DECISION  
2022 NSUARB 93  
M10366  
NOVA SCOTIA UTILITY AND REVIEW BOARD  
IN THE MATTER OF THE PUBLIC UTILITIES ACT  
- and -  
IN THE MATTER OF AN APPLICATION by NOVA SCOTIA POWER INCORPORATED  
for approval of its Annual Capital Expenditure Plan for 2022  
BEFORE:  
Roberta J. Clarke, Q.C., Panel Chair  
Steven M. Murphy, MBA, P.Eng., Member  
Richard J. Melanson, LL.B., Member  
APPLICANT:  
INTERVENORS:  
NOVA SCOTIA POWER INCORPORATED  
Blake Williams, Senior Regulatory Counsel  
Matthew Gorman, Regulatory Counsel  
CONSUMER ADVOCATE  
William L. Mahody, Q.C.  
Emily Mason, Counsel  
SMALL BUSINESS ADVOCATE  
E.A. Nelson Blackburn, Q.C.  
Melissa P. MacAdam, Counsel  
INDUSTRIAL GROUP  
Nancy G. Rubin, Q.C.  
PORT HAWKESBURY PAPER LP  
James A. MacDuff, Counsel  
EFFICIENCYONE  
James R. Gogan, Counsel  
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PROVINCE OF NOVA SCOTIA  
Nova Scotia Department of Natural Resources  
and Renewables  
Peter Craig  
David Miller  
Kendra Campbell  
BOARD COUNSEL:  
S. Bruce Outhouse, Q.C.  
FINAL SUBMISSIONS: April 27, 2022  
DECISION DATE:  
DECISION:  
June 9, 2022  
The Board approves the 2022 ACE Plan and provides  
directions to Nova Scotia Power in Paragraph 213 of this  
decision.  
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TABLE OF CONTENTS  
1.0  
2.0  
3.0  
INTRODUCTION.................................................................................................. 4  
ISSUE................................................................................................................... 5  
ANALYSIS AND FINDINGS ................................................................................. 5  
3.1  
Content of the 2022 ACE Plan................................................................... 5  
3.1.1 Spare Autotransformer.................................................................... 7  
3.1.1.1 Findings ............................................................................ 9  
3.1.2 VJ1 Generator Replacement Project and Control System Upgrade  
Project............................................................................................. 9  
3.1.2.1 Findings .......................................................................... 12  
3.1.3 Letters of Comment....................................................................... 12  
Routine Capital Expenditures .................................................................. 13  
3.2.1.1 Findings .......................................................................... 14  
Cost Minimization .................................................................................... 14  
3.3.1 NS Power’s Capital Project Cost Minimization Effectiveness,  
including Capital Cost Budgeting and Project Scoping ................. 15  
3.3.1.1 Findings .......................................................................... 22  
3.3.2 NS Power’s Capital Project Cost Minimization and Related Project  
Management Practices ................................................................. 28  
3.3.2.1 Findings .......................................................................... 38  
Reliability Investments ............................................................................. 43  
3.4.1.1 Findings .......................................................................... 52  
Economic Analysis Model........................................................................ 52  
3.5.1 Replacement Energy Cost ............................................................ 53  
3.5.1.1 Findings .......................................................................... 54  
3.5.2 Accounting Treatment of Decommissioning Costs........................ 54  
3.5.2.1 Findings .......................................................................... 57  
3.5.3 Monte Carlo/Decision Analysis...................................................... 57  
3.5.3.1 Findings .......................................................................... 58  
Revenue Requirement............................................................................. 58  
3.6.1.1 Findings .......................................................................... 60  
Contingency and Contingency Guidelines ............................................... 61  
3.7.1.1 Findings .......................................................................... 64  
Eastern Clean Energy Initiative and Impact of Recent Provincial and  
Federal legislation on Proposed Spending .............................................. 65  
3.8.1.1 Findings .......................................................................... 67  
Alignment with the 2020 IRP.................................................................... 68  
3.9.1.1 Findings .......................................................................... 71  
3.2  
3.3  
3.4  
3.5  
3.6  
3.7  
3.8  
3.9  
3.10 Total Cost of Ownership for IT Projects and Electric Vehicles................. 72  
3.10.1.1 Findings .......................................................................... 76  
3.11 Impact of COVID-19 on Capital Spending and Lessons Learned............ 76  
3.11.1.1 Findings .......................................................................... 79  
4.0  
SUMMARY ......................................................................................................... 80  
APPENDIX  
Schedule A- 2022 ACE Plan Projects Approved by Board  
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1.0  
INTRODUCTION  
Each year Nova Scotia Power Inc. files an Annual Capital Expenditure  
[1]  
(ACE) Plan outlining its proposed capital expenditures for the upcoming year. As a result  
of an amendment to the Public Utilities Act, R.S.N.S.1989, c. 380, for a large-scale public  
utility, such as NS Power, capital projects exceeding $1,000,000 must generally be  
approved by the Board. Prior to the amendment, the threshold was $250,000.  
[2]  
NS Power’s 2022 ACE Plan sought approval for capital projects totalling  
$181.1 million. This decision is about whether the Board should approve this proposed  
capital spending.  
[3]  
Based on the evidence presented, and after considering the submissions  
made by the parties participating in this proceeding, the Board has determined there is  
sufficient justification for the need, and the corresponding cost estimates, for the proposed  
projects. Therefore, the Board approves the 2022 ACE Plan.  
[4]  
In addition to considering the specific projects submitted for approval in the  
ACE Plan, the Board has taken the opportunity presented by the annual filing to address  
more general issues relating to capital spending and the approval process.  
[5]  
In this decision, the Board has commented on the following:  
Project scoping and management;  
Cost minimization;  
Reliability investments;  
The Economic Analysis Model (EAM);  
Revenue Requirement;  
Contingency and contingency guidelines;  
Eastern Clean Energy Initiative (ECEI) and Impact of Recent Provincial and  
Federal Legislation;  
Alignment with the 2020 Integrated Resource Plan (IRP);  
Total cost of ownership for IT projects and electric vehicles; and  
Impact of COVID-19 on capital spending and lessons learned.  
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[6]  
In addition, the Board directs NS Power to take certain actions as outlined  
in Paragraph 213 of this decision.  
2.0  
ISSUE  
The Board must decide whether the ACE Plan program and spending that  
[7]  
NS Power asked to have approved are prudent, necessary, and justified.  
3.0  
ANALYSIS AND FINDINGS  
[8]  
Each year when NS Power files its ACE Plan application, the Board takes  
the opportunity to explore issues related to the activities the utility proposes and the way  
spending is budgeted and justified. The Board identifies these issues early in the  
proceeding and seeks comments from the parties on the issues list before it is finalized.  
[9]  
The Board considers these issues important, as there have been limited  
opportunities to publicly consider them. This is because there has been no general rate  
application (GRA) by NS Power since 2013, partly due to Rate Stabilization Periods. The  
Board observes, however, that NS Power has filed a GRA, to be heard in September,  
2022. Some of the issues canvassed in this decision may be explored further in that GRA  
hearing.  
[10]  
In this decision, the Board will first consider the 2022 ACE Plan application,  
and then address the issues which emerged as important through the process.  
3.1  
Content of the 2022 ACE Plan  
[11]  
NS Power’s 2022 ACE Plan application provides a comprehensive overview  
of its capital expenditure program. It includes the following:  
A description of capital projects for which NS Power is seeking approval;  
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Details regarding routine capital expenditures requiring Board approval;  
A list of capital projects to be submitted for subsequent approval;  
Lists of capital items not requiring Board approval;  
Responses to Board directives from prior ACE Plan proceedings; and  
Responses to stakeholder engagement commitments.  
[12]  
NS Power forecasts total capital spending of $531.6 million during 2022.  
This amount is for individual capital items, including capital items under $1 million and  
Point Aconi items which do not require Board approval; routine capital expenditures;  
carryover spending from previous years; and items for subsequent submittal. NS Power  
stated that these expenditures are “focused on customers and providing safe, reliable,  
environmentally compliant, affordable and innovative electrical service.”  
[13]  
NS Power requested approval for spending of $181.1 million. The  
requested amount includes 24 individual capital projects totalling $70.6 million. NS Power  
plans to spend $33.3 million on these projects in 2022, and an additional $37.3 million in  
2023, and beyond. NS Power also requested Board approval for $110.5 million for routine  
capital expenditures in 2022.  
[14]  
The 24 individual projects NS Power asked the Board to approve include  
20 projects, each with a total estimated cost between $1 million and $5 million, and four  
projects with cost estimates, each exceeding $5 million. The number of individual projects  
is greater than in the 2021 ACE Plan application.  
[15]  
NS Power provided a detailed description, justification, and cost support for  
each of these capital work order applications. NS Power also provided substantial  
additional information in its responses to Information Requests (IRs) submitted by  
intervenors and the Board.  
[16]  
The Board notes that during the proceeding, other than the Consumer  
Advocate (CA), no intervenor objected to any of the capital projects submitted for Board  
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approval in NS Power’s 2022 ACE Plan. The CA’s consultant objected to approval of two  
projects related to Victoria Junction Unit 1(VJ1), which are discussed later in this decision.  
However, the Small Business Advocate (SBA) and CA submissions examined several  
issues in their submissions related to NS Power’s capital spending that are also discussed  
in this decision.  
[17]  
The Board finds that the capital projects listed in Schedule “A” are  
necessary. Further, the Board is satisfied that the plan is prudent and that the spending  
has been justified in accordance with the Board-approved Capital Expenditure  
Justification Criteria (CEJC).  
[18]  
The Board approves the projects and capital expenditures set out in  
Schedule “A”. Should any of them be cancelled, or deferred beyond 2022, NS Power  
must resubmit them for Board approval.  
3.1.1 Spare Autotransformer  
[19]  
In the 2021 ACE Plan application, NS Power sought approval of the  
purchase of a spare autotransformer to respond to an unplanned failure. John Wilson, of  
Resource Insight, the CA’s consultant, said that NS Power had done an insufficient  
analysis of the alternatives. Lia MacDonald, NS Power’s Vice-President, Transmission,  
Distribution and Delivery, testified at the 2021 hearing that NS Power was developing an  
overall plan for the autotransformers in its system. The Board approved the purchase but  
directed NS Power to report in the 2022 ACE Plan on the status of the management plan  
for the autotransformer fleet.  
[20]  
In this application, NS Power filed Appendix G in response to the Board’s  
2021 directive. The report provides a risk profile of the ten 138kV substation  
autotransformers currently in service. The units vary in age, criticality, condition, and  
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overall risk. NS Power indicated the year for tentative replacement of each unit, and in  
several cases, noted interim mitigation strategies for identified problems.  
[21]  
In response to CA IR-13, NS Power stated that the earliest planned  
replacement of a substation autotransformer would be in 2023. Like any other  
replacement, the request for approval must be justified at the time. NS Power said that it  
does not intend to run these autotransformers to failure. The company said replacement  
decisions will be based on criticality and condition, rather than service life or the  
probability of failure.  
[22]  
Mr. Wilson says that the plan filed as Appendix G provides insufficient  
analysis. In his opinion, the probability of failures should be considered under the CEJC  
scoring. He expected the plan to explain how future replacement decisions would be  
made. Mr. Wilson thinks that NS Power should have a more aggressive plan instead of  
relying on a spare autotransformer for an indefinite period. He concluded that NS Power  
“seems unwilling” to plan more strategically and recommended that the Board select an  
independent consultant to investigate autotransformer replacement strategies in co-  
ordination with NS Power’s subject matter experts.  
[23]  
Both Mr. Wilson’s opening statement and the CA’s closing submissions  
suggest that there is nothing newly developed as a plan for management of the  
autotransformer fleet.  
[24]  
NS Power disagreed with Mr. Wilson’s recommendation, noting that the  
Board had approved the 2021 spare autotransformer project. NS Power said that the  
information in Appendix G shows the company is prudent in its asset management of  
these units. Directing an independent consultant to investigate is both unnecessary and  
would provide no value to ratepayers, according to NS Power. The company said the  
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details are a “snapshot” of its autotransformer management plan. NS Power submitted  
that it is constantly assessing and updating the plan and is not currently requesting  
approval of any replacement project from the Board. Each project will be justified when  
approval is sought. The company urged the Board not to accept Mr. Wilson’s  
recommendation.  
3.1.1.1  
Findings  
[25]  
The Board need not, and will not, revisit its decision about the spare  
autotransformer from the 2021 ACE Plan. While the Board considers that Appendix G  
does not set out an explicit plan for the autotransformer fleet, the Board is satisfied that  
NS Power is aware of the risk level of each unit now. The company has mitigation  
strategies in place. The Board expects NS Power to continually monitor and assess the  
status of the transformers. When NS Power determines there is need for a replacement,  
the Board expects a fully justified application will be filed. Such applications will receive  
the same rigour the Board brings to all capital expenditure requests by the company. The  
Board does not consider it necessary to engage an independent consultant as suggested  
by the CA.  
3.1.2 VJ1 Generator Replacement Project and Control System  
Upgrade Project  
[26]  
Only two projects in the 2022 ACE Plan were singled out by an Intervenor:  
C0029693 and C0029691, a generator replacement and control system upgrade,  
respectively, for the combustion turbine (CT) at VJ1. In the application, NS Power said  
that the generator assembly currently at VJ1 was commissioned in 1976; the replacement  
will extend the life of the unit and the equipment will be consistent with what has been  
installed at other CT units. The company said the replacement is the “only technical  
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feasible alternative.” NS Power claims that refurbishment will not mitigate the risk of a  
forced outage or collateral damage to the rest of the unit. The company described CT  
units as critical to meet firm capacity requirements. NS Power said the investment in this  
unit is consistent with the 2020 Integrated Resource Plan (IRP).  
[27]  
As for the control system upgrade, NS Power said that portions of the  
existing control system are now obsolete. Finding replacement parts, troubleshooting,  
and diagnosing problems has become difficult. Without replacement of the system, this  
will only continue. The company plans to replace the system during the regularly  
scheduled outage. The replacement will improve service life and reduce future costs due  
to the modular design.  
[28]  
Mr. Wilson questioned the estimated costs, including the contingency  
amounts for both projects. The cost estimate classifications are Class 3, and the  
contingency range is +10% to +30% for both projects according to the response to SBA  
IR-26.  
[29]  
Mr. Wilson expressed concern about what he considered an excessive  
contingency for the projects. He also considered the procurement process had not  
resulted in cost minimization. Mr. Wilson’s concerns were:  
A lack of evidence of competitive bidding for both projects;  
Higher budgets than two other generator replacement projects; and  
An unreasonable 20% contingency for both projects.  
