The cost of electricity in Nova Scotia is already very high, and soon it’s going to be even higher. This is a big problem for business in the province — and for ordinary residential customers. A 2010 survey showed that, for most users, Nova Scotia electricity is more expensive than electricity anywhere else in Canada except Ontario and Prince Edward Island. Some Nova Scotia users pay almost twice the price they would pay in Quebec, Manitoba or British Columbia.

In April, Nova Scotia Power Corp. announced that it was seeking more big rate hikes from the provincial Utility and Review Board, to be effective at the beginning of 2012. The details have yet to be worked out, but it looks as if increases for various classes of customers will be 7%-17%, with big, industrial users subject to the largest hikes.

Privately owned NSP predicts more substantial rate increases over the next few years. One of the reasons is the utility’s plan to make massive capital expenditures to increase its power-generation capacity.

NSP is owned by Emera Inc., a Canadian public company trading on the Toronto Stock Exchange. Emera emerged from the privatization of Nova Scotia’s electricity system in the early 1990s. The privatization has been controversial ever since it happened, with the usual complaint being that the privatized company cares more for its shareholders than it does for its customers. (After every winter power failure in the province, there are newspapers stories about poor old Granny on the South Shore, swathed in blankets and freezing in her modest house while calls to the electricity company go unanswered.)

In New Brunswick, the province’s 2009 plan to sell New Brunswick Power Corp. collapsed in the face of huge public opposition. The same thing happened in Newfoundland in 1994. Some say those provinces learned the Nova Scotia lesson.

Why is Nova Scotia’s electricity so expensive? One theory is that Emera enjoys “monopoly rents,” increased earnings because of the restricted availability of electricity. The current yield on Emera’s shares is more than 4% and the stock has almost doubled in the past year, a heady brew for stockholders. Emera recently reported a 63% increase in earnings for the first quarter.

Another explanation is that NSP is intent on generating power itself, when it could buy cheaper power from independent producers and suppliers outside the province. Those who argue this point say there should be no rate hikes to fund capital expenditures, and existing power-generation assets should be sold.

Is there a solution? Perhaps NSP should sell its power-generation assets and be content with managing Nova Scotia’s transmission grid, although it’s not clear that such a move would guarantee lower rates. But one thing is certain: despite periodic promptings from the left, the province is not going to buy the system back. The province is broke.

Winter is over. Granny on the South Shore can put those blankets away for a while. But only for a while. IE