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June 17, 1998
(Justice)

The following is being distributed at the request of the Office of the Consumer Advocate:

Court of Appeals renders opinion - Public Utilities Board has jurisdiction to decide the fate of excess earnings - Newfoundland Power no longer entitled to retain excess earnings as of right

The Newfoundland Court of Appeal has stated that the Public Utilities Board does not have the jurisdiction to allow Newfoundland Power to retain excess earnings in the same manner as in the past. The issue arose during the 1996 Public Utilities Board hearings when the consumer advocate, noting the fact that Newfoundland Power was able to retain some excess earnings, requested the Public Utilities Board to put the issue before the Court of Appeal. On June 15, 1998, the Court of Appeal rendered its opinion.

In the years 1992 and 1993, Newfoundland Power's return on rate base was in excess of the range determined by the board's order. However, in 1988, Newfoundland Power had written the Public Utilities Board requesting the right to retain excess earnings as long as these earnings did not exceed the company's rate of return on common equity as set by the board. Section 8.1 of the Public Utilities Act makes no reference to common equity but rather return on rate base. Thus, the court's decision.

In 1992, the power company earned 11.43 per cent on rate base and in 1993 11.37 per cent on rate base. However, the return on rate base in those years was higher than 11.19 per cent which was the upper limit of the approved range. Based on initial information, it appears that the overearnings could approximate several million dollars.

The consumer advocate Dennis Browne said: "The Public Utilities Board retains jurisdiction in reference to this issue. The board must now decide how it will deal with the court's opinion. One of the options the board has is to require a rebate of excess earnings to consumers."

The consumer advocate is to request the Public Utilities Board to have auditors place a dollar figure on the overearnings. The issue could be dealt with when the board meets in October 1998 to decide other matters pertaining to Newfoundland Power.

The consumer advocate said: "This ruling is favourable to consumers. The utility must now abide by the law and not retain excess earnings as a right. Consumers must now be considered for a rebate when there are excess earnings. We are pleased with this decision."

Contact: Dennis M. Browne, Q.C.
                Tel: (709) 754-1800
                Fax: (709) 754-2701
                E-mail: mgk@roadrunner.nf.net

1998 06 17 10:30 a.m.