[30]  
NS Power confirmed in response to NSUARB IR-63 that the generator  
replacement is needed to continue safe reliable operation of the unit until 2045. The  
company expects continued operation of the CT fleet until at least that time for the  
required fast acting generation due to intermittent renewable generation. NS Power  
estimated the sustaining capital investments for the entire VJ1 unit from 2023 -2045  
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exceed $7 million in 2022 dollars. In response to SBA IR-6, NS Power said that sustaining  
the existing diesel CTs “is the lowest cost option to meet system capacity requirements  
when evaluated against alternative resource options.”  
[31]  
Mr. Wilson recommended that the Board withhold approval for both projects  
and, instead, require NS Power to resubmit the applications after addressing his concerns  
and seeking to further minimize costs.  
[32]  
In its rebuttal evidence, NS Power explained that the generator project was  
sole-sourced from the original equipment manufacturer (OEM) to eliminate the need for  
significant modifications and retrofitting. The company said that the increased budget is  
due to additional scoping learned from the other two projects, site preparation, travel, and  
cost escalation since 2017 when those projects were undertaken. Part of the reason for  
the contingency related to restrictions resulting from the COVID-19 pandemic. In addition,  
the two units Mr. Wilson referred to were steam generators, not CT generators; NS Power  
refurbishes steam generators more often and therefore, its experience suggests a lower  
contingency amount for those projects.  
[33]  
Mr. Wilson remained concerned and questioned whether NS Power favours  
OEMs in its procurements, and whether the company can provide clear justification for its  
contingency amounts. As a result, the CA submitted that the Board should accept Mr.  
Wilson’s recommendation on the two VJ1 projects.  
[34]  
NS Power maintained that it does not favour, nor always commits to, OEMs  
but determines what is the best value for its customers, considering “the future life-cycle  
costs” of the asset. As for the 20% contingency, NS Power said it had fully justified the  
level, in accordance with its Non-Binding Contingency Guidelines, based on the COVID-  
19 protocols (which had not been in effect for the two earlier generator replacements),  
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potential “unknowns” when old systems are removed, the difference between steam  
generator refurbishments and CTs, and its internal expert judgement. The company  
urged the Board to reject Mr. Wilson’s recommendation.  
3.1.2.1  
Findings  
[35]  
The Board is satisfied that NS Power has justified both VJ1 projects in  
question. The Board accepts the reasons for the 20% contingency. Further, the Board  
considers the explanation for the selection of the OEM for the replacement generator to  
be reasonable. As a result, the Board considers the projects prudent, and approves them,  
along with the other projects listed in Schedule “A.”  
3.1.3 Letters of Comment  
[36]  
The Board received two letters of comment from Kevin Mullen who, the  
Board understands, is the CEO of a company involved in renewable energy development.  
Mr. Mullen offered comments on several topics referred to in NS Power’s application,  
including:  
Wind projects and the role of NS Power compared to independent power  
producers;  
Conversion of coal plants to natural gas;  
Investment in New Brunswick transmission;  
Overspending on Tusket Falls and other small hydro dams;  
Project costs for the Mersey River system; and  
Use of grid scale battery storage.  
[37]  
The CA questioned NS Power about the indication in Mr. Mullen’s first letter  
that there are 17 small hydro dams which NS Power had identified, as of 2018, being in  
need of refurbishment or decommissioning. Mr. Mullen’s letter stated his company had  
contacted NS Power and offered to take ownership of some of these dams, including  
Tusket Falls. In an exchange with Jamie MacDonald, Vice President, Power Production,  
Mr. Mahody suggested that, given the extent of potential hydro investment, such offers  
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should be considered. While Mr. MacDonald said the company is always interested in  
looking at offers, NS Power must comply with its continuing regulatory requirements and  
guidelines. Mr. MacDonald acknowledged that these requirements and guidelines would  
apply to any owner of these dams.  
[38]  
In response to questions from Nancy Rubin, Counsel for the Industrial  
Group, NS Power filed Undertaking U-6. Ms. MacDonald confirmed that NS Power had  
a discussion with Mr. Mullen’s company in 2020 and had determined that its proposal was  
not viable. The Board notes that, should NS Power contemplate the sale or transfer of  
its undertaking, s. 62 of the Public Utilities Act requires approval before any sale or  
transfer can occur.  
[39]  
The Board briefly explored the other topics in Mr. Mullen’s letters with the  
panel. Ms. MacDonald said she had read the letters and looked at some of the reports  
cited. In her view, many of his comments relate to ECEI matters, and identify “…the very  
type of questions that’ll be answered with the submissions.” While Ms. MacDonald said  
there was nothing in his comments that is new to the company, she hoped that Mr. Mullen  
would engage in the process when the ECEI applications are submitted.  
[40]  
The Board appreciates that Mr. Mullen took the time to provide comments  
and information to the Board, and encourages him to engage further with NS Power, and  
participate, should he wish, when the ECEI applications come before the Board.  
3.2  
Routine Capital Expenditures  
[41]  
Routine capital expenditures are recurring annual expenses incurred to  
sustain NS Power’s equipment, and to allow for both system growth and addition of  
customers to the system. NS Power requested approval for its Routine capital program  
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in the amount of $110,533,578, exclusive of Point Aconi Routine spending of $764,158,  
which does not require Board approval.  
[42]  
The proposed Routines budget in 2022 is approximately 17% higher than  
the 2021 ACE Plan budget; however, the Board notes that it is lower than actual spending  
in 2021. The increased spending in 2021 was primarily due to above-average  
distribution-related work.  
3.2.1.1  
Findings  
[43]  
The Board approves NS Power’s 2022 Routine capital expenditures in the  
amount of $110,533,578. The Board notes that Distribution Routine D007, in the amount  
of $4,387,955, is approved at that figure on the understanding that where poles being  
replaced are less than 30 years old, Bell Aliant is responsible to cover the Sacrificial Life  
of the poles, as that term is defined in a joint use agreement between the parties. Any  
such amount paid by, or recovered from, Bell Aliant should not be included in NS Power’s  
rate base.  
3.3  
Cost Minimization  
[44]  
The issue of NS Power’s capital cost minimization efforts became an area  
of focus for the Board and stakeholders during the 2019 ACE Plan proceeding. As noted  
in the Board’s 2021 ACE Plan decision, the Board now considers it useful to address cost  
minimization through two separate themes. These include the effectiveness of NS  
Power’s cost minimization practices, including capital cost budgeting and project scoping;  
and NS Power’s capital project cost minimization and related project management  
practices themselves.  
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3.3.1 NS Power’s Capital Project Cost Minimization Effectiveness,  
including Capital Cost Budgeting and Project Scoping  
[45]  
The Board’s 2021 ACE Plan Order directed NS Power as follows:  
3. Continue to track the information noted in Paragraph 92 of the Board's 2020 ACE Plan  
decision for each completed capital project that was submitted for Board approval in  
2017, 2018, 2019, 2020 and 2021 (either through or outside of the ACE Plan  
proceedings, including projects submitted for subsequent approval, but excluding U&U  
projects). Further the Board directs that the following additional information be included  
in the related 2022 ACE Plan reporting:  
NS Power is to identify all new projects that have been added to the report; and  
For any capital projects that have a negative variance greater than or equal to 25%  
of the Board approved capital cost estimate, NS Power shall provide an  
explanation detailing the reasons for the variance.  
The Board directs NS Power to continue to track this information, including information  
related to projects approved by the Board after 2021, and report it in subsequent ACE  
Plan applications. The Board finds the format of Appendix E of the 2021 ACE Plan  
application a useful means of presenting this data. The Board, therefore, directs that  
the data continue to be presented in this format in subsequent ACE Plan applications  
(subject to the modifications noted in the preceding paragraph). This reporting shall  
also categorize projects by function (i.e., generation, transmission, distribution, and  
general plant), with "generation" projects further categorized by type of project (i.e.,  
hydro, steam, gas, other renewables).  
[46]  
NS Power provided this information in Appendix E. Appendix E presents  
an analysis comparing Board approved project budget amounts to final spending on the  
completed projects. In particular, Appendix E provides the Board with information to  
better assess NS Power’s capital cost minimization and capital cost budgeting  
effectiveness, as well as its use of contingencies.  
[47]  
The Board has summarized the information in response to NSUARB IR-76,  
and included, where relevant, comparative figures from the 2021 and 2020 ACE Plan  
proceedings in brackets:  
There are 211 projects included in Appendix E (154 projects were  
included in Appendix E of the 2021 ACE Plan Application).  
The average variance for the listed projects amounts to  
approximately +9.5% (2021: +10.8%; 2020: +10.47%) of the original  
submission approved project cost estimate.  
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The total variance of $20,137,705 for the listed projects is over and  
above the total contingency amount of $11,791,484 included in the  
total of the original submission approved cost estimates.  
The average contingency amount for the listed projects amounts to  
approximately 5.9% (2021: 5.6%; 2020: 5.03%) of the original  
submission approved cost estimate less the contingency amount.  
For projects approved by the Board prior to November 8, 2019 that  
have an original submission approved cost estimate greater than  
$250,000 but less than $5,000,000, amounting to 190 projects in  
total:  
a. 31% (2021: 28%; 2020: 31%) had a negative variance;  
b. 69% (2021: 72%; 2020: 69%) had a positive variance; and  
c. Of the projects that had a positive variance, 92% (2021: 92%;  
2020: 91%), or 121 projects, did not require an ATO  
submission to the Board.  
There was one project approved by the Board after November 8,  
2019 that had an original submission approved cost estimate greater  
than $1,000,000 but less than $5,000,000. This project had a  
positive variance but did not require an ATO submission to the  
Board.  
For projects that have an original submission approved cost estimate  
greater than $5,000,000, amounting to 5 projects in total:  
a. 0% (2021: 0%; 2020: 33%) had a negative variance;  
b. 100% (2021: 100%; 2020: 67%) had a positive  
variance; and  
c. Of the projects that had a positive variance, none  
required an ATO submission to the Board.  
For all projects that have an original submission approved cost  
estimate less than $250,000, amounting to 15 projects in total, the  
total sum of the individual project variances as a percentage of the  
total sum of the individual project original submission approved cost  
estimates is 206% (2021: 206%; 2020: 210%). Updated for their  
subsequently approved greater than $250,000 submissions, the total  
sum of the individual project variances as a percentage of the total  
sum of the individual project original submission approved cost  
estimates is 10% (2021: 10%: 2020: 9%).  
72% of the projects listed in Appendix E have a variance to the  
original approved estimate that falls within the expected accuracy  
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range of -20% to +30% for an AACE (Association for Advancement  
of Cost Engineering) Class 3 cost estimate.  
18% of the projects listed in Appendix E have a variance to the  
original approved estimate greater than +30%.  
[48]  
A further review by the Board of the data in Appendix E reveals the following  
(the Board has provided the comparative percentages from the 2021 and 2020 ACE Plan  
proceedings in brackets):  
For projects that have a negative variance, the total variance amount  
is approximately $6.78 million or 3.2% (2021: 2.7%; 2020: 3.1%) of  
the total of the original approved cost estimates.  
For projects that have a positive variance, the total variance amount  
is approximately $26.92 million or 12.7% (2021: 13.5%; 2020:  
13.6%) of the total of the original approved cost estimates.  
[49]  
In the 2021 ACE Plan Order, NS Power was directed to provide detailed  
reasons for any negative project spending variances greater than or equal to 25% of the  
Board approved capital cost estimate. NS Power neglected to include this information in  
its 2022 ACE Plan Application. However, the company did provide the requested  
information in response to NSUARB IR-76(l). Sixteen of the projects in Appendix E have  
negative variances greater than 25%.  
[50]  
Mr. Wilson completed his own analysis of the data contained in Appendix  
E. His analysis produced similar results to those listed above, and he stated the following  
in his evidence:  
In comparison to my review of the contingency data provided by NS Power in the 2021  
ACE Plan Proceeding, the new data continue to show that NS Power appears, on average,  
to underestimate project costs, inclusive of estimated contingency amounts. While the  
2021 data showed a slight increase in this tendency, the 2022 data show a slight decrease  
in this tendency. It appears that for projects placed in service through late 2019, there has  
been no material improvement in the accuracy of project cost estimates.  
[Exhibit N-10, p. 13]  
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[51]  
Mr. Wilson’s analysis of Appendix E also led him to conclude that most of  
NS Power’s high overspend costs occur on steam generation plant projects. Based on  
his analysis of evidence submitted in Board Matter M10197 (Tusket Main Dam  
Refurbishment ATO), he also asserted that for most hydro capital projects, NS Power’s  
project cost estimates are reasonably reflective of actual spending. However, he noted  
that a group of high-overspend hydro capital projects indicates a significant cost  
estimation problem. With regards to transmission and distribution (T&D) capital projects,  
Mr. Wilson stated:  
In comparison with the pattern I note above with respect to steam generation projects and  
below with respect to civil hydroelectric projects, it appears that NS Power has a good track  
record with cost estimates in the renewable, transmission and distribution project areas,  
with high-overspend projects occurring at a lower frequency than steam generation  
projects and with less dramatic financial consequences than the high-overspend civil  
hydroelectric projects.  
[Exhibit N-10, p. 14]  
[52]  
Mr. Wilson’s opinion regarding NS Power’s track record on T&D capital  
project cost estimating was probed further during the hearing. The Board questioned NS  
Power on the data the company provided in response to CA IR-17 and IR-18. That is the  
data upon which Mr. Wilson based his T&D analysis. In response to Board questioning,  
NS Power clarified some of the data provided in response to CA IR-17 and IR-18 and  
provided Undertakings U-22 and U-23 to provide further clarification post-hearing. The  
Board asked Mr. Wilson if the clarifications provided by NS Power would change his  
conclusion. Through Undertaking U-25, Mr. Wilson re-performed his analysis based on  
the clarifications provided by NS Power, and stated:  
Based on this clarified analysis, I continue to conclude that NS Power has a good track  
record of cost estimates for new transmission facilities or investment in the replacement of  
existing transmission facilities at a substantially upgraded level of service.  
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Based on this clarified analysis, I continue to conclude that NS Power has a good track  
record of cost estimates for new distribution facilities or investment in the replacement of  
existing distribution facilities at a substantially upgraded level of service.  
