A plan for refunding millions of dollars to the majority of provincial power customers was filed with the Board of Commissioners of Public Utilities (PUB) last week.
It followed an agreement reached between Newfoundland and Labrador Hydro, Newfoundland Power and the consumer advocate earlier this year.
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Submitted June 30, the plan sets out Newfoundland Power’s coming attempt to provide a refund to any and all customers who paid for power from the island’s main grid between Jan. 1, 2007 and Aug. 31, 2013.
“No customer refund of this size or complexity has been previously undertaken by Newfoundland Power,” notes the application, now awaiting regulator approval.
The exact amount customers will receive is to be determined individually for each account. Newfoundland Power will multiply a customer’s power usage (kilowatt hours) by a refund rate (a cents per kilowatt hour value based on the money to be refunded) for bills issued during the refund period of more than 6 ½ years. The refund rate is estimated at 0.363 cents per kilowatt hour, but could change with a delay in approval.
Average customers on electric heat can expect an estimated $5.57 for every month they were billed during the 80-month period. A customer with a home not on electric heat can expect roughly $3.04 for every bill.
Accounts will vary widely, but, given the figures stated by Newfoundland Power, customers are generally expected to see a refund of anywhere from $240 to $450, before taxes, if steady power customers throughout the period subject to the refund.
Any money owed to Newfoundland Power will be deducted before money is paid out, according to the filing.
Taxes paid on original bills will be returned with the refund. The entire refund amount will then see HST applied, according to the application, although the utility still needs to clarify as much with the provincial government. It also must be clarified if anything else will apply (for example, if the Residential Energy Rebate launched in 2011 will be factored into the calculations).
Overcharged on fuel costs
The rebate is because customers were overcharged on fuel costs, mainly Newfoundland and Labrador Hydro’s costs for fuel at Holyrood. The actual fuel costs ended up being far less than what was expected during the time in question. The surplus value was set aside — in the utility “Rate Stabilization Plan (RSP) Fund — with a dispute later emerging over who would receive the money and how it would be repaid.
Looking only at money due to customers on the main island grid, the fund held $141.7 million as of October 2016, with about $128.8 million to go to Newfoundland Power customers. The rest is due to some Hydro customers (not dealt with in Newfoundland Power’s filed plans), plus $3.5 million the utilities want for administration costs ($2.5 million being for Newfoundland Power).
The effort to come will be immense.
Newfoundland Power expects it will still need four or five months after the plan is approved for prep work, before money changes hands.
More than 170,000 cheques are expected to be issued by Newfoundland Power alone in the initial round of refunds — so many the utility will contract out the job to a chartered bank.
Refunds will first be issued to existing Newfoundland Power customers who were also customers at the time, plus any customers who come forward to self-identify and are confirmed as having been customers at the time in question.
Individual customers can carry multiple power accounts. During the refund period, Newfoundland Power had about 510,000 service accounts for roughly 268,000 customers. The utility believes 186,000 customers from the period still have active accounts today, while there is limited information — and in some cases no information — on another 82,000 customers whose accounts are no longer active.
Following the initial round of refunds, according to the filing, the utility plans to push a national and international advertising campaign to try to reach any other individuals who were customers during the rebate period.
The utility’s search and the cash refunds will end two years following the plan’s initial approval date.
(NOTE: Updated at 10:20 a.m. on Thursday, July 7, 2016, to provide clarification on application of taxes.)
Newfoundland Power administrative costs
Customer service — $1.5 million
Banking — $570,000
Advertising — $250,000
Customer service system upgrades — $110,000
Miscellaneous (including legal advice and temporary call centre) — $70,000
(Note: Figures are estimates only. As provided in the “RSP Surplus Refund Plan Application,” filed by Newfoundland Power with the Board of Commissioners of Public Utilities, June 30, 2016.)