Muskrat Media-5

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Questions to ask and points to ponder - 2

September 6, 2012 – Today, I offer for the media’s consideration more angles on the Muskrat Falls story, and points to consider when the people responsible are being interviewed. This entry was so long, I had to break it into two more easily digestible pieces. If you haven’t seen part 1, I suggest you read that first.

Is Quebec really being obstructionist?

In a letter to the editor in the August 23 Telegram, former premier Roger Grimes suggested that the provincial government has been perpetrating lies about Quebec, exploiting historical resentments over the Churchill Falls deal to political advantage. He offered concrete examples of how Quebec has worked with the province in the past.

This is a critical point, as Jerome Kennedy continues to claim that we need to break Quebec’s “stranglehold” on this province. Someone is not telling the truth, and we are poised to pay billions based on what could be a cloud of political spin. Why haven’t the media checked the truth of Grimes’s claims? Most of it should be there, on the historical record. 

We are certainly able to check the accuracy of the 2010 decision of the Régie de l'énergie, the board that regulates utilities in Quebec. (This is pivotal in the province’s argument that Quebec is frustrating our legitimate aspirations.) I know because I read that decision myself, with the help of a lawyer. Here’s a summary of what happened:

1. If Newfoundland and Labrador Hydro (NLH) makes a request to carry power on Hydro Quebec’s (HQ) transmission grid, HQ must oblige.

2. In this case, the province requested scenarios for five different amounts of power, going to five different locations – with a range of 25 possible configurations.

3. HQ did several studies and generated a number of alternatives. NLH claimed that these studies were not done correctly, and appealed to the Régie.

4. At the hearings, HQ tabled engineering studies to make its case. However, this province called no evidence. We did not cross-examine their witnesses, or call a witness of our own.

5. HQ’s position was uncontested, so the Régie had no choice but to decide in their favour. This province either bungled or intentionally threw the case.

6. This was not reported in the media.

 I realize that the public and media alike should look askance at everything they read in blogs. We are lone wolves, lacking the credibility and objectivity of a newsroom full of journalists. However, when a blogger makes a contentious statement and offers compelling evidence, shouldn’t that be checked?

Here’s my entry on the Régie decision (and I apologize in advance for missing punctuation marks):

http://www.thetelegram.com/Blog-Article/b/11517/The-Regie-Decision

There’s another way to assess Quebec’s sincerity. Back in 2005, Ontario and Quebec submitted a proposal to develop the Lower Churchill (including Gull Island), in response to an RFP from this province. However, in 2006, Williams announced with some bravado that the province would “go it alone.” Since then, the best he could come up with was Muskrat Falls, a deal financed entirely by the people of this province. Really? Was that the best he could do?

It may be difficult to get our hands on the Ontario-Quebec proposal now, but you never know until you ask – and start digging. Because I have a feeling it was roughly similar to the deal Grimes almost signed in 2002 (see below). If anything it was probably better, since the province’s financial position was stronger in 2005. Either way, if the offer was a good one, doesn’t that say something about Quebec wanting to be a partner, rather than a bogeyman?

No, I’m not suggesting that Quebec is without fault. We have one very good reason for historical resentment. But if you look at the reality, versus accusations made by provincial politicians, one might conclude that the situation was exploited and exacerbated to increase popularity in the polls.

What about the 2002 Grimes deal?

I interviewed Roger Grimes recently, and we discussed his 2002 deal to develop Gull Island. On the face of it, it sounds like a much better deal than Muskrat Falls, though it was also a very different deal. For one thing, the power was being sold to Quebec, who would purchase from us at the border, making them responsible for any upgrades to transmission lines in Quebec (in other words, it bypassed one of the central issues of our Régie complaint). Newfoundland and Labrador would have owned the asset outright, when paid off. The power had a base price of $33.50 per megawatt hour, and there was a clause to adjust for inflation. The province would have made about $100 million per year during the first 35 years, Grimes said, after which it would realize a much greater return from sales – enough to build a transmission line to the province with cash earned from the project.

The catch was that Newfoundland had no money in the bank (this was before oil revenues were rolling in) so we had to borrow, and the best interest rate in North America was being offered by Hydro Quebec. In other words, HQ would have been the customer for the power and provider of the loan. Dean MacDonald said this was untenable when he resigned from the board of NL Hydro, effectively killing the deal, because HQ could foreclose and own the asset.

Grimes says that was nonsense, that long-term power purchase agreements were in place and this province would never be in danger of default. Questions about this deal are relevant now, with Dean MacDonald apparently being groomed to become the new leader of the Liberal Party. I asked Grimes if any reporters from TV, radio or print have ever requested a copy of the deal, and an interview to explain or defend it. 

“No, they have not done so,” he said.