[Exhibit N-18, p. 5, and p. 8]  
[53]  
As noted in response to NSUARB IR-76(k), 72% of the capital projects in  
Appendix E have final spending amounts that are within the AACE Class 3 capital cost  
estimate expected range of accuracy of -20% to +30% of their respective original  
approved estimates (inclusive of contingency allowances). Further, 18% of the Appendix  
E projects have final spending that exceeds +30% of their respective original approved  
capital cost estimates. As noted during the 2021 ACE Plan proceeding, AACE Class 3  
capital cost estimating expectations generally suggest that no more than 10% of capital  
projects should have final spending exceeding the +30% upper accuracy limit; no more  
than 10% of capital projects should have final spending less than the -20% lower accuracy  
limit; and at least 80% of capital projects should incur final spending falling within these  
accuracy limits. In response to CA IR-10(e), NS Power noted that while 18% of Appendix  
E projects exceed the AACE upper accuracy expectation, the company has experienced  
a declining trend between 2016 and 2020 in projects that are over-spent by more than  
30%. NS Power also suggested a positive trend in the percentage of projects falling  
within the -20% to +30% range expected for projects with Class 3 estimates. These  
perceived trends were presented in the following table:  
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Total # of  
projects  
placed in  
service  
Percentage of  
Projects over-  
spent by greater  
than 30%  
Percentage of  
projects under-  
spent by  
greater than  
20%  
Percentage of  
projects with total  
spending  
between  
-20% and +30%  
of budget  
Year  
2016  
4
59  
82  
56  
10  
211  
0.0%  
11.9%  
9.8%  
25.0%  
59.3%  
72.0%  
87.5%  
80.0%  
72.0%  
75.0%  
28.8%  
18.3%  
5.4%  
2017  
2018  
2019  
7.1%  
2020  
20.0%  
10.0%  
0.0%  
All years  
18.0%  
[Exhibit N-4, IR-10(e)]  
[54]  
In its rebuttal evidence, NS Power stated that the information provided in  
the 2022 ACE Plan Application and in response to IRs indicates that NS Power’s capital  
project spending variances generally are within AACE guidelines. This claim was  
explored further during the hearing:  
Q. (Murphy) … On page 22 of your reply evidence -- it states, "Generally with  
respect to Nova Scotia Power spending" I'm sorry.  
Generally, with respect to Nova Scotia Power's project spending, the data  
produced by Nova Scotia Power, either in the 2022 ACE Plan or in  
responses to its IRs, indicates that Nova Scotia Power project variances  
are within AAEC (sic) Guidelines as described in the above: (i) the project  
data within Appendix “E” shows that NS Power is executing projects within  
AACE guidelines;...  
However, in response to CA's IR-10(e), Nova Scotia Power stated that 18 percent of the  
projects listed in Appendix E of the ACE Plan Application have overspent their budgets by  
more than 30 percent. So I guess my question is, really, can you reconcile those two  
statements, the one from the reply evidence and the one from the response to the CA's  
IR?  
A. (Dandurand) Yes, I believe that I can, Mr. Murphy, and I think the starting point  
for that would be the data that's included within Appendix E. And so when looking at that  
data within the appendix, looking at the total cost for all of the 211 projects listed within the  
appendix, relative to their approved budget amounts, the ratio of those projects that are  
overspent more than 30 percent, which falls in line with the expectation for a Class 3  
estimate, will be somewhere closer to about 12 percent.  
Q. I'm not sure I follow. Did you say that based on the Appendix E data 12 percent  
of the projects fall above that 30 percent threshold? But how does that reconcile -- I'm not  
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sure how that reconciles with the response to the CA's IR where it says 18 percent of the  
projects were above that threshold.  
A. (Dandurand) I think the reason for that difference, Mr. Murphy, is that the  
comparison between the final cost or, you know, the total cost for a project relative to what  
it was in the ACE Plan for will differ from the final cost of the project compared to its  
approved budget amount.  
So I think that that's why those two numbers don't reconcile, is that one is  
comparing to what the project was approved for versus what the project was entered into  
the ACE Plan for.  
And the reason why that is important, in terms of that distinction, is that there may  
be a project that is in the ACE Plan for a particular amount but was later submitted to the  
Board for the Board's approval and then the measuring -- or the baseline for measuring,  
rather, then becomes what the project was approved for, not what the project was in the  
ACE Plan for.  
A. (Dandurand) Yeah. So I'm speaking to all -- all of our projects within Appendix  
E, Mr. Murphy, and so there are notes within Appendix E specific to projects that may have  
been in the ACE Plan for a specific amount, was then advanced for approval, for the  
Board's approval, and approved at a specific amount that may differ from what it was in the  
ACE Plan for, and then that's the comparison that I was making when I was speaking to  
the alignment to AECE [sic] Guidelines, and that explains the difference between the two  
figures that you mentioned earlier.  
Q. So you're talking about projects, perhaps, that were in the ACE Plan below 250  
or below a million and then ultimately crossed those thresholds and needed -- you know,  
at one point, below 250 you didn't need approval and below a million you don't need  
approval, but at some point perhaps those projects progressed beyond a million, beyond  
250, and ultimately needed Board approval, so when you're talking about the 12 percent  
number, you're talking about the -- it's called the latest approved budget number.  
A. (Dandurand) We're talking about the first approved budget number in those  
cases ---  
A. (Dandurand) --- for a project that was advanced for the Board's approval.  
[Transcript, pp. 317-322]  
[55]  
In effect, this exchange confirmed that the 18% of Appendix E projects  
exceeding the AACE +30% upper accuracy limit, as referenced in response to CA IR-  
10(e) and NSUARB IR-76, is based on a comparison of final project spending to original  
budgets as presented in prior ACE Plans. However, when final project spending is  
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compared to the original Board approved project budgets, 12% of Appendix E projects  
exceed the AACE upper accuracy limit.  
3.3.1.1  
Findings  
[56]  
In its reply to closing submissions, NS Power stated that none of its  
evidence pertaining to project budgeting and spending, as outlined in Section 4 of its  
rebuttal evidence, was refuted in either the Wilson opening statement, nor the CA or SBA  
closing submissions. In addition, the company asserted the evidence shows that its  
project variances are within AACE guidelines. The CA, on the other hand, argued that  
NS Power has a long history of project cost control issues.  
[57]  
While the Board does not fully agree with the position put forward by the  
CA, the Board believes that the effectiveness of NS Power’s capital project cost  
minimization practices, including capital cost budgeting and project scoping, remains in  
question. This is the same view that the Board expressed in its 2021 ACE Plan decision.  
[58]  
As NS Power noted during the 2021 ACE Plan proceeding, the bulk of its  
capital project cost estimates in its ACE Plans are at a Class 3 level, in accordance with  
AACE International Recommended Practice. NS Power noted that AACE states that  
typical accuracy ranges for Class 3 estimates are -20% to +30%, inclusive of contingency  
allowances. Further, AACE cost estimating methodology implies that 80% the projects  
listed in Appendix E should typically have a final cost that falls within this expected  
accuracy range. AACE also suggests that generally 10% of the projects should have final  
costs that fall below the -20% accuracy limits, and 10% should fall above the +30% limit.  
[59]  
Referring to the project data contained in Appendix E of the application, the  
Board reviewed the data to compare original Board approved project budget amounts to  
final spending on the related projects. The review took into account the “subsequently  
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approved” budgets for those projects listed in Appendix E that were originally estimated  
by NS Power to be below the Board capital approval threshold of $250,000 pre-November  
8, 2019 and $1 million post-November 8, 2019. Based on this review, it appears that NS  
Power’s total spend on the projects listed in Appendix E is, on average, 6.8% greater than  
the Board approved budget amounts. This is a nominal improvement over the 7% figure  
presented by NS Power during the 2021 ACE Plan proceeding. Further, while NS  
Power’s average capital overspend of 6.8% on the Appendix E projects is within AACE  
accuracy expectations, it still remains above the midpoint of the -20% to +30% range.  
[60]  
In addition, during the hearing, NS Power confirmed that approximately 12%  
of the Appendix E projects incurred final spending that exceeded the Board’s original  
approved budget by more than the maximum expected AACE accuracy limit of +30%.  
The Board notes that this represents an improvement over the 14% figure presented by  
NS Power during the 2021 ACE Plan proceeding. However, 12% of Appendix E projects  
incurring overspending beyond the AACE +30% upper accuracy limit for Class 3  
estimates still exceeds the 10% expectation prescribed by AACE.  
[61]  
In Undertaking U-25, Mr. Wilson re-performed his analysis of NS Power’s  
capital cost performance on T&D projects. Based on the revised T&D project cost data  
in Undertaking U-22 and U-23, Mr. Wilson again concluded that NS Power has a good  
track record of completing accurate capital cost estimates for T&D capital projects.  
However, the Board has reviewed Undertaking U-25 in more detail and has found  
apparent discrepancies in the underlying data. In particular, the Board notes the  
following:  
In Table 1, the variances for the GRA transmission projects appear to be  
calculated by subtracting the “actual spend” from the “approved budget”  
rather than vice versa. As a result of what appears to be a summation error,  
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the total variance of $4,215,692 for the transmission projects appears to be  
correct in Table 1.  
In Table 1, the average cost variance for the listed transmission projects as  
a percent of the total approved budget for the projects should be +2.4% (i.e.,  
$4,215,690 divided by $173,730,611) rather than +2.0% noted in Table 1.  
Table 1 has not adjusted the “actual spend” value for “CI C0031089 –  
2021/2022 Trans ROW Widening” to reflect the fact that NS Power has  
projected additional spending on this project. Based on data provided in  
the 2022 ACE Plan proceeding, final spending on this project is expected  
to be $5,284,787, resulting in a project variance of -$3,733 rather than -  
$2,803,258 noted in Table 1. With this adjustment, the total cost variance  
for the listed transmission projects is $7,015,215. This represents an  
average variance of +4.0% of the total approved budget for the transmission  
projects.  
In Table 2, the average cost variance for the listed distributions projects as  
a percent of the total approved budget for the projects should be +2.7% (i.e.,  
$5,217,864 divided by $191,032,031) rather than 0% noted in Table 2.  
Table 2 has not adjusted the “actual spend” value for “CI C0031083 – New  
Distribution ROW Phase 6” to reflect the fact that NS Power has projected  
additional spending on this project. Based on data provided in the 2022  
ACE Plan proceeding, final spending on this project is expected to be  
$11,533,408, resulting in a project variance of +$1,770,673 rather than -  
$3,880,343 noted in Table 2. With this adjustment, the total cost variance  
for the listed distribution projects is $10,868,880. This represents an  
average variance of +5.7% of the total approved budget for the distribution  
projects.  
Further, Table 2 has not adjusted the “actual spend” value for “CI 47124 –  
Advanced Meter Infrastructure” to reflect the fact that NS Power has  
projected additional spending on this project. Based on data provided in  
the 2022 ACE Plan proceeding, final spending on this project is expected  
to be $143,414,479, resulting in a project variance of +$10,185,527 rather  
than +$7,104,567 noted in Table 2. With this adjustment, coupled with the  
adjustment noted in the previous bullet, the total cost variance for the listed  
distribution projects is $13,949,840. This represents an average variance  
of +7.3% of the total approved budget for the distribution projects.  
[62]  
With these adjustments, the average cost variances for transmission and  
distribution projects in Undertaking U-25 remain within AACE accuracy expectations for  
Class 3 capital cost estimates. However, NS Power’s capital cost performance on T&D  
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projects is not as good as Mr. Wilson suggested. In fact, the Board finds that the average  
T&D cost variances are more aligned with NS Power’s overall capital project average  
overspend of 6.8%. Distribution capital cost performance is perhaps more concerning,  
with average overspending above the midpoint of the -20% to +30% AACE expected  
accuracy range.  
[63]  
Based on the above, and considering the responses to NSUARB IR-76, the  
Board finds that NS Power has marginally improved its capital cost overspending  
performance compared to its performance noted in the 2021 ACE Plan proceeding. The  
Board notes NS Power’s improvement. However, it is clear to the Board that, on average,  
NS Power continues to overspend on capital projects. As such, the Board finds, as it did  
in its 2021 ACE Plan decision, that NS Power’s capital cost minimization and/or  
budgeting/scoping performance as it relates to AACE expectations remains less than  
ideal. It also remains unclear to the Board whether this issue is related to inadequate NS  
Power capital cost estimating/budgeting practices, inadequate costs minimization efforts  
by NS Power, or a combination of both.  
[64]  
In the 2021 ACE Plan Order, NS Power was directed to include  
explanations within Appendix E detailing the reasons for any negative project spending  
variances greater than or equal to 25% of the Board approved capital cost estimate. In  
its 2021 ACE Plan decision, the Board expressed concern that underspending of this  
magnitude could suggest project over-scoping at the original cost estimate stage, or a  
significant reduction or cancellation of the originally planned work scope. Just as large  
positive variances can skew overall capital project spending results upward, the Board is  
concerned that large negative variances can skew overall spending results downward.  
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[65]  
NS Power provided the requested large negative variance information in  
response to NSUARB IR-76(l). Sixteen of the projects in Appendix E have negative  
variances greater than 25%. The total of the variances for these projects is -$3,082,511.  
For the most part, the variances are a result of costs being lower than estimated,  
reductions in the originally estimated work scope, and not requiring the use of contingency  
funds. The total dollar amount of these variances only represents approximately 1.4% of  
the total of the original Board approved budgets for the Appendix E projects. However,  
these variances represent roughly 21% of the total variance from the original Board  
approved budgets for all the Appendix E projects. If these variances and related approved  
budgets are removed from the overall variance calculations, NS Power’s total spend on  
the remaining projects listed in Appendix E would be, on average, 8.6% greater than the  
approved Board budget amounts (compared to 6.8% when the large negative variances  
are included). The Board does not consider this difference significant at this point.  
However, the Board will continue to monitor large negative project variances in future  
ACE plan proceedings to ensure that variances related to significant project scope  
reduction do not skew NS Power’s capital cost performance reporting.  
[66]  
In response to CA IR-10(e), NS Power provided a table (at Paragraph 53  
above) that the company claims shows a declining trend between 2016 and 2020 in  
Appendix E projects that are over-spent by more than 30%. NS Power also suggested  
that the table shows a positive trend in the percentage of projects falling within the -20%  
to +30% range expected for projects with Class 3 estimates. The Board finds the table  
useful. However, as presented, the table is organized by the year the Appendix E projects  
were placed into service. The Board notes that the year a project is placed in service  
may be long after the original project’s cost estimate is submitted for Board approval.  
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Therefore, to better discern trends over time in NS Power’s capital cost estimating and  
spending performance, the Board finds it would be more informative if the table were  
organized by the year projects were put forward for original Board approval (as the second  
column in the table). As such, the Board directs NS Power to incorporate the table  
accordingly in future ACE Plan applications.  
