INTRODUCTION

In early April 2024, Nova Scotia’s Energy Reform Act^[1] (originally known as Bill 404) passed, marking the beginning of a new direction for Nova Scotia’s energy system. At the time of writing only a small portion of the Act was in force, but the balance of its robust changes are expected to come into force in the near future, ushering in significant changes for Nova Scotia’s electricity sector — including both “traditional” electricity generators and existing and new renewable energy and energy storage proponents, including onshore and offshore wind and green hydrogen.

BACKGROUND

Nova Scotia’s electricity sector is dominated by the vertically integrated incumbent electricity utility, Nova Scotia Power Inc. (“NS Power”). With the substantial changes occurring in the Nova Scotia electricity sector driven by federal and provincial environmental goals, including a phase out of NS Power’s still substantial coal fleet by 2030 and a provincial 80 per cent renewable electricity grid target for the same year.

The provincial government announced the creation of a Clean Electricity Solutions Task Force (“Task Force”) on April 20, 2023. The Task Force was charged with exploring ways to modernize Nova Scotia’s electricity infrastructure and regulatory environment through, in part:

1. Examining the then current transmission grid capacity and determining the level of increased grid capacity required to ensure Nova Scotia’s energy targets are met;
2. Reviewing the extent of the regulator’s (the Nova Scotia Utility and Review Board) jurisdiction, its powers and its enforcement capacity; and
3. Engaging with Nova Scotians, including subject matter specialists, on the best path forward for the electricity sector.

The Task Force released its report on January 31, 2024, entitled Modernizing Energy from Transition to Transformation: A Report of the Clean Electricity Solutions Task Force.^[2] The Task Force made 12 specific recommendations, four of which will be noted here. The Task Force’s first recommendation was the enactment of an Energy Modernization Act that would in part establish defined purposes for energy regulation in Nova Scotia, create a Nova Scotia Independent Energy System Operator (“NSIESO”), enable transparent competition for new generation, and create a standalone energy regulator.^[3]

Recommendations #2 and #3 were to provide an expanded budget and adjusted compensation framework for the new Nova Scotia Energy Board to hire and retain the appropriate expertise in staffing to fulfill the new Board’s expanded scope of responsibilities, and recommendation #7 was for the new NSIESO to oversee open competition for new infrastructure, with NS Power not being excluded from the bidding in any competitive process overseen by the NSIESO.

NOVA SCOTIA ENERGY REFORM (2024) ACT ^[4]

The provincial government took the recommendations of the Task Force under consideration and accepted the majority of the substantive changes, and in early April 2024, Nova Scotia’s Energy Reform (2024) Act (originally, Bill 404) was passed by the Nova Scotia legislative assembly.

The creation of an independent system operator which is mandated by the new Act will be the first time that Nova Scotia will have a system operator function separate from the incumbent electric utility, and is a substantive change to the electricity regime in the province. In the words of the Task Force,

To enable the successful transition of our energy system, The Task Force believes it is necessary to eliminate the tension created by the competing interests NSPSO [the internal NS Power system operator function] must balance: the interests of shareholders and the interests of customers.^[5]

The creation of a new Energy Board which is also required by the new Act, focused solely on the energy sector as opposed to the much broader mandate of the current Nova Scotia Utility and Review Board, will allow for a greater focus of the energy regulator on the significant changes occurring during the fast moving energy transition occurring in Nova Scotia at present and anticipated to accelerate towards 2030.

Some of the key items arising from the new legislation are as follows.

1. Statutory Amendments and New Acts

The Act establishes 2 new statutes:

• The Energy and Regulatory Boards ^[6]
• The More Access to Energy ^[7]

These new Acts focus on specialization, competition, environmental and reliability considerations. In line with these changes, the Energy Reform (2024) Act also makes substantive amendments to, in part, the:

• Nova Scotia Electricity ^[8]
• Nova Scotia Gas Distribution ^[9]
• Nova Scotia Public Utilities Act.^[10]
• Nova Scotia Power Privatization ^[11]

2. Specialized Energy Board

Over the past few years, the provincial government has put special emphasis on developing the province’s energy potential (both for environmental and economic reasons), improving services and reducing energy costs for Nova Scotian residents and businesses. With the Energy Reform (2024) Act, the province takes further steps toward this goal by creating a board with specialization in energy regulatory matters.

