Nova Scotia Power has been given permission to hike customer bills to cover its fuel costs for the next three years.

The utility said residential customers will pay, on average, $22.80 more per year.

In a statement to CBC News, company spokesperson Andrea Anderson said power rate increases over the past five years have been less than the inflation rate.

The "fuel stability plan" approved by the Nova Scotia Utility and Review Board will see Nova Scotia Power pay nearly $2 billion for fuel used to generate electricity over the next three years. It also reflects costs related to the Maritime Link, which was built to carry hydroelectricity into the province from Newfoundland.

Nova Scotia Power said without a smoothing mechanism, customers would see "significant uneven rate changes over the next three years."

Customer groups supported the idea of a three-year plan, but — as is usual in regulatory hearings — they contested some elements in the application.

Average hike

The utility said for residential customers, the approved fuel plan means a 1.1 per cent yearly increase, which equates to an average of $1.90 per month per customer, depending on consumption.

Exact numbers will be filed with regulators later this month.

The utility has not decided if it will seek an increase to cover costs not related to fuel in 2020.

Those were frozen by the McNeil government, but the cap is ending.

"A disciplined focus on internal cost restraint has enabled Nova Scotia Power to avoid seeking an increase in non-fuel costs since the 2014 general rate application," Anderson said.

"We are continuing to work very hard on that path. We haven't determined when we will file the next GRA. We remain committed to continuing our efforts to avoid non-fuel increases for customers."

Plan for excess earnings rejected

Regulators did not give Nova Scotia Power everything it was seeking.

The board rejected a company request that it create and control a fund for earnings above its 8.75 to 9.25 per cent rate of return.

Nova Scotia Power wanted to use that money to pay unexpected costs and reduce pressure for a general rate increase.

Currently, over-earnings are automatically applied to the fuel bill to keep rates down, which is a "simple and easy" system the board said has "served well for a number of years."

"The proposal by Nova Scotia Power involves negotiation and agreement — but agreement by whom? Will all customer classes, some of whom do not normally attend hearings, be represented? Then, perhaps, a contested application to the board?" asked board members Peter Gurnham, Roland Deveau and Steven Murphy.

The decision maintains the status quo.

The board also threw out Nova Scotia Power's claim it lacked jurisdiction to decide how over-earnings should be spent, refusing to become a "toothless tiger."

The board said since it has the power to set a rate of return, "the board must have jurisdiction in setting just and reasonable rates to determine how that excess revenue is dealt with."

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