[67]  
The Board directs NS Power to continue to track the information noted in  
Paragraph 92 of the Board’s 2020 ACE Plan decision for each completed capital project  
that was submitted for Board approval in 2017, 2018, 2019, 2020, 2021 and 2022 (either  
through or outside of the ACE Plan proceedings, including projects submitted for  
subsequent approval, but excluding U&U projects). Further the Board directs that the  
following additional information be included in the related 2023 ACE Plan reporting:  
NS Power is to identify all new projects that have been added to the  
report; and  
For any capital projects that have a negative variance greater than  
or equal to 25% of the Board approved capital cost estimate, NS  
Power is to provide an explanation detailing the reasons for the  
variance.  
[68]  
The Board directs NS Power to continue to track this information, including  
information related to projects approved by the Board after 2022, and report it in future  
ACE Plan applications. The Board directs that the data continue to be presented in the  
2022 ACE Plan application Appendix E format in future ACE Plan applications (subject to  
the modifications noted in the preceding paragraph). This reporting is to also categorize  
projects by function (i.e., generation, transmission, distribution, and general plant), with  
“generation” projects further categorized by type of project (i.e., hydro, steam, gas, other  
renewables).  
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3.3.2 NS Power’s Capital Project Cost Minimization and Related  
Project Management Practices  
[69]  
In its 2019 ACE Plan Order, the Board directed NS Power to provide, in  
future ACE Plan applications, “specific examples of project execution cost minimization  
efforts for the prior year, complete with a description of the cost savings accrued by these  
efforts.” In its 2020 ACE Plan decision, the Board found that the cost minimization  
examples provided by NS Power in its 2020 ACE Plan application were not responsive to  
this direction. As a result, the Board’s 2020 ACE Plan Order extended its 2019 direction  
to provide, in future ACE Plan applications, “examples of cost minimization during  
execution and construction from the prior year’s projects, with specific cost minimization  
being fully described.”  
[70]  
In its 2021 ACE Plan Order, the Board directed NS Power to continue  
providing, in future ACE Plan applications, specific examples of cost minimization  
practices used during execution and construction of the prior year's projects, with specific  
cost minimization efforts being fully described. In particular, the Board directed NS Power  
to present this information in the format used in Section 11.1.5 of the 2021 ACE Plan  
application. This material was to be supplemented with additional specific project details  
in the format used in Attachment 1 of NS Power's response to CA IR-1 in the 2021 ACE  
Plan proceeding. NS Power complied with this directive in its 2022 ACE Plan application  
by providing Appendix F in its application.  
[71]  
The Board’s 2021 ACE Plan Order further directed NS Power to undertake  
stakeholder engagement to address the following issues as they relate to the company’s  
cost minimization efforts:  
A better understanding of NS Power's cost minimization and project  
management practices;  
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Development of criteria for the selection of projects to be included as  
specific examples of NS Power's cost minimization efforts;  
The capital cost threshold for which NS Power will conduct internal post  
project reviews;  
A framework and reporting protocols for a capital cost "lessons learned"  
business practice; and  
Whether the Board's Contingency Directive should be expanded to require  
data on all projects with budgets or spending over $250,000, and whether  
the scope of the data request should be wider.  
[72]  
NS Power submitted its 2021 ACE Plan Stakeholder Engagement Report  
to the Board on October 1, 2021.  
[73]  
In response to these directives, and as it did in its 2020 and 2021 ACE Plan  
applications, NS Power stated in its application that “Cost minimization is at the forefront  
of all stages of capital project development and execution.” The company went on to  
reiterate that it follows cost minimization processes intended to “obtain best value for  
customers at the lowest cost.” NS Power then described some of the general cost  
minimization processes that it typically employs throughout the course of capital project  
execution. These processes are essentially the same as those outlined by the company  
in the 2019, 2020 and 2021 ACE Plan proceedings.  
[74]  
Section 11.1.5 of NS Power’s 2022 ACE Plan application then described  
several capital cost minimization efforts undertaken by the company over the past year.  
As in the 2021 ACE Plan application, these efforts were categorized as follows: design  
and detailed engineering; project execution efficiencies; and procurement  
process/negotiated savings. The total project cost savings NS Power assigned to these  
efforts was $13.4 million, as presented in Figure 71 of the application. For each of these  
categories, Appendix F of NS Power’s application described specific project cost  
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minimization examples (49 in total) that were completed to help achieve these project  
cost savings.  
[75]  
In response to NSUARB IR-77(e), NS Power stated that the $13.4 million in  
cost savings noted in Appendix F represent approximately 11% of the approved costs of  
the related projects. During the hearing, Paul Dandurand, Senior Manager of Asset  
Management Operations and Capital Planning, confirmed that the noted savings of $13.4  
million relate only to the examples in Appendix F. He further stated that the examples of  
cost minimization and related savings in Appendix F are not inclusive of all the cost  
minimization efforts by NS Power over the course of 2021.  
[76]  
The Appendix F cost minimization efforts were assessed further in Mr.  
Wilson’s evidence. Mr. Wilson noted that the reported cost savings of $13.4 million in  
Appendix F primarily results from NS Power’s procurement process and negotiated  
savings. He further stated that while NS Power views its procurement process as the  
main opportunity to achieve cost minimization, Appendix F does not provide much further  
explanation. Specifically, he identified that most of the Appendix F procurement process  
savings are explained as “Procurement process resulted in lower pricing,” or words to  
that effect. In most of these cases, Mr. Wilson noted that the cost savings appear to  
simply be the difference between the winning bid and another bid or the original budget.  
He therefore recommended that NS Power:  
Provide cost minimization information that is more useful for identifying lessons learned in  
the 2023 ACE Plan. The Board should then identify as an issue in the 2023 ACE Plan  
proceeding the determination of what cost minimization information would be useful (and  
worth the effort) to compile and file, or whether it may be more efficient to consolidate the  
cost minimization report with information summarized from the post-project reviews into a  
single requirement.  
[Exhibit N-10, p. 6]  
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[77]  
The Appendix F examples of capital cost minimization submitted by NS  
Power were explored further during the hearing:  
MEMBER MURPHY: Jeff, can you call up response to Board IR-77(b), please?  
That's good. Thanks, Jeff. In that IR, Nova Scotia Power is asked to explain specifically  
how the company's procurement process resulted in cost savings for the eight projects that  
were listed.  
Q. So Nova Scotia Power was asked to explain how the procurement process  
resulted in cost savings for eight of those projects that -- those eight projects that are noted.  
For five of the projects, number (i), (ii), (iv), (vii) and (viii), Nova Scotia Power explained  
that the cost savings was a result of using the company's RFP process where the selected  
lowest cost vendor's cost was less than the original budget amount. Can you confirm to me  
that the cost savings for those projects that were noted in Appendix F based on that  
response are simply the difference between Nova Scotia Power's estimate and the price  
provided by the low-cost vendor?  
...  
Q. So I'm looking for confirmation -- for those five projects, can you confirm to me  
that the savings is the difference between what was budgeted by Nova Scotia Power for  
the project and the price that was provided by the lowest cost vendor?  
A. (Dandurand) That I would need for each of these individually to undertake to  
confirm that for you, Mr. Murphy. I believe that to be the case, but I’m not 100 percent  
certain that that's the case in all of these five examples.  
Q. Okay. I don't think I'll ask for an undertaking for this, but that's the way I interpret  
the response. So my question, really, was if I'm interpreting it correctly, wouldn't those  
savings actually be more related to perhaps an overestimate on Nova Scotia Power's part  
or perhaps the low bidder being a little more aggressive than perhaps Nova Scotia Power  
thought, rather than a proactive example of cost minimization on behalf of Nova Scotia  
Power?  
A. (Dandurand) So I think the intention of these examples, Mr. Murphy, to  
demonstrate cost minimization is the RFP process itself, and so utilizing the RFP process  
to competitively source either materials, services, et cetera, resulting in cost savings for  
customers through that process and then making the comparison between what the  
successful bidder's cost was relative to others that were competing through that RFP  
process. And the reason that we highlight that, of course, is that our procurement  
resources, you know, work to negotiate the best possible price for our customers, and so  
the savings then are captured as a result of that work that's done by those involved in  
negotiating the best price for customers.  
Q. Do you know what percentage of procured projects are procured using a tender  
process or an RFP process rather than a sole source process?  
Q. Or rather than percentage, would it be fair to say that the good majority of  
projects are procured using a tender process or an RFP process?  
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A. (Dandurand) I think subject to check, Mr. Murphy, I would say that I would  
expect the majority of, you know, projects are competitively sourced and then in some  
cases, yes, there's a requirement to sole source, but I would need to confirm that for you  
in terms of a specific percentage as to what percentage of our procurements are  
competitively sources versus sole sourced.  
Q. Okay. And I understand what you're saying about the -- about the procurement  
the RFP procurement process and whatnot, but it almost sounds like it's fair to say that  
that process is a standard process rather than a project-specific process. And I guess in  
terms of cost minimization, the examples that the Board is looking for is project-specific  
examples rather than general -- general examples that could be applied to the bulk of Nova  
Scotia Power's projects.  
A. (Dandurand) So I think -- I think, Mr. Murphy, that, you know, those examples  
related to our procurement process can certainly apply to our capital, you know, projects  
and procedures, so that's the reason why we've captured them as such. Specific examples  
outside of the procurement process or, you know, processes that are on the front end of a  
project, for example, we have captured some of those in Appendix F of the ACE Plan that  
are related more to the execution phase of our capital projects. But just to not -- not include  
these, you know, cost savings initiatives from a procurement, I'll say, perspective is  
something that we did not want to do. We just wanted to ensure that they were included in  
there as they are part of the execution of our -- of our capital projects.  
[Transcript, pp. 289-295]  
[78]  
As it relates to the provision of cost minimization examples in future ACE  
Plan applications, NS Power proposed criteria describing how such examples will be  
selected. These criteria, identified in the 2021 Stakeholder Engagement Report, would  
be implemented for the 2023 and subsequent ACE Plans and include:  
projects over $5 million; and  
projects between $1 million and $5 million identified as part of the post  
project review selection criteria (ATO, a unique or first-time undertaking  
(new technology), significant schedule under or over performance, and/or  
project manager initiated for sharing or recognition).  
[79]  
In addition, NS Power stated in its 2021 Stakeholder Engagement Report  
with respect to the selection criteria of cost minimization projects within ACE Plans: “NS  
Power will monitor the process for effectiveness and solicit feedback internally and  
through stakeholder engagement through the 2022 ACE Plan process and consider  
updates as a continuing improvement activity.” The CA supports this proposal but  
believes that a random sampling of 15% of projects under $1 million should also be  
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included as examples. NS Power does not agree with the CA on this point. Instead, the  
company agreed to also include specific examples of its cost minimization efforts from  
projects under $1 million that meet the criteria identified in the second bullet above,  
excluding the ATO criterion.  
[80]  
During the hearing, the CA asked NS Power to identify any “new initiatives”  
the company undertook in 2021 to ensure projects costs were minimized and executed  
on a least cost basis. NS Power responded that it has developed a number of continuous  
improvement initiatives, but that there has not been a lot of specific new initiatives  
implemented. In his closing submission, the CA stated:  
Recognizing the level of attention that the Board and stakeholders have placed on cost  
minimization in recent years, it is concerning that NS Power is unable to identify new  
initiatives that ensure projects are executed on a least cost basis. For a company that takes  
all opportunities to highlight that cost minimization is integral to how it executes its projects,  
NS Power comes up remarkably emptyhanded when asked to provide the concrete  
examples of how this is achieved.  
[Exhibit N-21, p. 17]  
[81]  
For the 2023 ACE Plan, NS Power has agreed to report on any new cost  
minimization techniques that it adopts.  
[82]  
With respect to NS Power’s cost minimization practices, the issue of capital  
project management and delivery was raised during this proceeding. This was aimed at  
addressing the Board’s 2021 ACE Plan directive for the company to work with  
stakeholders to develop a better understanding of NS Power's cost minimization and  
project management practices. In response to CA IR-9, NS Power reiterated its  
commitment from the 2021 ACE Plan stakeholder engagement process to review and  
update its project management guidance documentation and practices, which includes  
cost minimization elements. Updates to this documentation will be incorporated into a  
new NS Power Project Delivery Model (PDM), which is currently being developed by in-  
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house subject matter experts. The PDM will include guidance and recommended practice  
for risk management, value engineering and benchmarking, to ensure these tools are  
identified and applied appropriately. The PDM will be provided as the project  
management standard guidance for capital projects at NS Power. NS Power confirmed  
during hearing testimony that it expects the PDM will help the company improve its capital  
cost performance so that it better meets AACE accuracy expectations. NS Power also  
stated that it expects the new PDM to be implemented in the second quarter of 2022.  
[83]  
As part of the PDM implementation, NS Power noted that training on the  
use of new practices and reporting tools to capture information related to cost  
minimization is planned to be completed in the first half of 2022. Cost minimization  
reporting will also be a standing agenda item for regular meetings with employees leading  
capital projects. Capital and project management workshops are also planned for 2022  
to discuss elements of NS Power’s capital planning and execution and project  
management practices. In addition to providing employees with information related to NS  
Power’s processes, these workshops will also provide training on new or updated  
elements. This will include topics that have been the subject of ongoing consultation with  
stakeholders, including cost minimization, post-project reviews and NS Power’s  
contingency guidelines.  
[84]  
To address the Board’s 2021 ACE Plan directive related to work with  
stakeholders to develop a framework and reporting protocols for a capital cost "lessons  
learned" business practice, NS Power described its proposal in its 2021 Stakeholder  
Engagement Report. The company stated that it will implement changes to formalize its  
capital project planning process to ensure learnings are institutionalized. NS Power  
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claimed that this will result in the lessons learned business practice forming part of the  
post-project reviews. Elements of the company’s proposal include:  
The post-project review will assess the project against a template of key  
project elements and expected outcomes. The product of the review will be  
a summary report with any recommendations for correction, improvement,  
standardization or training as applicable.  
A post-project review template will be utilized to guide and record the  
review. The template will identify key project elements for post-process  
consideration. A copy of the proposed template was included as Appendix  
D in the 2021 Stakeholder Engagement Report.  
Guidance and education on the post project review process will be  
documented internally and included in the annual NS Power capital program  
workshops for education and best practice awareness.  
[85]  
is deficient and presented recommendations for improvement.  
[86] Other issues raised during the hearing concerning NS Power’s costs  
minimization practices included:  
Sole-sourcing of capital projects; and  
The CA contends that NS Power’s proposed post-project review template  
NS Power’s post-project review process.  
[87]  
Mr. Wilson expressed concern related to NS Power’s sole-sourcing  
procurement practices. In particular, he noted that cost minimization is more difficult in  
sole-source procurement due to a lack of competition and because it is more difficult to  
form an independent estimate of cost. As such, he recommended that NS Power include  
projects procured through a sole-sourcing process with budgets or costs over $1 million  
and a sample of projects with costs below $1 million in the post-project review process.  