Two Boards instead of one

The new Energy and Regulatory Boards Act^[12] will effectively split the current Utility and Review Board (“UARB”) into two entities:

• One to deal with energy matters (the Energy Board).
• One to deal with all other matters that previously fell within the UARBs’ jurisdiction (the Regulatory and Appeals Board).

The two boards will have one common Chair, and each will have its own Vice-Chair. The chair of the current UARB will take on the role of Chair of the new Boards, while the vice-chair of the current UARB will take on the role of vice-chair of the Energy Board. The Regulations created under the UARB statute remain in force under the new Energy and Regulatory Boards Act,^[13] suggesting the procedural rules for matters before the Boards will likely remain the same as for the UARB.

Board Recommendations

The Energy and Regulatory Boards Act allows the Minister of Natural Resources and Renewables, when considering changes in legal or political direction related to public utilities or the integrated electricity system as a whole, to submit the proposed change to the Energy Board for its recommendations, to protect the interests of the public and the applicable public utility. This will allow the Minister, in collaboration with the energy regulator, to make informed changes for the further development of Nova Scotia’s energy systems.

Board Direction

The Energy and Regulatory Boards Act also provides the Energy Board with additional direction in carrying out its mandate. For example, it requires that, in determining matters over which it has authority, the Energy Board must consider the extent to which the matter:

• Supports competition and innovation in the provision of energy resources in the province.
• Supports the development of a competitive electricity
• Ensures the provision of safe, secure, reliable and economical energy supply in the province.
• Supports sustainable development and sustainable prosperity.

The government retains the ability to provide further direction by allowing the Governor in Council (ie. Cabinet) to add to these considerations through regulation. Further, the Energy Board’s decisions must be consistent with the purpose of the Energy and Regulatory Boards Act, the More Access to Energy Act and their regulations. Contextual analysis will be required in this regard.

The thrust of these changes is to create an independent regulator with a specific focus on the energy sector, while still making effective and efficient use of the existing resources of the current UARB. The new Energy Board is intended to have the expertise and regulatory powers necessary to regulate the rapidly evolving energy landscape in Nova Scotia. In this regard it will be interesting to see in due course the qualifications of the other members of the Energy Board yet to be appointed, and whether the province adopts the Task Force’s recommendations #2 and #3 noted above to provide the Energy Board with an expanded budget and adjusted compensation framework to hire and retain the appropriate expertise to fulfill the new Board’s expanded scope of responsibilities.

3. Promotion of Competition

Two of the stated purposes of the More Access to Energy Act^[14] relate to increased competition:

• Seeking to “increase competition and innovation in the Province’s energy sector”^[15].
• “[P]rovide for competitive procurement practices for new energy-system ”^[16]

The More Access to Energy Act largely sets out to achieve these (and its other) goals by establishing a new Nova Scotia Independent Energy System Operator (“IESO”). The IESO will direct operations of transmission systems pursuant to agreements with owners and operators of transmission systems in the province (the “IESO-controlled grid”), a role currently filled by the Nova Scotia Power System Operator. Amongst many other responsibilities, the new IESO will also be tasked with:

• Responsibility for the development of transmission tariffs (for approval by the Energy Board).
• Establishing market rules governing the IESO-controlled grid and actors on it.
• Facilitating the operation of a competitive electricity
• Conducting procurement for energy resources.

One element worthy of note here is the provincial government’s acceptance of the Task Force’s recommendation #7 noted above for the new IESO to oversee open competition for new electric infrastructure. In this regard the energy resources for which the IESO is mandated to conduct procurements include, electricity supply, electricity capacity, energy storage, ancillary services and hybrid peaking resources. Hybrid peaking resources in this context are defined as “electricity resources and non-electricity resources used in combination to satisfy the integrated electricity system demand.” The IESO is also mandated to work with the Nova Scotia demand-side management (“DSM”) franchise holder to supply NS Power with reasonably available, cost-effective DSM. As such, together with the traditional roles of an independent system operator to manage the grid, the NSIESO is given broad powers with respect to the procurement of energy resources required to fulfill the results of the integrated planning exercises also mandated to be carried out by the IESO.

