Nova Scotia Power defends business dealings with Emera subsidiaries

Nova Scotia Power pushed backMondayagainst an audit criticizing its business dealings with fellow Emera subsidiaries.

It happened inside and outside regulatory hearings into the audit of Nova Scotia Power's compliance to its affiliate code of conduct.

"Of all of the transactions that were reviewed, there's not a single disallowance that was recommended," Nova Scotia Power president Karen Hutt told reporters outside the Nova Scotia Utility and Review Board hearing.

"If we weren't acting appropriately in terms of getting the best value for customers, that would be proof positive of that and that hasn't occurred."

Nova Scotia Power on Tuesday provided regulators with a summary of affiliate transactions. It shows in 2016, the utility spent about $42.9 million buying goods and services fromrelated Emera companies.

First test since2015

NorthStar Consulting Group was hired by the regulator to examine millions of dollars in transactions between Nova Scotia Power and other companies owned by its parent Emera in 2015 and 2016.

It was the first compliance test since a new affiliate code of conduct was brought in for the electrical monopoly in 2015.

The audit singled out a big transformer testing contract awarded to affiliate Emera Utility Services.

NorthStar's Douglas Bennett saidNova Scotia Power shared insider data with its affiliate,overpaid the agreed price and characteristically did not analyze alternatives.

Transactions 'were not competitive'

The contract cost is blacked out in publiclyreleased regulatory documents.

"What we saw in the accounting functions, what we saw in the procurement function, the transactions with EUS[EmeraUtility Services]were not competitive," Bennett testifiedMonday.

Bennett saidthe board should take an even closer look at those contracts with EmeraUtilityServices in what's called a prudence review.

Hutt defended the EmeraUtilityServices transformer contracton Monday, saying, "in this transaction we feel very comfortable that we acted in the best interest of customers."

Hutt saidNova Scotia Powerdoes not have the workforce available to inspect approximately 10,000 transformers, so the job was outsourced.

"It made sense for us to be able to keep the core work of the business inside and make sure that that wasexecuted against our service standards and the incremental work would then be outsourced to an appropriate provider. In this case, it happened to be an affiliate," Huttsaid.

Picking away at audit

Inside the hearing room, Nova Scotia Power lawyer Dan Ingersoll picked away at theaudit's finding that Nova Scotia Power could not demonstrate the required analysesprecedingthe majority of transactions with affiliates.

Ingersollsaidthe literal interpretation of the affiliate code of conductused byNorthStarthat each and every transaction be analyzed was impractical, especially in cases where Nova Scotia Powerwas providing services to other Emera affiliates like renting space.

Nova Scotia Power saidit has accepted 23 of 33 recommendations made by NorthStar and has an action plan in the works.

But that did not impress Bennett, who said those steps did not satisfy him.

Corporate governance dispute

The utility and the auditors also disagree on another criticism from NorthStar, that there is not enough separation between Nova Scotia Power andEmera in Nova Scotia Power's corporate structure.

Many Emera executives hold the same post at Nova Scotia Power.

Nova Scotia Power saidit'scommon for corporate officers of utility holding companies to be members of their regulated affiliates' board of directors and that "it is not inappropriate or outside industry norm for the EmeraCOO [chief operating officer] to occupy the position of board chair at Nova Scotia Power."

Hutt saidofficers and directors ofNova Scotia Power have a fiduciary duty of care to treat information confidentiallywhen dealing with affiliates.