Although NS Power questioned the value of such reviews, it agreed to add these items  
to the post-project review criteria.  
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[88]  
With regards to post-project reviews, in the 2021 ACE Plan proceeding, NS  
Power agreed to complete internal post-project reviews for capital projects over $5 million  
in cost. The Board, however, found that a capital cost threshold of $5 million for NS Power  
to conduct internal post-project reviews was too high, but needed to be countered by  
concerns about regulatory efficiency and associated costs to complete more post-project  
reviews at a lower threshold. Consequently, the Board directed NS Power to engage with  
stakeholders to develop an appropriate threshold.  
[89]  
In its 2021 Stakeholder Engagement Report, NS Power outlined proposed  
criteria and project capital cost thresholds which would trigger when post-project reviews  
are to be completed. Through the 2022 ACE Plan proceeding, the company proposed  
an additional trigger to address concerns of Mr. Wilson related to sole-sourced projects.  
NS Power described these criteria and thresholds in its rebuttal evidence:  
NS Power will commit to conducting post project reviews as follows, which shall be  
available upon the NSUARB’s request:  
Post project reviews for all projects submitted for approval that are greater than $5  
million (including actual spend greater than $5 million);  
Post project reviews for all projects between $1 million - $5 million that meet the  
following criteria (beyond already established ATO and FIN thresholds): (i) unique  
or first-time undertaking (e.g. new technology), (ii) significant safety or  
environmental event or risk management deployed, (iii) significant  
schedule/budget under or over performance, (iv) project manager initiated for  
sharing or recognition; and (v) projects that include sole sourcing of equipment,  
materials or services of material monetary value within the context of the capital  
project; and  
5 post project reviews each year for projects less than $1 million, with a focus on  
steam projects for the first year.  
[Exhibit N-12, p. 26]  
[90]  
Mr. Wilson recommended that NS Power should make all, or a reasonably  
sized sample, of its post-project reviews available as part of the 2023 ACE Plan filing. He  
further recommended that the Board should then identify as issues in the 2023 ACE Plan  
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proceeding (a) whether the post-project reviews are useful and effective and (b) what  
information from those reviews (such as a summary) NS Power should submit on an  
annual basis. NS Power objected to this recommendation, noting that post-project  
reviews will be available at the Board’s request, and, as such, do not need to be filed with  
future ACE Plans.  
[91]  
Finally, the 2021 Stakeholder Engagement Report addressed the Board’s  
2021 ACE Plan directive to assess whether the Board's contingency directive should be  
expanded to require data on all projects with budgets or spending over $250,000, and  
whether the scope of the data request should be wider. The CA has recommended that  
the contingency directive (Appendix E of the ACE Plan) be expanded to include the scope  
of the contingency (e.g., Class 3) for each project, a breakout of the different levels of  
contingency if a project has multiple contingency levels, data on all projects with budgets  
or spending over $250,000, and relevant data (e.g., excluding “actual spend”) for in-  
progress and proposed projects. In addition, Mr. Athas stated:  
This filing raises the questions of whether NSPI’s cost estimation process merits further  
review and lacks sufficient transparency to determine if the value ascribed to the project  
has or will materialize for Nova Scotians. The cost estimation process is still creating more  
examples where cost overruns extend well beyond the contingency set by NSPI in their  
application.  
[Exhibit N-9, p. 8]  
[92]  
Based on this assertion, Mr. Athas recommended expanding the annual  
ACE filing to include a greater emphasis on cost minimization, with each specific project  
submitted for approval including a detailed discussion of how various approaches to  
reducing cost were evaluated and applied in an effort to better understand where there is  
significant project scope risk.  
[93]  
NS Power does not agree with the CA’s recommendation. The company  
believes that its current reporting effectively addresses ACE Plan reporting requirements  
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ordered previously by the Board. NS Power also does not believe that Mr. Athas’  
recommendation is either necessary or appropriate. The company noted that the extent  
of such a discussion within the “why do the project this way” section of a capital application  
description page will depend on the current stage of the project at filing. Further, NS  
Power currently adds a technical justification explanation separate from the EAM to  
identify alternatives to capital investments. Separate and apart from the EAM, the  
company provides information within the Capital Description Page, which identifies  
alternatives explored. In addition, when there is only one technically feasible project  
alternative, NS Power provides information as to why other project alternatives were  
discounted.  
3.3.2.1  
Findings  
[94]  
In Section 11.1.5 and Appendix F of its 2022 ACE Plan application, NS  
Power provided examples of cost minimization efforts over the past year. The Board finds  
these examples and related supporting information to be useful and informative. The  
Board directs NS Power to continue to provide such information in subsequent ACE Plan  
applications. This is to include specific examples of cost minimization practices used  
during execution and construction of the prior year’s projects, fully describing specific cost  
minimization efforts, complete with a description of the cost savings accrued by these  
efforts. In particular, the Board directs that this information continue to be presented in  
the format used in Section 11.1.5 and Appendix F of the 2022 ACE Plan application.  
Further, as agreed by NS Power, the Board directs the company to report on any new  
cost minimization techniques that it adopts.  
[95]  
During the 2021 ACE Plan hearing, NS Power revealed that it selected at  
random the 35 projects used to produce the cost minimization data in Figure 69 of the  
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2021 ACE Plan application. As such, the Board directed NS Power to engage with  
stakeholders to develop criteria for the selection of projects to be included as specific  
examples of NS Power's cost minimization efforts in future ACE Plan applications. NS  
Power presented these proposed criteria in its 2021 Stakeholder Engagement Report.  
The Board finds them to be reasonable and effectively balancing satisfactory reporting  
that provides the Board and stakeholders with a sample size of cost minimization  
achievements while not adding to regulatory inefficiencies or costly reporting. The Board,  
therefore, directs NS Power to use these criteria (including those for projects less than $1  
million) in future ACE Plan applications to select projects to be included as specific  
examples of the company’s cost minimization efforts. The Board also directs NS Power  
to monitor the process for effectiveness and solicit feedback internally and through  
stakeholder engagement through future ACE Plan processes and consider updates as a  
continuing improvement activity.  
[96]  
As noted above, the Board questioned NS Power during the hearing about  
its claimed cost savings related to “procurement negotiations” for five projects in Appendix  
F. Specifically, these questions dealt with the issue of claimed project cost savings  
associated with using the company's RFP process where the selected lowest cost  
vendor's cost was less than the original budget amount. The Board understands and  
agrees with NS Power’s response that seeking competitive bids is a means of obtaining  
value and minimizing costs for customers. However, as noted in its 2021 ACE Plan  
decision, the Board considers this a general example of obtaining best value, and one  
that the Board would expect NS Power to use for the bulk of its capital projects. As such,  
the Board does not consider the noted costs savings on these projects to be specific  
examples of a proactive cost minimization practice by the company. Instead, the Board  
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considers these cost savings may primarily result from astute or aggressive bidding  
practices on the part of the low bidder and/or NS Power over-estimating the project cost.  
[97]  
Similarly, there are three projects in Appendix F (HYD - WRC LEM Balance  
of Plant, HYD - Weymouth Falls Unit 1 Generator Refurbishment, and TRE Heavy Fuel  
Oil Tank Refurbishment) where NS Power explained, in response to NSUARB IR-77(b),  
that the claimed cost savings are a result of NS Power selecting the lowest bidder for the  
project. The claimed savings are the difference in price between the lowest bidder and  
the next lowest bidder. Again, the Board does not consider the noted costs savings on  
these projects to be specific examples of a proactive cost minimization practice by the  
company. Instead, the Board considers these cost savings may primarily relate to  
individual bidder’s approaches to pricing projects and/or astute or aggressive bidding  
practices on the part of the low bidder.  
[98]  
NS Power’s noted cost savings in Appendix F for the eight capital projects  
referenced in the preceding two paragraphs amounts to a total of approximately $8.2  
million. If these savings are deducted from the total Appendix F project cost savings of  
$13.4 million, the Appendix F savings would be $5.2 million. This would represent only  
4% of the approved project costs in Appendix F. The Board trusts that in future ACE Plan  
applications NS Power will not weight its Appendix F reporting so heavily to these types  
of minimization and savings examples. As such, the Board partially supports Mr. Wilson’s  
recommendation, and encourages NS Power to provide cost minimization information in  
future ACE Plan applications that is more useful for identifying lessons learned. Ideally,  
NS Power’s new criteria to include projects as specific examples of the company’s cost  
minimization efforts will help to address this issue.  
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[99]  
The Board looks forward to implementation of the company’s new PDM in  
the second quarter of 2022. As per the documentation included in the 2021 Stakeholder  
Engagement Report, the Board expects the PDM will include development and execution  
of a planned and documented forward-looking cost minimization review process to be  
applied to projects indicated for cost minimization review. The Board also expects that  
the process will utilize a simple running cost minimization tracker of key project elements  
with status for cost avoidance and cost reduction opportunities.  
[100]  
Moving forward, the Board would like to see a capital project cost estimating  
process incorporated into the PDM. The intent of this process would be to help NS Power  
improve its capital cost estimating/budgeting practices, with the goal of reducing the  
company’s overall spending variance. If this process has not yet been incorporated into  
the PDM, the Board directs NS Power to engage with stakeholders to solicit input.  
[101]  
In its rebuttal evidence, NS Power proposed criteria and project capital cost  
thresholds (including those for sole-sourced projects) which would trigger when post-  
project reviews are to be completed. The Board finds these to be reasonable and directs  
that they be adopted by NS Power in advance of submission of the 2023 ACE Plan  
application. Mr. Wilson recommended that NS Power should make all, or a reasonably  
sized sample, of its post-project reviews available as part of the 2023 ACE Plan filing. NS  
Power does not agree that, as a matter of practice, internal post-project reviews should  
be filed with future ACE Plans. The Board agrees with NS Power, particularly given that  
the company must continue to file both ATOs and FINs with the Board in accordance with  
the CEJC, fully justifying either under- or overspending beyond CEJC thresholds. In  
addition, the company has stated that post-project reviews will be available at the Board’s  
request. As such, if the Board requires a sample of post-project reviews for future ACE  
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Plan applications, it can simply request, and would expect, to be provided with the  
information. Through future ACE Plan proceedings, the Board and stakeholders will have  
the option to review the triggers for post-project reviews.  
[102]  
The Board finds NS Power’s proposal for a framework and reporting  
protocols for a capital cost "lessons learned" business practice to be appropriate. The  
Board, therefore, directs the company to implement that practice in advance of  
submission of the 2023 ACE Plan application. The CA expressed concerns related to NS  
Power’s proposed post-project review template in the “lessons learned” business  
practice. However, the Board has reviewed the template and finds it reasonable, as well  
as addressing most of the CA’s concerns. Nonetheless, as the “lessons learned”  
business practice evolves, there may be opportunities and reasons for the template to be  
updated. The Board, therefore, encourages NS Power to review the template regularly  
to determine whether it can be improved. The Board and stakeholders will also have the  
option to review usefulness and effectiveness of the “lessons learned” business practice  
in future ACE Plan proceedings.  
[103]  
The Board has reviewed the evidence related to the Board’s 2021 ACE Plan  
directive to assess whether the Board's contingency directive should be expanded to  
require data on all projects with budgets or spending over $250,000, and whether the  
scope of the data request should be wider. Both the CA and the SBA (through Mr. Athas)  
have argued that ACE Plan cost minimization reporting should be expanded. NS Power  
believes that its current approach to cost minimization reporting strikes a proper balance  
of providing the Board and stakeholders with helpful information to assess contingency  
and capital budgeting/spending, while not being overly burdensome. The company thus  
submitted that no further Board direction is required with respect to cost minimization  
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reporting, whether within future ACE Plans or otherwise, beyond what NS Power has  
already committed to in the current ACE Plan proceeding. NS Power argued that the  
contingency directive should remain as directed by the Board.  
[104]  
The Board agrees with NS Power. At this point, the Board believes it has  
the required cost minimization reporting, both currently and as directed in this decision,  
that it needs to effectively evaluate the company’s capital cost performance and cost  
minimization efforts and practices. Nevertheless, the Board still has concerns associated  
with the effectiveness of NS Power’s capital cost minimization and budgeting practices.  
The Board expects to see improvement in these areas, and these issues will continue to  
be monitored in future ACE Plan proceedings. Should these concerns continue, the  
Board may, at some point, direct NS Power to engage a third-party expert to review cost  
minimization and capital cost budgeting practices.  
3.4  
Reliability Investments  
[105]  
In past ACE Plan applications, NS Power has stated that reliability is a  
primary focus of its investments. The 2022 application is no different. NS Power also  
emphasizes the need to balance affordability for customers with improvement in system  
reliability.  
[106]  
In this application, the reliability focus is on T&D projects and a response to  
weather events, which are becoming increasingly more severe. The transmission capital  
investment is focused on sustaining system reliability. Customer reliability is the focus of  
distribution capital investment. The 2022 ACE Plan is targeting investments for T&D  
vegetation management and defective, deteriorated, or failed distribution equipment.  
[107]  
NS Power said it employs a Customer Reliability Strategy (CRS) to identify  
and implement improvements in system reliability to benefit its customers. The  
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company’s goal is to prioritize reliability investments to “mitigate the highest risks on the  
system for the greatest number of customers.” The company said it uses lessons learned  
from problem feeder investments to improve CRS projects.  
[108]  
In response to NSUARB IR-48, NS Power discussed its CRS, describing  
the strategy as “the collection of asset strategies, processes and investment  
recommendations…for T&D assets.” However, there is no separate documented  
program for the elements of the CRS. The CA further explored this:  
Q.  
…Ms. MacDonald, as I reviewed the various IR responses, I understand  
that Nova Scotia Power's Customer Reliability Strategy is not documented. Is that correct?  
A.  
(L. MacDonald) So what I would say on that is that it -- insofar as it is the  
collection of programmes, it's the collection of how we're organized in terms of our asset  
management approach, and then the various projects or collections of projects that you  
see, those things working together is the Customer Reliability Strategy.  
Q.  
Okay. And so if one were looking to see Nova Scotia Power's strategy for  
customer reliability that has been committed to writing, what would we look at?  
A.  
(L. MacDonald) We would look across recent ACE Plans, performance  
standards, the problem circuit reporting as well as the various storm templates, so there's  
really a collection of reliability driven reporting and programming that we think is very  
comprehensive and transparent and has absolutely developed and evolved over the last  
number of years.  
Q.  
And at other major electrical utilities, Ms. MacDonald, that have a  
Customer Reliability Strategy, are you familiar with whether or not at those utilities it's  
common to have a documented reliability strategy?  
A.  
