Government directs PUB to maintain status quo on rural rate subsidy

Mines and Energy Minister Walter Noel today announced that government has directed the Public Utilities Board (PUB) to maintain the existing approach to the rural rate subsidy for communities located in rural Newfoundland and Labrador.

In accordance with PUB direction, Newfoundland and Labrador Hydro (Hydro) had proposed to phase out preferential rates for many rural electricity customers in their current rate application. On average, a diesel customer pays only 26 per cent of the cost of providing electricity service. Hydro�s rural interconnected customers pay 64 per cent of the cost. Hydro recovers the balance of its costs for these customers from Newfoundland Power�s customers and from its own customers on the Labrador interconnected system. This permits rural customers to maintain a rate structure that is affordable and comparable to electricity rates in other areas of the province.

"Hydro currently operates 24 isolated diesel generating plants serving approximately 4,500 people, and distributes power to approximately 21,800 rural interconnected customers in 180 communities across the province," said Minister Noel. "The cost of supplying power to rural and isolated communities is much greater than urban centres. Government is ensuring that those living in rural Newfoundland and Labrador do not have to shoulder these costs on their own.

"If government did not direct the PUB to maintain the current rate subsidy, the PUB may have approved rate increases for institutional and commercial customers in isolated communities of up to 40 per cent a year for several years. They could also have directed Hydro to begin reducing subsidies for residential customers in the future, resulting in similar increases.

"Subsidies of this nature happen in various sectors of our province. Provincial ferries, road construction and schools are subsidized by all Newfoundlanders and Labradorians. This reflects the rural nature of our province and has always been a part of our culture.

"Although government cannot interfere with the management and efficiency issues at Hydro, we feel it is imperative to address issues of a social policy nature that affect the survival of rural Newfoundland and Labrador. This is not a new issue as subsidies for rural electrical service have been in place since the beginnings of rural electrification in the province. This direction is a continuation of a policy that is currently in place to help alleviate the immense costs associated with the provision of electricity in our isolated communities. Government will continue to work for all Newfoundlanders and Labradorians to ensure an adequate and affordable supply of electricity is available."

Media contact: Darrell Mercer, Communications, (709) 729-5777.

2003 07 09                                      3:30 p.m.