CANADA (From news reports) -- Nova Scotia Power's largest industrial customer says it shouldn't be responsible for paying down any part of a $500-million federal bailout of the utility.

Port Hawkesbury Paper filed an application with the Nova Scotia Utility and Review Board this month asking for clarity on its role in repaying the federally backed loan and associated costs.

"It would be unfair, unduly discriminatory and seriously adverse to PHP [Port Hawkesbury Paper] to require PHP to pay additional future costs," the company said in its submission to the regulatory board.

The federal bailout came after several years of Nova Scotia Power deferring some charges to its customers, accumulating hundreds of millions of dollars in what it calls unrecovered fuel costs.

The paper mill, however, said it paid for all its fuel and power costs up front unlike other customers. Therefore, it says, it didn't contribute to the circumstances around the bailout and shouldn't incur any more charges.

Port Hawkesbury Paper first raised this issue in recent board proceedings, when the federal bailout was being contemplated, but didn't get a clear answer.

The company asked for an assurance from Nova Scotia Power that the bailout wouldn't impact its power rates, and said it expected the utility to give "a simple confirmation."

The utility did not provide that confirmation. Rather, it said cost recovery through future "tariffs" -- or service charges -- to the paper mill would "depend on the type, form, scope, and/or intent of that tariff."

The board said the question fell outside the scope of the proceeding and would have to be deferred to give other parties an opportunity to respond.

As a result, Port Hawkesbury Paper asked the question again in a new application to the board. It calls for an expedited process with a decision by early in the new year, "well in advance" of a March 31 deadline the board gave to the paper mill and the utility to develop a new tariff.

How it started

The issue stems from delays in construction of the Muskrat Falls hydroelectric facility in Labrador, which connects to Nova Scotia's grid through the Maritime Link.

While Nova Scotia Power waited for energy from the dam to come online, it had to find alternative fuels, which were more costly, but the utility didn't immediately pass off those elevated costs to most customers.

Port Hawkesbury Paper was an exception during this period. As Nova Scotia Power's only "extra-large" industrial customer, it has a unique service agreement with the utility.

"PHP as an incremental customer in its own separate class was required and agreed to pay 100% of the fuel and purchased power costs to serve its load," the company told the board.

It said its power costs during Muskrat Falls delays were "significantly higher" than they would have been if the dam's hydroelectric energy had started flowing to Nova Scotia on time.

Since it paid the full cost of power while other customers did not, the paper mill said it "fails to see any reasonable justification or argument" for paying any portion of the bailout.

It said incurring those costs would be a "violation of all regulatory norms."