(L. MacDonald) Yes, I think different utilities do this in different ways. In  
some ways, you could -- you could think of it in terms of presentations, of PowerPoint  
presentations or Word documents which summarize the collection of activities that I’m  
talking about here.  
When we say that it's not documented as its own standalone, it's because we have  
these other parallel collection of approaches working together, and that's the approach  
we've taken. But I am familiar with how other utilities can certainly put together one  
document or one presentation to summarize these types of efforts.  
Q.  
And is the company giving consideration to centralizing this and having a  
documented reliability strategy?  
A.  
(L. MacDonald) In terms of centralizing, in fact, what we've done over the  
last few years is reorganized to an enterprise asset management function, which is where  
we've integrated the generation as well as transmission and distribution grid reliability  
approach into an overall function and department of engineers and analysts and others  
working together constantly to make sure that we are coordinated and are seeing those  
cross-functional learnings that apply to various reliability strategies all in one function. And  
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in that way, perhaps you could think of it as the reliability strategy is embodied in how that  
is organized and some of the -- we've alluded to reliability teams in many of our IR  
responses in this ACE proceeding, and that is how we do the work. It's constant and it's  
every day as opposed to a document or a presentation.  
Q.  
And I don't mean to sound as though I'm challenging about the work  
getting done, and we'll come to some of the reliability results in a moment, but just from an  
idea of having a centralized, documented strategy that then can be looked at in order to  
understand, okay, certain capital projects being justified on this basis, here's the strategy  
under which that particular capital project fits, is the company giving some thought to  
getting a documented reliability strategy put in place?  
A.  
(L. MacDonald) As -- as I'm explaining, Mr. Mahody, I think we are, or we  
have. How that results in one document, I think remains to be determined whether that is  
a valuable exercise in and of itself, but the criteria, the asset management mechanisms,  
the various reports and metrics against which we report on all of this, those are absolutely  
documented and provided and then elaborated on as needed through the various  
processes that we're part of.  
Q.  
Ms. MacDonald, perhaps by way of an undertaking, would you be willing  
to list the various documents that do make up the overall reliability strategies so we have  
in one place where this list of documentation would be?  
A.  
(L. MacDonald) Yes, we can undertake to do that.  
[Transcript, pp. 49-54]  
[109]  
Undertaking U-1 lists the documents NS Power considers support the CRS:  
A listing of documents and data that support this strategy are outlined below and are  
organized in the three main components of the Asset Management Mechanism. Risk  
Profiles, Mitigating Measures and Maintenance Strategies.  
Risk Profiles:  
Feeder Risk Profiles  
Transmission Line Risk Profiles  
Major Substation Asset Risk Profiles  
Mitigating Measures:  
Annual Capital Expenditure Plans  
Performance Standards Annual Report  
Performance Standards Summary and Revision Reports  
Storm Reports  
NS Power Problem Circuit Study  
Climate Adaptation Planning Documents  
Third Party Risk Reviews from Insurers  
Reliability Team Working Documents  
Maintenance Strategies:  
Feeder Inspection Data  
Transmission Inspection Data  
Preventative Maintenance Programs  
Real Time Monitoring Data  
Feeder Load Monitoring Data  
Feeder Protection Coordination Studies  
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Third Party Engineering Assessments  
Substation Field Inspection Data  
Root Cause Analysis Reports  
Distribution Planning Studies  
[Exhibit N-19, U-1, pp. 4-5]  
[110]  
NS Power’s application included reliability statistics for its own operations,  
as well as those for Atlantic Canada utilities. The company stated that, generally, its  
annual outage frequency and duration is below the other Atlantic utilities, and where it is  
higher, it is due to a substantial number of storms.  
[111]  
In its 2020 Performance Standards decision (M10055), the Board identified  
the worst 5% problem circuits and set out its expectations of NS Power regarding the  
circuits:  
A comprehensive and effective approach to align the reliability performance of those  
circuits with the service level provided to customers in other regions of the province needs  
to be developed. It is unclear whether NS Power has undertaken any reliability analysis to  
determine if performance would be improved with additional or reconfigured infrastructure  
(circuits or substation) that could minimize circuit exposure. It is also unclear whether  
integrating innovative technological advances associated with microgrids, battery storage,  
or other distributed energy resources was studied to determine the effectiveness of such  
measures in improving service restoration or minimizing outage durations. The Board  
directs NS Power to undertake a comprehensive analysis which results in clearly identified  
measures, as well as the associated timing and costs, to bring these problem and chronic  
circuits into alignment with the reliability performance in the rest of the province. This study  
and the action plan are to be reviewed during an upcoming ACE Plan proceeding.  
[Emphasis added]  
[Decision letter, June 23, 2021, p.13]  
[112]  
The NS Power Problem Circuit Reliability Study was filed with the Board on  
December 10, 2021 in response to the Board’s directive. The Board made the Study an  
exhibit in this proceeding. The Study described four problem circuits in Cape Breton. The  
four circuits “have been and continue to be, targets of reliability investments to improve  
performance.” NS Power considered other options for improving the performance of each  
circuit, and developing some specific projects, taking into account reliability gains, costs,  
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feasibility, and the time required to implement the work. The proposed investment for 26  
projects totals $10.8 million. The Study noted four key areas as investment targets:  
Targeted priority device replacement;  
Storm hardening and reliability upgrades of devices;  
Enhanced vegetation management; and  
Smart Grid and Intelligent Devices deployment.  
[113]  
Mr. Athas expressed concern about the overall level of funding stemming  
from the plan for the four problem circuits and what he considers to be disproportionate  
spending on outage causes as well as a general lack of specifics. He noted that most of  
the spending is on vegetation management and bringing lines to roadside, leaving little  
for the issues noted in the Study. Mr. Athas also expressed his concerns, generally, about  
a lack of specifics in the justification of T&D projects based on the impact on reliability:  
Reliability impact is frequently used as justification for T&D capital projects and at times  
excessively so. Absent a specific numerical impact upon which to evaluate the cost-benefit  
of what is being proposed the term becomes little more than a buzz word.  
[Exhibit N-9, p. 33]  
[114]  
NS Power stated in its rebuttal evidence that the investment in the four  
problem circuits on vegetation management and outage causes is warranted due to the  
geographic conditions as well as the meteorological systems in the areas. The company  
considers its approach to mitigating the issues with the circuits in the circumstances is  
balanced.  
[115]  
Mr. Athas set out several questions about vegetation management  
spending, suggesting that the circuits in question had fallen behind, and remedial  
attention was long overdue. NS Power rejected Mr. Athas’ position, saying that there was  
no evidence that NS Power had fallen behind in its vegetation management. The  
company said it regularly reviews indicators to take the best steps to undertake the  
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necessary activities. NS Power did not accept Mr. Athas’ suggestion that there is a need  
for an investigation. Further the company disputed the accuracy of the suggestion that it  
waits for a feeder to be in the “bottom 5%” before investing in it, noting that there are other  
feeders on which it is making investments in addition to the problem circuits.  
[116]  
A further concern of Mr. Athas is the impact of underspending on several  
projects which he claims could negatively impact reliability. In its rebuttal evidence, NS  
Power responded to these concerns, noting that the projects identified by Mr. Athas have  
progressed. Further, with one exception, the projects all had variances of less than 10%  
from their approved budgets. NS Power noted that, in its quarterly reports filed with the  
Board, variance explanations are available to address Mr. Athas’ concerns.  
[117]  
In its application, NS Power discussed its Reliability Investment Strategy for  
aging T&D assets. The company stated that aging infrastructure is not replaced solely  
based on age, but other factors may impact its useful life: condition; risk; reliability impact,  
and others. In response to NSUARB IR-8, NS Power said its proposed capital  
investments for these assets will address current challenges as well as help to avoid  
future outages. In the longer term, the investments will support reliability “by both  
correcting existing/emerging reliability issues and avoiding issues that have not caused  
reliability impacts yet.”  
[118]  
The CA also explored the amount of spending on vegetation management  
with the NS Power panel during the hearing:  
Q.  
(Mahody) Still on the topic of reliability, I would like to talk about trees. And  
if we could turn up page 168 of the Exhibit N-1, Mr. Goodine?  
Q.  
And down as the very bottom, line of that portion of the evidence, it  
indicates that 27 percent of all identified event-day outage hours year to date in 2021 have  
been caused by trees.  
So is that fair to say that somewhere between 25 to 30 percent of customer-  
experienced outages, the company in 2021 said that those were caused by trees?  
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A.  
(L. MacDonald) Yes, in addition to what I think we explain as well in the  
ACE Plan and elsewhere in respect to how weather-coded outages are often also tree  
caused, but coded to the weather event in question, so it's at least that, and likely more,  
depending on how the weather codes fall into trees.  
Q.  
And that range of tree-caused outages, Ms. MacDonald, has been a  
relatively consistent level over the last 10 or more years?  
A.  
(L. MacDonald) Subject to check, I think so, and again, depending on how  
the weather relates to it. And if you want to point me to something, we can, ---  
Q.  
A.  
Q.  
Sure.  
--- myself and my colleagues, talk more about that.  
Certainly.  
Mr. Goodine, Exhibit N-5, Responses to Board IRs, could we turn up Response to  
Board IR-50(b), and just down at the bottom of that page, if we could see that graph? Okay.  
Q.  
So Ms. MacDonald, I was understanding that this graph, if you take out  
the 2010 and 2014, or if you normalize those as significant events that occurred that’s  
referenced in your evidence, that line, at approximately 25 percent is what I understood to  
be a relatively consistent impact of trees on the system.  
A.  
(L. MacDonald) Yes. Looking at it that way, you can definitely say that.  
Q.  
Okay. As you know, Ms. MacDonald, a significant amount of investment  
has been made in vegetation management, in tree trimming, over at least the last 10 or 15  
years, to the tune of millions and millions of dollars annually. Why is it that the impact that  
we see of trees causing outages doesn’t seem to have changed, even though we've  
invested the tens of millions of dollars that we have in that initiative?  
A.  
(L. MacDonald) So broadly speaking, I would say that maintaining the level  
-- perhaps it's a downward trend as well, if we look at it -- but is working in the context of  
increasing occurrences and severity of those weather days that I spoke about in terms of  
both the day itself that weather could be affecting the system as well as the stress in the  
days after.  
And so all of that taken together, we know that the frequency and the severity of  
those events, the wind, for example, that causes -- typically causes the tree issues, have  
been increasing, so in some ways, to be holding or slightly decreasing in terms of the  
effects of that, as part of what we call maintaining and improving system performance in  
the context of the increasing severity and frequency of the weather.  
Q.  
And going forward, Ms. MacDonald, I understand the company plans to  
spend approximately $8 million in vegetation management tree trimming in the coming  
years. Is that a sufficient amount, in the company's view, given the impact the trees are  
having on our reliability?  
A.  
(L. MacDonald) Well, we're constantly reviewing that, and if it becomes  
apparent that we need to increase in a material way the size of one of those programmes,  
we would bring that forward. But that is exactly the work that we're reviewing constantly,  
in terms of the balance of our programme among vegetation management investment as  
well as the other equipment related system-wide transmission distribution and feeder level  
improvement.  
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So it's all part of that balancing act based on what we see in the trends.  
[Transcript, pp. 55-59]  
[119]  
In her opening statement and closing submission, the SBA said that  
significant questions remained about what is targeted to address reliability and how  
success is assessed. The SBA emphasized the need for clarity, saying it is necessary to  
be able to determine what has been achieved by the investment.  
[120]  
During the hearing, Ms. MacAdam asked the NS Power panel how the  
company will know if it has addressed the problem and achieved reliability. Matthew  
Drover, Senior Director of T&D and Delivery Operations, said that NS Power tracks the  
performance of all its feeders regularly, and if they are improving, the company knows it  
has made a difference.  
[121]  
The Board also explored performance measures with the NS Power panel:  
Q.  
(Murphy) So these two tables, my understanding is they present expected  
reductions in CKAIDI and CKAIFI performance measures as a result of completing  
proposed projects in the Feeder Action Plan that was submitted -- I think it was Exhibit N-  
2, as part of this proceeding.  
And I think these may be questions for Mr. Drover, but I'm wondering if you could  
explain how the targets for the estimated reduction in CKAIDI and CKAIFI were  
determined?  
A.  
Q.  
A.  
(Dandurand) Mr. Murphy, maybe I'll start ---  
Sure.  
(Dandurand) --- with -- in response to your question, and then Mr. Drover  
and I can respond accordingly.  
Q.  
Maybe I'll -- before you start, my next question was going to also be how  
were those estimated range reductions estimated as well, so let's combine in the one  
question.  
A.  
(Dandurand) Okay. For sure.  
Yeah. So the estimated reduction in CKAIDI and CKAIFI, as you’ve noted in the  
table, are what the company would expect as a reduction in those two metrics as a result  
of the investments that are included in the plan.  
I guess the caveat to that, though, would be listed at the bottom of the table as  
well, just an important note that that anticipated avoided CKAIDI, CKAIFI from a particular  
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project within the plan would vary, depending on the unique conditions that the feeder is  
exposed to in any given year.  
So they are a range of, I'll say, possible outcomes, as the sub-note suggests to the  
table, with respect to reduction in those reliability metrics; again, based on the investments  
within the study.  
Q.  
But is that specifically based on, I guess, Nova Scotia Power experience  
in doing previous type of work and what you saw in terms of reductions in those measures?  
A.  
(Dandurand) So I guess partly.  
My understanding would be that certainly, with the elements that feed into what  
the causes of outages are and having a firm understanding as to what the causes of  
outages are or impacts to reliability, and again, I'll say, coupled with the company's  
experience using that information to provide an expected range in reduction to CKAIDI and  
CKAIFI.  
Q.  
Thank you. In that same IR Response to the -- it was IR Response 81(b)  
---  
Q. --- there's reference there, it says:  
Loss of supply related outages on feeder 53 [or sorry] 58C-403 contributed  
approximately 15 percent of customer hours of interruption and approximately 22 percent  
of the number of customer interruptions on average from 2018 to 2021.  
Those numbers, I guess, to me, anyway, appear rather significant and I'm  
wondering what steps Nova Scotia Power's undertaking to reduce those particular  
transmission interruptions.  
A. (Drover) I can speak to that one, Mr. Murphy.  
So when it comes to loss of supply, those are typically either transmission or  
substation interruptions to a poll substation, and they can have the same causes as the  
other types of feeder outages we have, whether it's vegetation that falls on the transmission  
line or a type of asset that has weakened for whatever reason.  
So it's part of our asset management programme, same that we do with our feeder  
inspections, we do the same thing with transmission inspections, and the projects that we  
put forth within the ACE Plan would reflect those -- those programmes.  