4. Environmental Focus

The Energy Reform (2024) Act also aims to integrate environmental considerations into Nova Scotia’s energy regulatory system through various mechanisms.

Sustainability

One of the stated purposes of the new More Access to Energy Act is to “support the sustainable development, sustainable prosperity, energy efficiency and greenhouse gas emissions reduction goals of the Province articulated in the Environmental goals and Climate Change Reduction Act.” This is particularly relevant since the Energy Board will be required to make decisions consistent with the purposes of this Act. The Energy Reform (2024) Act specifically incorporates the ideas of “sustainable development” (as defined in the Environment Act) and “sustainable prosperity”^[17] (as defined in the Environmental Goals and Climate Change Reduction Act):

• “[S]ustainable development” means development that meets the needs of the present generation without compromising the ability of future generations to meet their own needs.
• “[S]ustainable prosperity” means prosperity where economic growth, environmental stewardship and social responsibility are integrated and recognized as being interconnected.

The Energy Board, when approving rates, tolls, charges, tariffs and capital applications or any other matter over which it has authority, must consider the extent to which they support sustainable development and sustainable prosperity.

Curtailment

The Act makes changes to improve clarity around, and financial compensation for, curtailment for generation facilities that have received a power-purchase agreement (“PPA”) under a procurement initiated under section 4B of the Electricity Act (which addresses the procurement of renewable low-impact electricity or energy storage). These statutory clarifications, to be set out in a new section 4E of the Electricity Act, directly affect renewable electricity generators and energy storage in the province, both of which are needed for the province to reach its renewable energy goals. For this new Section 4E, “curtailment” will be defined as “based on instruction sent to a generation facility from the system operator, the decrease or cessation of the generation facility’s generation output.”^[18] Pursuant to that section, generally:

• The purchaser of the facility’s generation output will compensate the facility at the rate set out in the power purchase agreement between them where curtailment exceeds 5% of a generation facility’s total energy bid.
• There will be no compensation for (i) any curtailment below 5% of the total energy bid, (ii) where the facility is not generating electricity when the system operator instructed the generator to stop/decrease output or (iii) where the system operator’s request was due to “an unforeseeable emergency or force majeure ”^[19]

Further regulatory certainty is provided on the curtailment issue by making the system operator responsible for determination of what constitutes an emergency or force majeure event and allowing curtailment disputes to be appealed to the Energy Board.

Policy Guidelines

The amendments to the Public Utilities Act^[20] also provide the Minister with the authority to issue policy guidelines concerning objectives set out in its regulations. The Energy Board is charged with implementing these policy guidelines. These guidelines will provide flexibility in the Minister’s ability to influence regulation of public utilities.

Nuclear Power

The Energy Reform (2024) Act^[21] also removes the long-standing legislative prohibition in Nova Scotia against NS Power’s construction of a nuclear power plant.

5. Increased System Reliability

The Energy Reform (2024) Act^[22] increases the Energy Board’s ability to address energy reliability concerns within the Nova Scotia electricity context. One of the express purposes of the new More Access to Energy Act is to “ensure the provision of a safe, secure, reliable and economical energy supply in the Province.”^[23]

Energy Board Powers

Reliability is addressed through expanding powers of the new Energy Board. First, the Energy Board is required to make decisions consistent with the purposes of the More Access to Energy Act, which includes the reliability consideration. The Energy Board is also outright required to give appropriate consideration to ensuring the provision of “safe, secure, reliable and economical energy supply in the Province”^[24] when approving rates, tolls, charges, tariffs, capital applications or any other matter over which it has authority. Upon application to it, the Energy Board will be authorized to approve, modify or retire reliability standards. The Energy Board will also be authorized to monitor, assess, enforce compliance with, and make orders with respect to, approved reliability standards, and have the power to issue certain interim licences with respect to the operation of the Provincial transmission system where required “to ensure the reliable supply of electricity.”^[25]

IESO

The More Access to Energy Act also gives the IESO direction with respect to reliability. Some of the objects of the new IESO relating directly to reliability, include:

• Establish and enforce reliability standards for the province’s integrated electricity system.
• Maintain the reliability of the bulk electricity system.
• Participate in the development of standards relating to the reliability of the transmission system.
• Undertake power system planning responsibilities to ensure the reliability of the bulk electricity system for present and future needs, as well as for the efficient operation of a competitive market.
• Forecast reliability of electricity resources for the province.
• Collect and make public information relating to the reliability of the integrated electricity system to meet the province’s electricity needs.

