Tuesday, March 20, 2012

Emera Inc

I own this stock (TSX-EMA).

Every time I have a blog about this company I get negative comments from someone in Nova Scotia. The following is the latest, but typical.

Anonymous...Emera is gouging the people of Nova Scotia in order to provide dividends to its stockholders. It actually disgusted me to read your blog entry on this company. Let me spell it out for you. Each time Emera raise power rates (10% increase in the near future), it is with the rationale that they need the money to improve infrastructure, yet the infrastructure has crumbled in their hands as dividends have gone up. Small businesses are being forced under in order for you to make your 14 per cent. The entire populace of Nova Scotia hates this company. Eventually we will kick them out. Something to think about.

So, let’s talk about this subject. First of all, Nova Scotia Power Inc. which Emera owns is a regulated company. They cannot do anything without the approval of the Nova Scotia Government. The other thing is the problem of going green costs money. The Nova Scotia government is proud of going green. I suggest if you want lower electricity costs you talk to the Nova Scotia government who mandates how electricity is to be produced and what it is to cost.

If you think you would be better off with the government running the electrical utility, let me tell you how well the government of Ontario has done. My electricity bill went up 4% in 2008, 18.3% in 2009, and 18.7% in 2010 and then down by 8% in 2010. Why did it go down in 2010? This is because we got a “Clean Energy Benefit” equal to a 10% discount. Also, I am on “time of use” billing, so we are trying to lower our consumption.

Why did we get this Clean Energy Benefit? It was because there was a lot of protest about the increasing electrical bills. The problem is that this “Clean Energy Benefit” is a hoax. It is being paid for out of tax money and Ontario cannot afford it. We will not have our deficit under control (that is the new debt we get into each year because we cannot balance our books) until 2018 at the earliest.

The other wonderful thing about Ontario Electrical billing is the “Debt Retirement Charge”. We had thought in Ontario that Ontario Hydro (what we call the utility that generates electricity for Ontario) was one public utility that was being well run. But we were wrong. We were very wrong. It all blew up in 1998 when Ontario Hydro could no longer lie about its finances.

This occurred when the government split up Ontario Hydro into Hydro One and OPG. The debt from Ontario Hydro was too big to be paid off by the new entities. (It was also too big to be paid off the old entity too.) That is why we got a “stranded debt” which the taxpayers are to pay off via their electrical bill.

There was to be this stranded charge on our electrical bill for 10 years. Now the estimate is until 2015 or 2018. One big problem is the money from this charge is going into the Ontario revenue common pot and until the Auditors report of December 2011 no one knew the status of this debt.

Now the auditor general says that the money has really gone to pay down the old Ontario Hydro stranded debt. He also said that progress on paying the debt has been slow even though ratepayers have kicked in $8 billion of the $7.8 billion they owed in 1999. However, we still do not know what the current debt is and the government does not seem inclined to tell us.

Now why is our electricity getting so expensive? One reason is that the government is pushing green and renewable electricity. This costs lots and lots of money. At least Ontario has spent lots and lots of money on it. Everywhere going green and renewable for electricity production costs lots and lots of money. The other reason our electricity is expensive is that we spent too much going Nuclear. Going Nuclear is mainly the reason for the stranded debt (which is 3.6% of my bill).

Since we have gone green with such things as Wind Turbines there has been unexpected consequences. The thing is the wind blows when the wind blows. Because of this, we can end up exporting electricity at negative cents per kWh. Ontario tax payer foots the bill. See “Ontario power: Why Ontario effectively paid its neighbors $214,584.24 in one weekend hour to take our power” at The Star. And, this is not the first time. See an April 2011 article in at cnews on the same subject. The wind turbines produce electricity when the wind blows, they do not care whether we need the electricity or not.

And Nova Scotia’s government has a renewable energy strategy. I cannot image this would be cheap in Nova Scotia and expensive in the rest of the world. I suggest if the people of Nova Scotia want cheaper electricity that they do not mandate green renewable energy.

It is an old argument about who does a better job of running utilities, the government or private industry. In theory, since the government does not need to make a profit, the government should be able to provide utilities at a cheaper price. The problem is real life. In real life this does not happen.

Perhaps the problem is that the people who regulate a utility and who run a utility are the same people when the government runs a utility. If you have group of people as regulators that is different from the group of people who run the utility maybe you can get a utility that is run properly.

When Ontario Hydro started out we had cheap energy. Electricity was cheap because we had Niagara Falls. We thought in Ontario that Ontario Hydro was different from other government run utilities. We were wrong. First we spend too much on going to nuclear power, now we are spending too much going green.

If you want to know where I stand politically, I am a fiscal conservative and a social liberal. What does this mean? I believe that you do not fund social programs by debt. It never ends well. You must fund social programs as you can afford them. A social liberal means that I believe you cannot tell someone else how to live their lives.

And yes, I do know that there are also problems that Emera has in the Bahamas. However, one thing at a time and also I have had no comments on this.

Tomorrow I will start my review on how the company is doing.

Emera Inc. is an energy and services company that has two wholly-owned regulated electric utility subsidiaries, of Nova Scotia Power Inc. and Bangor Hydro-Electric Company. Emera also owns 19% of St. Lucia Electricity Services Limited, and 25% of Grand Bahamas Power Company that serves 19,000 customers on the Caribbean island of Grand Bahamas. Emera also owns the Brunswick Pipeline; Bayside Power, in Saint John, New Brunswick; Emera Energy Services; a joint venture interest in Bear Swamp northern Massachusetts; a 12.9% interest in the Maritimes & Northeast Pipeline; and an 8.2% interest in Open Hydro. Its web site is here Emera. See my spreadsheet at ema.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.


  1. I own this stock too :)
    Pretty intense comment. I am from New Brunswick, I didn't know Emera situation in Nova Scotia.
    I like the stock, it has grow well in my portfolio for the last couple years.

  2. I love your blog. That comment was from a sour grape....Every so often you'll come across one of those :)

    Keep up the good work.

  3. Here in Alberta, our power bill is roughly $80 a month.

    $40 of my bill goes towards fees, distribution charges, transmission charges, and deferral riders.

    I have an account that I deposit small amounts of money I receive to save for a solar power system to go completely off the grid. I can even make money selling power back through the lines :)