[Transcript, pp. 285-289]  
[122]  
While the SBA sought some means of quantifying the success of reliability  
investments, the Board observes that there was no suggestion about how this might be  
achieved. The Board notes NS Power’s statements in its rebuttal evidence about the use  
of predictive analysis to inform its spending priorities, targeting improvements in CKAIDI  
and CKAIFI in the study. The company said improvements in feeders are hard to predict  
exactly, due in large part to external factors like storms. NS Power went on to say that  
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its success can also be reviewed in the annual Performance Standards Review by the  
Board.  
3.4.1.1  
Findings  
[123]  
The Board finds that presently there is no need to direct an investigation  
into reliability investments made by NS Power as part of this proceeding. No party  
objected to the approval of any of the projects identified to improve reliability in the 2022  
ACE Plan application. The Board considers that the appropriate venue in which to explore  
whether improved performance has been achieved is in its annual Performance  
Standards Review. The Board understands that the results of T&D capital spending will  
not necessarily be seen immediately, however, and expects NS Power to be diligent in  
continuing regular monitoring of the circuits/feeders in the interim.  
3.5  
Economic Analysis Model  
[124]  
The Board identified the EAM in the Final Issues List developed for this  
proceeding, with three areas for examination: Replacement Energy Cost (REC);  
Accounting Treatment of Decommissioning Costs; and Monte Carlo/Decision Analysis.  
The Board discusses these areas below, recognizing that they are all elements for  
consideration in the EAM.  
[125]  
The SBA suggested that NS Power could expand the use of the EAM to  
scrutinize projects where the company has identified only one option as technically  
feasible. Mr. Athas said NS Power should expand on this conclusion as well as clarifying  
its review of alternatives. NS Power’s response was that the company already does this  
and will continue to do so. The Board does not consider further direction is required.  
[126]  
In its 2021 ACE Plan decision, the Board referred several questions to the  
stakeholder engagement process, including:  
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Whether the Board should direct NS Power to update the EAM to align with  
new practices and more recent data that affect the replacement cost of  
energy and the design of sensitivities;  
Whether NS Power should be directed to provide a full explanation of the  
current accounting treatment for all decommissioning-related costs.  
[127]  
In its 2021 Stakeholder Engagement Report, NS Power indicated that  
complete agreement with stakeholders was not reached on these two issues. The Board  
accepted the report in a letter dated November 2, 2021, and said it expected the  
unresolved issues would be addressed in either the next ACE Plan proceeding or other  
applications before the Board.  
3.5.1 Replacement Energy Cost  
[128]  
NS Power reported agreement to update the REC calculations in the EAM  
to align with the IRP Reference Plan 2.0C. The sensitivity for the REC would remain at  
10%; however, NS Power noted that this would be updated to show it represents a  
P67/P33 range in alignment with IRP fuel sensitivities. In its closing submissions, NS  
Power said it would update the 10% sensitivity once it has completed its IRP evergreen  
work, suggesting it makes no sense to update it on a frequent or annual basis.  
[129]  
Sensitivities for capital investment were updated to 30%, although the CA  
considered that rather than apply a Class 3 sensitivity of 30% to all projects, the sensitivity  
should be aligned with the class of each project. NS Power’s position is that most projects  
submitted for Board approval are based on Class 3 estimates and therefore the 30%  
sensitivity is most appropriate. The company claimed that making changes to the EAM  
to accommodate the CA’s position would be administratively burdensome. Finally, NS  
Power said it would continue to show the economic impact on a project of a one-, two-  
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and three-year delay in its EAM, with analysis of longer periods for projects where there  
is uncertainty around timelines.  
[130]  
In his evidence, Mr. Wilson said that the changes made from the  
stakeholder engagement regarding REC are appropriate but suggested that the energy  
cost sensitivity should reflect the same range as the sensitivity for capital investment. He  
also suggested that, due to recent legislative changes, there should be a change to a  
different IRP scenario.  
3.5.1.1  
Findings  
[131]  
The Board is satisfied that NS Power has appropriately updated its EAM  
regarding REC for current use and expects that there will be a further update once the  
evergreen process of the IRP is complete.  
3.5.2 Accounting Treatment of Decommissioning Costs  
[132]  
In its October 1, 2021 Stakeholder Engagement Report, NS Power said it  
had provided stakeholders with a complete explanation of its current accounting treatment  
for decommissioning-related costs and considered the Board’s directive to have been  
properly addressed. However, the company noted concerns of the CA about how  
decommissioning liabilities are treated in the EAM. NS Power’s position is that the  
decommissioning liability is the same in reinvestment and decommissioning options in  
the EAM at the beginning of the analysis, and the future revenue requirement only  
changes if the future cash flows between the options are different. The company said the  
changes are captured in the EAM through the changes in depreciation expense, financing  
costs and tax impacts.  
[133]  
The CA pursued the issue of decommissioning costs in the context of the  
Tusket Main Dam Refurbishment ATO proceeding (M10197) currently before the Board.  
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In response to CA IR-19, NS Power said it does not have formal policies and practices  
about the comprehensiveness and accuracy of decommissioning costs developed for use  
in the EAM. The company said it typically evaluates the projects at a Class 5 level, and  
then further refines its analysis. The company went on to say that hydro projects can be  
deferred indefinitely if there is sustaining capital to ensure it reaches the next  
refurbishment or life extension modernization investment. While such a deferral may not  
be the most economic alternative, NS Power said it looks at what is the best value for its  
customers.  
[134]  
Mr. Wilson suggested that the Board should direct NS Power to provide a  
sensitivity analysis including the cost of decommissioning in the economic analysis of the  
Mersey redevelopment project, which is not yet before the Board. During the hearing,  
this issue was explored by the CA with the NS Power panel:  
Q.  
… In his eighth recommendation, Mr. Wilson indicates that Nova Scotia  
Power should include a sensitivity analysis in the Mersey EAM that, at a minimum, includes  
the full cost of decommissioning the facility at the end of the analysis period. It is Nova  
Scotia Power’s intent to supply that type of information as part of the Mersey filing?  
A.  
(Dandurand) Yes, Mr. Mahody, to the extent it’s appropriate, a  
decommissioning scenario would be included as part of the filing.  
[Transcript, p. 83]  
[135]  
Justin Heisler, Controller, also confirmed this in response to Board  
questions, with additional comment from Mr. MacDonald:  
Q.  
(Murphy) Again aligned with Mersey, I wanted to follow up on a question  
that Mr. Mahody asked earlier today. …  
But Mr. Mahody referenced a recommendation from Mr. Wilson that Nova Scotia  
Power include a sensitivity analysis in the Mersey EAM, which includes the full costs of  
decommissioning the facility at the end of the analysis period.  
And I think Mr. Mahody asked the panel to confirm that that would be done, but  
maybe I misheard, but the answer I heard was that Nova Scotia Power agreed to consider  
decommissioning as an alternative to Mersey Project. Is that what I heard?  
A.  
(Heisler) Mr. Murphy, that was me, Justin Heisler. So we will look at a  
decommissioning.  
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Q.  
As an alternative. But the question was per Mr. Wilson’s  
recommendations, when you look at the Mersey Redevelopment option, will you include  
decommissioning in that particular option at the end?  
It’s along the lines of the questions that Mr. Melanson was asking earlier. Will you  
look at decommissioning at the end of the project and include that in the costs for the  
refurbishment project or the redevelopment project?  
A.  
(Heisler) Yes, we will.  
Q.  
And you’ll conduct the sensitivity analysis that Mr. Wilson had  
recommended?  
A.  
Q.  
A.  
(Heisler) Correct.  
Okay, thank you.  
(J. MacDonald) Mr. Murphy, just to add to that. So certainly when you look  
at the price tag that’s on Mersey, we’re all, you know, like, a bit taken aback by sticker  
shock. But we’re endeavouring to look at the lowest cost option for customers whether,  
you know, it’s replacing the assets and sustaining the energy, whether it’s de-energizing,  
which would include keeping the dams in place; and then the third option is to take the  
dams out which is kind of the decommissioning option for Phase 1.  
So those are the considerations. And also part of those considerations are part of  
the consultation process that we have currently. And then certainly different views on all  
three of those, but certainly that would be part of the filing of the latter part of this year. But  
those are kind of the three options that we’re looking at.  
[Transcript, pp. 267-270]  
[136]  
The question of whether NS Power’s approach described in response to CA  
IR-19 of using a 40-year model in the EAM when looking at refurbishment or  
decommissioning introduces a bias in favour of refurbishment was pursued with Mr.  
Heisler:  
Q.  
(Melanson) And my experience with decommissioning versus  
refurbishment is primarily in the area of hydro, and most of the hydro assets, the useful life  
has been considerably longer than 40 years and could go on to perpetuity depending on  
how often you refurbish it. Doesn't that introduce a bias in favour of refurbishment in every  
application?  
A.  
(Heisler) Mr. Melanson, I mean, I think as we would have noted in our  
response to you; I believe it was CA IR-19. We do generally take the view that based on  
there’ sufficient sustaining capital, we can extend the life of specifically hydro facilities in  
perpetuity. But to your point, that isn’t always necessarily the most economic option. And  
so our approach would be to -- would be to look at all options, including decommissioning.  
And then we do expect that in certain cases at a certain point continuing to refurbish or  
extend the life of those assets may not be the most economic. So we would look at all  
appropriate options to ensure that the conclusion we’re drawing is in the best interests of  
customers.  
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Q.  
My question was not so much whether you're going to be looking at the  
two options or not. My question is not -- is there not a problem, is there not an internal  
problem with the mechanism of the economic analysis model so that every time you do it  
separately over the course of time, the outcome is never going to be in favour of  
decommissioning.  
A.  
(Heisler) I mean, certainly given the time value (indiscernible) on the basis  
of the comparing options on a net present value revenue requirement basis, there is –  
there is a benefit in deferring the decommissioning costs, but at the same time, there are  
sustaining capital requirements throughout the course of the throughout the course –  
through the life of the asset to extend that life, so I don’t know what the – certainly the time  
value of money isn’t a factor, but I think our general view would be that the approach we’re  
taking is appropriate from a net present value revenue requirement.  
[Transcript pp. 211-213]  
3.5.2.1  
Findings  
[137]  
NS Power confirmed, in its reply submission, its commitment to provide the  
sensitivity analysis around decommissioning in its Mersey application as suggested by  
Mr. Wilson. The Board agrees that doing so will provide a more appropriate EAM, but  
considering the potential inherent bias, expects that application to be closely scrutinized  
by stakeholders as well as the Board.  
3.5.3 Monte Carlo/Decision Analysis  
[138]  
In its decision in M10013 regarding the Annapolis Tidal Generator  
Retirement, the Board discussed NS Power’s Decision Analysis model and the Monte  
Carlo Economic Analysis model as discussed in the evidence of Matthew Schoenhardt of  
MS Consulting, a consultant to the Board’s consultant, Grant Thornton. The Board  
quoted a description of the Monte Carlo analysis from his report:  
[67]  
MS Consulting stated that the primary purpose of Monte Carlo Economic Analysis  
(MCEA) is:  
... The primary purpose of using MCEA is to compare project alternatives and understand  
under which scenarios does the ordinal ranking of each alternative change. Once the  
variables are identified that change the ordinal ranking, investigation of the most significant  
variables should have priority funding in the next stage so that their ranges can be further  
refined and/or reduced (i.e., de-risked by progressive project development). Investigating  
these key variables allows for reduced project development costs.  
One method of understanding critical conditions are “tornado diagrams”. A tornado diagram  
runs the economic analysis moving each variable through its maximum and minimum  
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range to determine the impact value on the outcome. This allows a user to see which  
variables are the most important to the desired outcome.  
[M10013, Exhibit N-9, Appendix A, p. 6]  
[139]  
In the Annapolis matter, Mr. Schoenhardt considered the NS Power  
Decision Analysis to be lacking. In this matter, there was little discussion of the issue.  
The Board notes that the Non-Binding Contingency Guidelines of NS Power, as filed in  
response to CA IR-15, refer to when a Monte Carlo analysis or similar simulation is used  
for range estimation. In response to NSUARB IR-21, NS Power explained that the  
company does not use such simulations as a standard for risk-rating and optimization;  
rather, NS Power uses the simulations for the evaluation of specific complex capital  
projects to compare alternatives.  
[140]  
Mr. Wilson did not suggest the Board should favour the use or the non-use  
of a Monte Carlo decision analysis in his evidence. In his opinion, the EAM is suitable,  
but the Monte Carlo analysis could be useful as an “intermediate level of sophistication  
and complexity that is particularly useful for complex hydro projects or new technologies.”  
3.5.3.1  
Findings  
[141]  
The Board considers Mr. Wilson’s view to be aligned with that of NS Power  
regarding the use of a Monte Carlo analysis. This appears reasonable to the Board;  
however, the Board will expect NS Power to be diligent in determining when such an  
analytical approach is called for, and to undertake a rigorous analysis in those instances.  
3.6  
Revenue Requirement  
[142]  
In the Board’s 2011 and 2012 ACE Plan decisions, the Board directed NS  
Power to provide an estimate of the effect which the ACE Plan spending might have on  
the revenue requirement over the next five years. NS Power included this information in  
its application, as it has done since those directives were issued. The Board’s purpose  
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for the directives was to gain insight into the affordability of proposed ACE Plan spending.  
The Board subsequently directed NS Power in the 2017 ACE Plan decision to provide the  
same information based on assumptions from stakeholders.  
[143]  
NS Power provided the calculations for revenue requirement based on its  
own, and on stakeholder, assumptions. In the application, NS Power claimed that the  
table based on its assumptions (Figure 59) “shows that NS Power’s capital expenditures  
have a cumulative decreasing effect on NS Power’s revenue requirement for customers  
over the next five years, taking into account the contribution to fixed costs provided by  
new customer additions.” After explaining the method of its calculation, NS Power stated:  
This method does not address the revenue requirement effect should capital projects not  
be completed. Costs resulting from not completing certain projects include items such as  
increased operating costs, increased fuel costs, increased repair costs, and other risks or  
implications. Avoided cost benefits are not included in this revenue requirement calculation.  
[Exhibit N-1, p. 119]  
[144]  
In addition to cost recovery from customer growth, NS Power went on to  
explain that Administrative Overhead (AO) and AFUDC credits and income tax impact  
contributed to the cumulative decrease in revenue requirement.  
[145]  
The Board notes that NS Power does not believe that the stakeholder  
assumptions accurately impact its capital program because the impact of fixed cost  
recovery and AO and AFUDC credits are removed. In response to NSUARB IR-44, NS  
Power acknowledged that AO is a main driver of the decrease.  
[146]  
NS Power also acknowledged in response to SBA IR-28 that the customer  
growth used in determining the revenue requirement includes projected growth, and if  
that growth is lower than projected, the revenue requirement increases. This led Mr.  
