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Management Side
Port Hawkesbury Paper hasn't met target for contribution to NSPI's fixed costs

POINT TUPPER, N.S. (From news reports) -- Port Hawkesbury Paper hasn't met the contribution to Nova Scotia Power's fixed costs originally outlined in its special power rate.

When the mill reopened in 2012 after a yearlong sales process, new owners Pacific West Commercial Corp. received a special load retention tariff for the electricity that it uses.

Under the tariff, the mill is to pay for the costs of generating electricity for it to operate and also make a contribution to NSP's fixed costs.

The rate was to be in effect for 7.5 years, but there was a provision that if the mill had not made a $20-million contribution to NSP's fixed costs in the first five years of the arrangement, some cost components of the rate could be reopened. The rate was approved by the Nova Scotia Utilities and Review Board.

"At this time, PHP is now in a position to confirm to the board that its contribution to fixed costs will be less than $20 million after five full fiscal years of operation, and that PHP will not be making additional contributions to reach the $20 million threshold," lawyer David MacDougall wrote in a letter dated Feb. 1 and filed with the UARB.

"As the board and NSPI are aware from the confidential PHP audited financial statements and supporting information filed annually by PHP with the board for the years 2013-2016, PHP has clearly not been 'significantly more profitable' than the PWCC projections, which was the board's stated potential concern."

The tariff is based on the assumption that it's better for other ratepayers that the mill continues to operate rather than if it is shut down.

"Port Hawkesbury Paper's letter to the Utility and Review Board essentially asks that the existing load retention tariff and its $4 per megawatt-hour cap on annual contributions to fixed costs continue," NSP spokesperson David Rodenhizer said in an email. "That request will be addressed through the UARB process. As for how much PHP has contributed to fixed costs, that's a confidential component of the customer's bill that we cannot release."

Recently, there have been times when the mill has not been making paper because in order to do so it would have had to pay high rates, as the demand on the generation system was high.

The mill had previously indicated in a report filed to the UARB that in its first six months of operation, it had made a $986,640 contribution to fixed costs.

The report stated the load-retention tariff is the most complicated rate offered by NSP. Its electricity bill is based on a formula involving the hourly incremental cost, variable capital cost and a contribution to fixed costs. The utility provides the mill with hourly, day-ahead and week-ahead projections, and Port Hawkesbury Paper indicates what its load requirements will be for those period based on the price forecasts.

The mill makes supercalendered paper for the catalogue and magazine market. It is a significant employer in the Strait of Canso area and beyond.

Marc Dube, a senior manager at the mill, could not be reached for comment Friday.

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