KJIPUKTUK (Halifax) – In 1992 the province sold Nova Scotia Power to Emera for $192 million (~$320 million in today’s dollars). Ever since Nova Scotia Power has been paying allegiance (and dividends) to the interests of shareholders, and is no longer directly accountable to Nova Scotians.
The Centre for Policy Alternatives calculated that the actual cost of divestment resulted in a ~108 million loss for the province at the time of the sale. The proceeds covered the provincial deficit, which of course represented costs incurred before 1992. This is why in 1992 Nova Scotians did not benefit from the sale, and why we continue to pay the price to this day.
At the time Nova Scotia Power was privatized Mulroney was Prime Minister and Donald Cameron was the Nova Scotia premier. Both were infamous for pursuing neo-conservative agendas that transferred public assets to big business.
There are many problems with a strategic focus on shareholder value; most prominently, investors prioritize low operational costs, high revenues and increasing dividends. For example, stock prices often react favourably to major layoffs because of resulting increases in profit margins.
A market-based economy makes it less attractive for corporations to make investments that realize long-term benefits (such as shifting away from coal). Instead, corporations are concerned with meeting quarterly revenue targets to keep stock prices high. Cuts to dividends cause the stock price to drop. A drop in stock prices directly impacts executives’ bottom line, who generally receive company shares and stock options as part of their compensation and bonus package. In weighing the alternatives of devastating the lives of long-serving, hardworking employees against taking a small, temporary pay cut, executives rarely choose to take the pay cut.
According to the rhetoric of the Mulroney/Regan/Thatcher era, privatization and deregulation create competitive markets that encourage corporate innovation and cost reductions for consumers. In practice, a deregulated, decentralized, multi-supplier system is inherently flawed; just ask Texas, where millions lost power during a cold spell and now face higher energy bills as a result
But Emera was not privatized in a competitive market. They have a monopoly over electrical supply in the province.
In 1992, the sale of Nova Scotia Power was supposed to create consumer value through competition with oil heating suppliers. However, to save money through the transition from gas to electric heating, consumers must invest in a thermal storage unit and cover the cost of installation, which is not a cost-effective way to save money. Households that use electric heating with baseboards or radiant in-floor heating (representing ~35% of electric heating consumers) have the highest heating costs in the province. Since Nova Scotia Power is known for frequent power outages, Nova Scotians who pay the highest heating rate have the least reliable heating systems.
In 2019 Hurricane Dorian left tens of thousands without power across Nova Scotia, Florida, the Caribbean, and other pockets along the east coast of North America. In the same year, Emera reported net adjusted earnings of $229 million from Canadian Electric Utilities alone and paid shareholders over $585 million. Since Nova Scotia has some of the lowest wages and savings rates in the country, most wealth transferred to shareholders exits the province and does not return.
Consumer protections don’t cut it
The NS Public Utilities Act set forth some consumer protections, including setting a cap on annual dividends and providing municipalities and some non-profits lower electricity rates. The Public Utilities Act also established the Utilities and Review Board (URB) to regulate all Nova Scotia utility suppliers and ensure consumer’s best interests are protected.
While the Minister of Finance can compel the Board to give evidence on their decisions, utilities are not directly regulated by the Government. The Minister of Finance appoints the members of the URB; they receive superannuation at the fixed rate of Senior Officials Pay Plan, including pensions and benefits; they also receive lifetime appointments, with some members serving since 1998. Their duties include approval of rate increases, new construction, executive pay, and annual dividends; they also mandate infrastructural improvements.
In sum, the members of the URB have substantial expertise in promoting business interests. There are no members with expertise in consumer protection, Indigenous Land and Treaty Rights or intersectional income inequality/instability. I think we can safely say that this mix of lawyers, engineers and accountants are not struggling to pay their electricity bill, unlike 38% of NS power consumers.
Despite such a powerful “consumer protection” board, why are Nova Scotia’s electrical consumers paying increasing rates to a company that has outperformed the TSX and Utilities Capped index for 20 years in a row and reported a ~13% shareholder return over the last five years (Emera Annual Report)?
Clearly, URB oversight isn’t enough. Nova Scotia Power should never have been sold.
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