Nova Scotia approves smaller Eastward gas-distribution increases, with further rate checks

The Nova Scotia Energy Board approved a settlement reducing Eastward Energy’s proposed residential gas-distribution increases to 4.75 per cent annually for 2027 through 2029, subject to further calculations and a compliance filing. In Eastward Energy Incorporated, 2026 NSEB 21, issued October 13, 2026, the board accepted a package intended to soften near-term costs without preventing the utility from recovering prudent investments.

The settlement describes a cumulative residential increase of 14.9 per cent, rather than the roughly 26 per cent cumulative increase originally proposed. It also provides for 2027 reductions of 1.1 per cent for the General Service Class and 2 per cent for Rate Class 3. These figures concern distribution rates, not the entire gas bill: the board does not regulate the natural-gas commodity cost or carbon cost in this proceeding.

The approval is not a final statement of each customer’s future bill. The board directed Eastward to confirm the class-by-class increases in a compliance filing incorporating its findings, after which an order would issue. The reasons required that filing within two weeks, followed by opportunities for intervenor submissions and a company reply; this report does not establish that the later filing or order has been completed.

A settlement still had to meet the public-interest test

Eastward, formerly Heritage Gas, applied in February 2026 for a three-year rate plan. The Consumer Advocate, Dalhousie University and Michelin joined the June settlement. The provincial Department of Energy did not sign it but did not oppose it. A hearing followed after extensive written evidence, questions and expert reports.

The board emphasized that agreement among parties does not replace its duty to approve only fair, justifiable and prudently incurred costs and rates that are just, reasonable and in the public interest. It found that the participating customer representatives covered all rate classes and that the compromise materially lowered most proposed rates without undermining the utility’s financial integrity.

The settlement reduced the proposed annual revenue requirements, including recovery of deferred balances, by approximately $7 million in each test year. That is a reduction from the application, not a cash refund or a finding that every customer’s existing bill will fall. Residential customers still contribute less than the cost of serving their class; the board accepted slower movement toward full recovery to avoid rate shock, while saying that movement must continue in later applications.

Lower charges today leave costs to recover later

Eastward’s Revenue Deficiency Account was designed to let the developing utility charge less than full cost while building its customer base. A separate Customer Retention Program account arose from competitive pressures and below-cost rates. At the time of the application, the balances were approximately $16.3 million and $49.9 million respectively. Collections go first to the revenue-deficiency balance because it carries the higher financing cost.

Eastward proposed raising the recovery rider’s cap to $1.50 per gigajoule for all classes. The settlement instead keeps a $1 cap for residential and General Service customers and sets a 65-cent cap for Rate Class 3. Lower near-term collections delay repayment; the projected retirement dates depend on future gas volumes, not a guarantee that the accounts will disappear on schedule.

The board retained concerns about the fairness of different class contributions. Larger customers argued that the compromise recognized that they already pay more than their cost of service, while a different allocation method could have shifted substantial costs to other classes. The board accepted the negotiated package but did not decide which method of allocating the retention account was best supported by utility principles.

The settlement also seeks no reconciliation of past contributions, despite an earlier direction contemplating adjustments after a cost-allocation review. The board acknowledged the regulatory difficulty but accepted the compromise. It left possible future allocation disputes focused on retention-account amounts remaining after 2029, rather than ordering refunds in this decision.

Eastward may retain the Revenue Deficiency Account through the test period with a reduced $25-million cap, even if its balance reaches zero. The board warned that continuation beyond those years is not assured and that deferral accounts are not meant to cushion inaccurate forecasts. It also allowed approximately $1.4 million in rate-hearing costs to be capitalized under this settlement, while saying future hearing costs should be operating expenses rather than assets earning a return.

Asset accounting helps explain the reduced increase

A major part of the reduction comes from changing how Eastward spreads the cost of long-lived assets over time. Starting in 2027, it must use an average-life approach instead of an equal-life grouping approach that can recover more depreciation earlier. The resulting annual depreciation requirements are approximately $1.43 million to $1.57 million below the application’s updated figures across the three years.

The board did not rule that one accounting approach is always wrong. Eastward’s network is relatively young and has limited evidence about actual asset retirements. In those circumstances, the board preferred the smoother approach as a better balance of accuracy, gradualism and fairness between current and future customers. The same underlying investment remains recoverable over the assets’ lives; the change mainly affects timing.

The next rate application must include a new depreciation study addressing asset lives and future removal and salvage costs, including how those costs could be phased into rates. The board deferred other proposed asset-life changes rather than combining them immediately with the new method. It also required detailed supporting calculations in the compliance filing.

The approved return on equity is 10.7 per cent, between the existing 10.65 per cent and Eastward’s requested 10.8 per cent, with a capital structure of 55 per cent debt and 45 per cent equity. An expert retained by board counsel recommended a substantially lower return but acknowledged the settlement’s trade-offs. The board applied the requirement to give the utility an opportunity to earn a return comparable to investments of similar risk; the approved figure is not a guaranteed profit.

Growth and major projects remain uncertain

The board accepted the customer-growth and gas-consumption forecasts but required a later comparison of projected and actual customer additions. It shared concerns about earlier residential forecasts, while noting that most expected revenue comes from existing customers and new additions have a relatively small revenue impact. It also approved using a ten-year rather than twenty-year weather average to better reflect warming temperatures and avoid systematic over-forecasting of demand.

The application forecast $103 million in capital spending over the three-year period. That forecast is not blanket construction approval. Major projects remain subject to separate oversight, and the board required annual capital reports and a roadmap with measurable milestones toward full cost recovery. It accepted that unspent forecast capital does not enter the rate base and that resulting excess revenues reduce the revenue-deficiency account.

Potential gas-fired generation connections and an energy-evolution project have no revenue requirements included in these test-period rates. The proposed Bedford Loop pipeline also needs a future approval application, with depreciation and related rate treatment beginning only when assets enter service. The board cautioned that anticipated generation projects were unconfirmed; lower future gas volumes could extend recovery of the retention-account balance.

Gas-conversion incentives survive, but scrutiny continues

The board approved continuing customer incentives, including a revised focus on domestic hot-water systems in multi-unit residential buildings. An expert questioned whether subsidizing gas appliances was necessary or consistent with emissions objectives and competing ratepayer-funded electric incentives. Eastward argued that incentives help attract and retain customers and spread network costs over a larger base.

The board considered the objections legitimate but not strong enough to reject the settlement. Future applications must show that incentives influence customer behaviour enough to justify their cost and address potential conflicts with government policy. The board did not settle the broader debate over the role of natural gas in decarbonization; it described Eastward’s role in that transition as still unclear.

Another required adjustment cuts the estimated cost of a future franchise-renewal application from approximately $3.3 million to $600,000. Eastward’s current franchise expires in 2028, and its intended renewal remains a separate application. The rate ruling does not renew the franchise or authorize the company’s proposed future infrastructure.

The immediate result is a conditionally approved three-year settlement, not an end to regulatory scrutiny. Final rate calculations, updated tables and supporting depreciation information remain part of the compliance process, while capital spending, deferred balances, incentives and forecasts face continuing reporting requirements and future review.