rejected the utility's call to reduce the emphasis on IRP and demand-side management (DSM), in anticipation of the "opening of the power grids to competition." The Board said that the utility should continue its current IRP efforts, including an "appropriate risk analysis" in its long-term planning studies to accommodate any reasonably foreseeable changes in planning parameters. The Board acknowledged that greater use of excess capacity (through reduced DSM efforts) would trim customer bills in the short term, but warned that such a plan would advance the need for new capacity, even without growth.
To guide the utility in developing the new rates, the Board reviewed evidence concerning technological developments crucial to TOD rates. To ensure that there is an "economic incentive" for such rate initiatives, the Board accepted electric thermal storage and hot-water storage technologies as rate-base expenditures, providing that the equipment is handled on a "direct-to-customer basis and a "lease-to-own basis."
While reviewing the company's expense projections, the Board disallowed 50 percent of the cost of the its corporate incentive compensation program, which employed a combination of corporate, divisional, and personal performance to set compensation awards. It explained that programs whose payout is tied entirely to shareholder return are "of dubious benefit to customers," while carefully formulated personal performance targets "may very well benefit customers directly." Re Nova Scotia Power, Inc., NSUARB-P-868, March 4, 1996 (N.S.Util.Rev.Bd.).
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