To limit future customer rate increases and reduce financing costs accumulating in the Supply Cost Variance Deferral Account, the Provincial Government is paying the remaining 2022 balance of approximately $190.4 million.

This is one of the initial steps to implement rate mitigation. The deferral account records the differences between the costs to supply the Island Interconnected System and the costs currently collected from customers in electricity rates. By paying the 2022 deferral balance, customers avoid having the cost recovered on their bills.

Significant work has been concluded with respect to rate mitigation. Term sheets have been signed and financing has been secured for the $1 billion federal loan guarantee; capital restructuring for Muskrat Falls and the Labrador Transmission Assets; and, the $1 billion investment by Canada in the province’s portion of the Labrador-Island Link.

Funding the deferral account balance is a further step in the Provincial Government’s commitment to mitigate customer rates. The implementation of the final components of rate mitigation cannot be finalized until full commissioning of all aspects of the Lower Churchill project, including the Labrador-Island Link.

As a result of the Muskrat Falls plant commissioning in November 2021, Newfoundland and Labrador Hydro (NL Hydro) was required to begin making payments under the Power Purchase Agreement for the associated costs to build, finance and operate the plant. NL Hydro is putting plans in place for Labrador-Island Link high-power testing to continue until April 6, 2023.

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“This action to pay the deferral account balance demonstrates the Provincial Government’s commitment to rate mitigation. Full implementation of rate mitigation cannot be finalized until full commissioning of the project, including the Labrador-Island Link.”
Honourable Andrew Parsons, KC
Minister of Industry, Energy and Technology

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Backgrounder: Supply Cost Variance Deferral Account

In December 2021, the Board of Commissioners of Public Utilities approved the creation of the Supply Cost Variance Deferral Account.

• As a result of the Muskrat Falls plant commissioning in November 2021, ahead of full project commissioning, Newfoundland and Labrador Hydro was required to begin making payments under the Power Purchase Agreement for the associated costs to build, finance and operate the plant.
• The deferral account incorporates supply costs related to the Muskrat Falls Project.
• The deferral account has allowed Newfoundland and Labrador Hydro to defer the expense associated with the Muskrat Falls Power Purchase Agreement.
• The account records the differences between the costs to supply the Island Interconnected System and the costs currently collected from customers in electricity rates.
• The balance that has accumulated in the account represents an amount owing from customers that is primarily due to payments made under the Muskrat Falls Power Purchase Agreement and offset by fuel savings.
• Newfoundland and Labrador Hydro is currently financing the deferral account through short-term borrowing facilities.