The IESO will also have authority to give directions for the purpose of maintaining the reliability of electricity service or the IESO-controlled grid.

Transmitters

At the same time, transmitters are required to participate in the development of reliability standards for the transmission system and to comply with procedures, directions and orders of the IESO to ensure such reliability.

Regulations

As well, under the More Access to Energy Act, the Governor in Council will be granted authority to make regulations respecting reliability standards.

CONCLUSION

As can be seen from the foregoing, the changes to be implemented by the Energy Reform (2024) Act are broad in scope, and designed to create a more competitive landscape for the provision of electricity and related energy resources in the Province as it transitions off coal and to a more renewable energy based system.

The new legislation is expansive, and the foregoing is just a sample of many of the key changes to be brought about by the legislation. Anyone operating in the electricity sector in Nova Scotia is recommended to review the legislation in its totality.

As noted at the outset, the changes outlined in the legislation are anticipated to be brought in to force over the coming months, anticipated to be in phases. Many practical issues will need to be dealt with, including the establishment of the new NSIESO and the new Energy Board, and transfers of relevant assets and staff from NS Power to the new IESO which although not described above is also a key element of the legislation.

At the time of writing the province had recently commenced recruitment for the inaugural Board and Chair of the NSIESO. The recruitment notice indicated that the NSIESO will have about 80 employees and an estimated budget of $20M, and that the IESO would assume the system operator functions currently embedded in NS Power in two phases, with the first involving transferring the responsibilities for system planning and generator interconnection processes and charging the IESO with responsibility for procurement of new energy resources, and the second transferring control of the dispatch of generation and transmission facilities.

As this all roles out, it will be important that the transition be as seamless as possible so as not to disrupt the electricity system, especially considering the significant energy transition that is occurring in Nova Scotia at the same time.

* David MacDougall, counsel McInnes Cooper, Lucia Westin-Eastaugh, associate McInnes Cooper and Alexandra Gosse, associate McInnes Cooper. McInnes Cooper provided strategic advice to the Clean Electricity Solutions Task Force.

1. Energy Reform (2024) Act, SNS 2024, c 2 [Energy Reform (2024) Act or Act].
2. Alison Scott & John Macisaac, Nova Scotia Clean Electricity Solutions Task Force: Modernizing Energy From Transition to Transformation A Report of the Clean Electricity Solutions Task Force (2024), online (pdf ): <cetaskforce.ca/wp-content/uploads/2024/02/FInal-Report-February-23.pdf>.
3. See ibid at 4–6.
4. Act, supra note 1.
5. Supra note 2 at 24.
6. Energy Reform (2024) Act, SNS 2024, c 2, schedule A [Energy and Regulatory Boards Act].
7. Ibid art 3.
8. Electricity Act, SNS 2004, c 25 [Electricity Act].
9. Gas Distribution Act, SNS 1997, c 4 [Gas Distribution Act].
10. Public Utilities Act, RSNS 1989, c 380 [Public Utilities Act].
11. Nova Scotia Power Privatization Act, SNS 1992, c 8 [Nova Scotia Power Privatization Act].
12. Energy and Regulatory Boards Act, supra note 6.
13. Ibid.
14. Energy Reform (2024) Act, SNS 2024, c 2, schedule B [More Access to Energy Act].
15. Ibid, s 2(a).
16. Ibid, s 2(d).
17. Ibid.
18. Act, supra note 1, s 21(1)(a).
19. Ibid, s 21(4)(b).
20. Public Utilities Act, supra note 10.
21. Act, supra note 1.
22. Ibid.
23. Ibid, s 6(2)(c).
24. Ibid.
25. Ibid, s 96(1).