This raises some interesting questions. First, if Muskrat Falls is such a great idea, why aren’t we developing Gull Island and exporting all the power through Nova Scotia? The short answer is, energy prices are way too low to make that feasible. And because of massive shale gas reserves, prices will not increase for decades. Does this mean we’ll be selling at a loss to Nova Scotia indefinitely, while paying through the nose for our own power? Is this what Danny Williams had in mind when he bragged about going it alone?

We can’t trust outside perspectives

The national media will not protect us from a bad deal. They generally parrot the official line on Muskrat, with no real digging. As an example, I offer this piece from The Globe and Mail, which lobs easy questions at Ed Martin and fails to probe his responses:

http://tinyurl.com/cwx5c5n

I’m also amused whenever I hear outside interests, such as federal politicians (most recently Tom Mulcair), Emera or the Government of Nova Scotia, congratulating us on signing such a wonderful deal. This is the equivalent of a salesman slapping you on the back for the smart purchase you’ve made. Such platitudes are meaningless and should be disregarded. We have to rely on ourselves – and our media – to get at the truth.

Point to ponder: If this is such a great deal (“good for Atlantic Canada,” as others keep saying) then why isn’t Nova Scotia a full partner in Muskrat, sharing the construction costs and the energy equally? Is it because the resulting power bill would be too high for Nova Scotians? If so, what does that say about us?

There are questions to be asked about the federal loan guarantee as well. During the federal election, Harper promised a loan guarantee or “financial equivalent” for the project. If Harper goes with the latter option, he cuts a cheque and our loan is not guaranteed – which raises extremely important questions about carrying this risk on our own. 

Do we need the power?

The province and Nalcor say this is the key question, upon which all subsequent decisions turn. However, when you go to Nalcor’s website for answers there are none, except the assumption that there is a need.

There is room for skepticism about reviews conducted by Navigant and Manitoba Hydro International (MHI). They were given a limited scope of questions to consider, all based on information supplied by Nalcor. And, as Telegram editorialist Russell Wangersky pointed out, Navigant has done 30 separate projects for Nalcor prior to the Muskrat review, calling into question the company’s ability to be truly independent within the context of a long-standing client relationship. More on that here:

http://www.thetelegram.com/Opinion/Columns/2012-01-21/article-2870424/He-who-pays-the-piper-.../1

MHI has credibility issues of its own, as noted in yesterday’s entry.

The review panel appointed by the provincial and federal governments was not favourable toward the project. Here’s a key paragraph from its executive summary:

“...the Panel concluded that Nalcor’s analysis, showing Muskrat Falls to be the best and least-cost way to meet domestic demand requirements, was inadequate and recommended a new, independent analysis based on economic, energy and environmental considerations. The analysis would address domestic demand projections, conservation and demand management, alternate on-Island energy sources, the role of power from Churchill Falls, Nalcor’s cost estimates and assumptions with respect to its no-Project thermal option, the possible use of offshore gas as a fuel for the Holyrood thermal generating facility, cash flow projections for Muskrat Falls, and the implications for the province’s ratepayers and regulatory systems.”

That paragraph alone would make a fabulous tip sheet for any journalist contemplating a series of articles about Muskrat Falls, but note that it does draw attention to “demand projections.”

The final report of the Public Utilities Board (PUB) also raised questions about power load forecasts and refused to give the project its blessing.

Nalcor has been helpful in answering my emailed requests for information on this subject, sending along a series of links to various exhibits that were provided to the PUB. It’s heavy slogging, through a bunch of graphs and charts and finally, the 16-page section on load forecasting in the November 10/11 Submission to the Board of Commissioners. This is especially heavy going, written in dense language that veers back and forth from considered analysis to bureaucratic bullshit. You can read that document here:

http://www.pub.nl.ca/applications/MuskratFalls2011/files/submission/Nalcor-Submission-Nov10-11.pdf

Is this really the best Nalcor can do, in explaining this pivotal decision to the people of Newfoundland and Labrador? Why wasn’t this document distilled down to its key points, and written in a language that is easily comprehensible to the Average Joe or Geoff? Do they really think the public can understand this? Or is this more of a smoke screen, to obscure the weaknesses in Nalcor’s forecasting? There are some good people working on Nalcor’s communications team, but I don’t think they are to blame for this mess. Chances are, they are following directives from higher up.

I did find one chart useful, and you can access it by going here and clicking Exhibit 103:

http://www.pub.nl.ca/applications/MuskratFalls2011/nalcordocs.htm

The box at the top of the page shows Island Peak Demand in MW. Between 2001 and 2010, the usage trends upward and then back down. Beneath that are NL Hydro’s 10-year forecasts, beginning in 2001. In almost every case, the forecasts are much higher than actual consumption. For example, in 2001, they forecasted Island Peak Demand would reach 1,741 MW in 2010. However, actual numbers for 2010 were 1,478. Apparently, that’s been the pattern at NL Hydro for at least two decades now. Why have the forecasts been off by so much, so often? Why should we start having faith – and investing billions of dollars – in their forecasts now? Why should we believe Jerome Kennedy, when he warns of rolling power blackouts by 2020?