Athas to conclude that, without support for the projected customer growth, that growth  
should not be included to justify minimizing the revenue requirement. He described it as  
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“misleading” and suggested the use of AO, most of which is in the early years, is not  
appropriate. He said that NS Power should use a low case customer growth projection.  
Mr. Athas concluded that the Board should make approval of the 2022 ACE Plan spending  
“contingent upon its projected customer growth metric for each year being achieved.”  
[147]  
NS Power rejected the SBA’s suggestion for using a low case customer  
growth scenario and said that the company had already provided such a scenario in  
response to SBA IR-28 which resulted in no change, and had also demonstrated this in  
Figure 59 by excluding all customer growth in the section entitled ‘Excluding Fixed Cost  
Recovery.” In its closing submission, NS Power confirmed that the revenue requirement  
is merely an estimate, and said it was neither necessary nor appropriate to adopt Mr.  
Athas’ suggestion to make the 2022 ACE Plan spending contingent on the growth being  
achieved.  
3.6.1.1  
Findings  
[148]  
While several years ago the Board directed the impact of proposed capital  
spending on revenue requirement be included in the ACE Plan applications, the Board  
now questions whether the information proves useful. As NS Power has acknowledged,  
it is an estimate only. In the Board’s view, given the uncertainties surrounding estimates  
in the calculation, and the lack of consensus on the inputs, the information does not  
appear to be useful. The Board will not require this information to be included in the 2023  
ACE Plan but reserves the right to seek information on the revenue requirement in a  
future proceeding. The Board observes that the GRA proceeding later this year may shed  
more light on this subject. Further, the Board agrees with NS Power that it should not  
accept Mr. Athas’ suggestion to make approval of the 2022 ACE Plan contingent on the  
achievement of projected customer growth.  
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3.7  
Contingency and Contingency Guidelines  
[149]  
Directive 7 of the Board’s 2020 ACE Plan Order directed NS Power to  
develop non-binding contingency guidelines “…describing how it determines when a  
capital cost estimate contingency amount is merited and at what level… .” The company  
issued the Non-Binding Contingency Guidelines (Contingency Guidelines) on November  
20, 2020 and revised them on August 31, 2021.  
[150]  
In this proceeding, Mr. Wilson made the following recommendation in his  
report:  
Include the following documents with every capital work order and application.  
Project maturity classification checklist  
Statement of the basis for the contingency guidelines including, as applicable:  
a. Predetermined guidelines reference to or statement of documented basis for  
use of a standard “single contingency” or other referenced practice;  
b. Subject matter expert judgement documented reasons for the determination,  
including a supporting risk register; and  
c. Other, more technical methods - Supporting analysis as described in the  
Contingency Guidelines. (Page 29)  
[Exhibit N-10, p.5]  
[151]  
Mr. Dandurand confirmed during the hearing that NS Power would provide  
the requested information for all projects with a capital cost over $1 million requiring Board  
approval as part of the 2023 ACE Plan filing. This was further confirmed by the company  
at pages 15-16 of its closing submission. The Board, therefore, directs NS Power to  
follow through on its commitment and provide the information set out in Mr. Wilson’s  
recommendation.  
[152]  
Mr. Wilson’s report also raised an issue with the use of expected accuracy  
ranges in establishing a contingency amount. His concern was that the Contingency  
Guidelines “…conflate the expected accuracy range of the budget estimate with the  
contingency determination.”  
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[153]  
The portion of the Contingency Guidelines quoted by Mr. Wilson which gave  
rise to his concern is reproduced for ease of reference:  
NS Power recognizes that AACE makes no correlation between the contingency and the  
upper limits of the estimate accuracy, however, the level of a project maturity and hence  
the estimate class is directly related to the level of Uncertainty inherent in the project budget  
estimate; as a result, there are varying levels of contingency that can be applied and  
although NS Power starts with using the AACE recommended upper limits of the estimate  
accuracy range to establish the range for the probable contingency, as project progression  
develops, NS Power will take into account evidence such as budgetary quotes, RFP  
responses, further detailed design, construction assessments and other insight as  
necessary to narrow the proposed AACE accuracy where possible for a given class of  
estimate.  
[Exhibit N-4, RIR-15, Attachment 1, p.10]  
[154]  
In Mr. Wilson’s opinion there is an internal contradiction in the referenced  
passage, where the AACE makes no correlation between the contingency and the upper  
limits of the estimate accuracy, while NS Power uses the AACE “upper limits of the  
estimate accuracy range to establish the range of the probable contingency… .” Mr.  
Wilson provided the Nictaux Canal Crest Rebuild project as an example where the AACE  
Class 3 estimate was apparently used to justify a 15% contingency, described as “…the  
lower end of the 10-30 percent range of this estimate class…”  
[155]  
This analysis led Mr. Wilson to make the following recommendation:  
Further clarify the Contingency Guidelines to avoid relying on the expected accuracy  
range to set a contingency, considering an approach I suggest for application of the  
predetermined guidelines method when used to determine a contingency.  
[Exhibit N-10, p.5]  
[156]  
The predetermined guidelines method envisaged by Mr. Wilson would be  
based on past performance modified up or down with the use of expert judgment. While  
Mr. Wilson discussed, by way of example, aligning the expert judgment with a project’s  
risk register, during questioning at the hearing he indicated a risk register would not  
necessarily be required for every project. For example, standard projects which are done  
over and over again might not require this type of assessment. Mr. Wilson did not want  
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to become involved in micro-management but suggested a risk register would be useful  
for civil hydro-electric projects.  
[157]  
NS Power was less receptive to this recommendation. The company  
confirmed the predetermined guidelines method is one already found in the Contingency  
Guidelines. NS Power agreed with Mr. Wilson that predetermined guidelines used with  
expert judgment is an appropriate approach. That said, the company maintained that a  
contingency range adds useful information in addition to methods such as predetermined  
guidelines. NS Power suggested that if the contingency amounts for projects were  
estimated at greater than 30%, they might not be ready for submittal. The company  
further submitted “a contingency range also provides clear direction and bounds to project  
managers.” Furthermore, the company said that because of the varying nature of projects  
within an asset class, the predetermined guideline plus expert judgment approach may  
not always be the preferred one.  
[158]  
The Board begins its analysis by noting that the issues being addressed  
relate to non-binding contingency guidelines. These were developed in response to  
concerns from stakeholders and the Board that, in numerous instances, it was difficult to  
determine, and therefore assess, what specific factors went into the contingency figure  
found in a capital work order. That said, as the guidelines are non-binding, the Board  
must be careful not to make them too prescriptive or, as discussed by Mr. Wilson, become  
involved in micro-management.  
[159]  
In every case, NS Power has the burden of showing that the chosen  
contingency amount is reasonable. If the Contingency Guidelines are helpful in focusing  
project managers on the need to have reasonable contingency figures reflected in the  
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preparation and execution of capital work orders, and showing the reasonableness of  
these figures to the Board, they are useful to both the company and the Board.  
[160]  
In this context, the Board has some difficulty in following how the range of  
the expected accuracy of, for example, a Class 3 estimate under the AACE guidelines  
informs the chosen contingency amount. NS Power and Mr. Wilson appear to agree that  
the AACE guidelines related to the accuracy of estimates make no direct correlation  
between this and the determination of contingency amounts.  
[161]  
The purpose of the AACE guidelines related to class estimates is to  
establish a range of accuracy based on the amount of work that has been done to arrive  
at these estimates. The purpose of these AACE guidelines is not to establish the potential  
bounds of any contingency related to each known risk, sometimes referenced as “known,  
unknowns.” Mr. Wilson said potentially unknown project risks, sometimes described as  
unknown, unknowns,” would be best addressed in a project management reserve type  
of account.  
[162]  
The use of the expected AACE class estimate accuracy range to support a  
contingency figure, such as appears to have been done in the Nictaux Falls Crest Rebuild,  
does not appear to the Board to add much to the exercise. Using the AACE class  
estimates to set upper bounds also potentially increases the project contingency to  
unreasonable levels, as explained by Mr. Wilson in his testimony when discussing Figure  
2 in his report, which is taken directly from the Contingency Guidelines.  
3.7.1.1  
Findings  
[163]  
The Board will not order the Contingency Guidelines to be altered at this  
stage, given their non-binding nature. Mr. Wilson’s recommended approach appears to  
have merit as it relates to transparency and simplicity. That said, the Contingency  
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Guidelines have just been adopted by the company. The Board will, therefore, not, at this  
stage, direct NS Power to limit its approach to the one suggested by Mr. Wilson.  
[164]  
Despite the foregoing, the Board is not satisfied NS Power’s evidence and  
submissions on this point sufficiently address the possibility of conflating accuracy ranges  
for estimates with the determination of a contingency amount. The Board would benefit  
from a better understanding of how NS Power can address the concerns about  
transparency, simplicity and potential inflation of contingency amounts when using the  
estimated accuracy ranges arising from the AACE guidelines as a form of guidance in  
arriving at a contingency amount. The Board directs NS Power to provide greater clarity  
in this regard in the 2023 ACE Plan.  
3.8  
Eastern Clean Energy Initiative and Impact of Recent Provincial and  
Federal legislation on Proposed Spending  
[165]  
The ECEI projects consist of C0044392 (Coal Conversion), C0044771  
(Wind), C0044391 (Transmission) and C0045132 (Energy Storage). The goal of the  
ECEI is to assist NS Power in the transition to 80% renewable electricity by 2030. These  
projects are listed as items for subsequent submittal in the 2022 ACE Plan. They are,  
therefore, not currently before the Board for approval.  
[166]  
The Coal Conversion project is for the conversion of up to two coal  
generating units (Point Tupper and Trenton 6) to gas-fired units. Understanding that  
scoping and project refinement have not reached a level required for submittal, the current  
total capital cost estimate for this project is $32,341,325, with $9,390,264 forecast to be  
spent in 2022.  
[167]  
The Wind project consists of 350 MW of wind energy from a provincial RFP,  
along with new generation facilities for onshore wind of up to 160 MW in partnership with  
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one or more Mi’Kmaq communities. The current total capital cost estimate for this project  
is $83,280,972, with a budgeted forecast spend of $29,563,744 in 2022.  
[168]  
The Transmission project involves a portion of the proposed Atlantic Loop,  
the purpose of which is to provide a transmission loop for accessing hydro-electric power  
from Quebec and Newfoundland and Labrador. This portion of the project would expand  
and upgrade the New Brunswick intertie and transmission capacity from that province.  
The current capital cost estimate for this project is $351,898,909, with a budgeted forecast  
spend of $20,378,370 in 2022.  
[169]  
The Energy Storage project envisages the purchase of four 50 MW 4-hour  
grid scale batteries for installation on the transmission system, to assist in integrating new  
renewable energy, provide energy arbitrage and resiliency services, along with firm  
capacity and fuel savings. The current capital cost estimate for this project is  
$171,207,920, with a budgeted forecast spend of $60,413,412 in 2022.  
[170]  
The total current capital cost estimate for the four ECEI projects is,  
therefore, approximately $638,729,126, of which approximately $119,745,790 is  
scheduled to be spent in 2022. The Board further understands that there are sensitive  
ongoing negotiations with respect to potential government funding for portions of these  
capital costs. Notwithstanding this, and the fact the company is not seeking approval of  
the ECEI projects as part of this application, the level of spending attracted considerable  
interest from the parties and the Board.  
[171]  
NS Power currently intends to file each capital work order for approval as a  
separate project. The company says the four ECEI projects are consistent with the  
scenarios developed in the recent 2020 IRP Action Plan. NS Power also says each  
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project can stand on its own merits, separate and apart from the others, as part of an  
overall approach designed to meet legislated climate change mitigation objectives.  
[172]  
The relationship between the ECEI projects and the 2020 IRP Action Plan  
will be discussed in more detail below. Aside from issues related to consistency with the  
2020 IRP, and any request by the parties to update the 2020 IRP, another issue raised  
as part of the ACE Plan proceeding was whether the projects should be considered  
separately by the Board. The Board further raised the issue of whether the ECEI could  
proceed without government funding assistance. As well, the Board raised the risk  
associated with natural gas conversions as a transitional energy source in the event  
natural gas falls out of favour when total methane emissions from source to burning are  
considered.  
3.8.1.1  
Findings  
[173]  
At this stage it is premature to provide any specific directions on many of  
the issues canvassed during the hearing, as the ECEI projects are not before the Board.  
Each project is tied to the goal of ending coal-fired generation in the province, significantly  
reducing reliance on carbon-based energy, and substantially increasing renewable  
energy production. NS Power has determined that each project can be justified on its  
own. The Board should not pre-judge this assertion at this stage.  
[174]  
In the past, the Board has commented on the conceptual and analytical  
difficulties which can arise, especially in the context of individual EAMs, when reviewing  
large projects involving a single generating system, which are presented in phases. The  
Board will simply comment that reviewing large projects with a common goal in isolation  
has similar potential pitfalls if information gaps arise. This is particularly the case in the  
context of the level of investment contemplated by the ECEI and its long-term systems  
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and planning impacts. To avoid delays, with the knowledge of stakeholder concerns  
expressed in this proceeding, engagement takes on added importance.  
[175]  
The Board is mindful that there are clear distinctions, for example, between  
the transmission upgrades with New Brunswick, and eventually Quebec, and converting  
coal plants to gas-fired ones. There would appear to potentially be direct links between  
substantial increases in intermittent wind generation and grid scale battery storage. In  
any event, all the projects relate to the decarbonization and renewable energy goal. The  
need for certain attributes in notionally separate projects, such as, for example, firm  
capacity attained through hydroelectric purchases or gasification of coal plants, could  
theoretically be dependent on what firm capacity is achieved by each project. The onus  
will be on NS Power to justify its approach and the Board expects a rigorous analysis.  
[176]  
NS Power has committed to providing project alternatives for each of the  
four ECEI submittals. The number of viable alternatives will depend on the scope and  
project refinements leading to the ultimate applications. This is the methodology  
envisaged by the CEJC and the Board expects all reasonable and viable alternatives to  
be included. Depending on how these alternatives are presented, it may or may not  
alleviate Mr. Wilson’s concern about EAMs for ECEI projects that are considered in  
isolation from the other ECEI projects. That is for another day.  
3.9  
Alignment with the 2020 IRP  
[177]  
The 2020 IRP proceeding involved a comprehensive exercise with  
significant stakeholder input. The goal was to develop a robust and risk-weighted long-  
term strategy to guide NS Power in meeting government decarbonization goals in a safe  
and reliable manner at the least cost to its customers. Through the engagement process,  
the company produced a number of scenarios in order to explore future policy options  
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