I reported recently on NB Power’s unusual and aggressive practice of charging the cost of replacement power incurred during the refurbishment of the Point Lepreau Candu nuclear station to future generations of consumers. I should also have reported that future consumers in neighbouring PEI are going to get hit by the same stunt.

Maritime Electric (ME), the power distributor serving most of PEI, owned by Fortis, has an agreement with NB Power to receive 30 MW of the output from the 680 MW Point Lepreau Candu nuclear generator. As part of this deal, ME is responsible for about 4.6% of the generator’s costs. Lepreau, when it operates, represents about 20% of ME’s supply.

As noted in the referenced post, Lepreau was closed for refurbishment in March 2008. The refurbishment was originally scheduled to take 18 months, however, the actual timeframe to complete the project has been significantly longer than planned and the projected start-up for the facility is now November 2012.

Instead of following the accepted user pay practice of billing consumers for power at the time they use it, ME followed NB Power’s practice of capitalizing ME’s share of the replacement power costs during the refurbishment. This is inconsistent with normal utility practice.

Prince Edward Island’s newly government-created Energy Commission reports that the deferral account balance was $47 million as of March 2011 and that deferred costs have and will continue to accumulate at a rate of approximately $2 million per month until Lepreau is back in service. Since 2011, the provincial government has been financing these replacement power costs. By financing this debt, the government has effectively endorsed the irresponsible practice of capitalizing replacement power costs and transferring that cost to future generations, thereby shielding ME from future charges of imprudence.

The Prince Edward Island Energy Commission is tasked with recommending an approach to recovering these deferred costs and is expected to report this fall. Should the children of current consumers pay, or should the grandchildren also get nailed?

Even without the unique practice of capitalizing replacement power costs, nuclear utilities, like Maritime Electric, create special risks of hidden liabilities transferring costs to future generations. Capitalizing replacement power costs makes this problem worse.