One other thing. The above chart refers to peak power demand, the highest amount of power we consume in the darkest weeks of winter. If we could find a way to manage that peak consumption – to trim the top off that peak, so to speak – we wouldn’t need Muskrat Falls at all. This is what Jim Feehan talks about when he refers to demand side management – a notion that was dismissed by the government but could certainly bear further questioning.

These are starting points. Some are questions, while others are points to ponder and perhaps stimulate further research.

I have heard at least one reporter say that opinions about Muskrat Falls are polarized and entrenched; that people are cherry picking from what they hear, accepting as fact that which they agree with and rejecting that which they don’t. That is no doubt true in some cases.

As well, the discussion has become too personal and nasty on all sides. However, I don’t agree with those who say it breaks down entirely along partisan lines. A considerable number of PC stalwarts are standing up and questioning Muskrat Falls, enough to make me worry about how quickly we are spiraling toward the point of no return.

I think the vast majority of regular people are confused, frustrated and overwhelmed by the arguments. They’d much rather hear the facts, clearly stated.

In the 2011 federal election, CBC produced the “Reality Check” series, in which they took a claim made by the three parties and investigated it for accuracy. It was unbiased, exposing questionable statements from all parties, and kept voters informed while keeping the parties honest. Its premise was simple: take a statement, dissect it, research it and report on whether it’s true or false (or somewhere in the middle). You can browse the Reality Check feature in this archive:

http://www.cbc.ca/news/politics/canadavotes2011/realitycheck/election/

That’s all I ask: a Muskrat Falls Reality Check, in which reporters (with any newsroom) take one of the many “pieces” in this project and turn it over until they can make sense of it – and offer a definitive statement on its veracity. They could deem a statement true, false, or speculation (some important aspects, such as government’s contention that oil prices will continue to soar, are just speculation but media can certainly talk to experts on this point and shed some light on it).

I would like to see a dedicated media website that keeps a running tally on the various claims, large and small, being made about Muskrat Falls – by both proponents and critics of the deal. If media research determines that a statement or position has merit, they could give it a check-mark. If proven wrong or highly dubious, it would get a big X. Visitors could see at a glance where we really stand on the project, and be in a better position to make up their minds on it.

Yes, that would take a lot of work and some resources. But it’s the most important story this province has seen in decades. It is worth the effort.

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  • jack rose
    September 09, 2012 - 09:24

    I have had a somewhat close eye on the Muskrat Falls debate. As an ordinary Joe (Jack) I have wondered why no one has provided an analysis of the overall economic fall out to the Newfoundland public if the rate increases from the MF development comes to pass. It appears to me that the cost per kw hour will more than likely cause our power rates to double. That alone will be an unacceptable burden for the rate payers of this province...especially when new energy programs are being developed as we speak in the US which will have the added affect of helping keep oil prices down. The US public would never accept prices for electricity at our current rates let alone the proposed after Muskrat. That's why President Obama is already pumping billions into new gas and liquified gas projects that were once ignored. But the second and just as equal a point I wish to make is this. What happens to our pocket book when the local grocery store gets a huge jump in there electricity bill? What happens to prices when the business we deal with on a daily bases get their new power bill. ? What happens to our purchasing power for food , clothing, building materials etc etc . The Newfoundland public will not just end up with a big power bill themselves but they will end up paying for every business that uses electricity in this province. As price increases get passed along we will be inundated with an unbearable cost of living increase. Where are the numbers on this reality? In my humble opinion...if the government of the day continues on this present path of hardheaded arrogance..they will go down in history with unforgiveable infamy. The costs to us as a people and as a province are so large related to this project that for once I'd like to hear someone in Government say that this province will not proceed any further until all parties are clearly and completely informed, until all questions that are out there are answered, and not until a totally exhaustive independent review has been carried out. We need a site as Mr. Meeker suggests where every question and every answer is documented in layman;s terms and allowed to be scrutinized by the Newfoundland people. Any thing less would be seen ,in my eyes at least, as a snub to every man woman and child in this province. When all is said and done the people with the best qualifications to make this decision on our future is the Newfoundland people...They should be the final judges...They should not feel like they are being pushed to the outside and left to linger on the steps as they await the verdict on their futures. Great leaders listen to their people ...bad leaders always think they know best. Political lives are not worth living if you rob that life from the family of people that gave it to you...forget the spin and do the right thing.

  • Cyril Rogers
    September 07, 2012 - 13:14

    JM...I fully agree with you that Mr. Meeker has offered the most informative information yet of any of the media and is to be totally commended for his efforts. Sadly, the mainstream media have yet to undertake or report on many of these questions and concerns. The bottom line for me is that this project is being bulit on an entirely false premise and the astronomical costs associated with its development will have far-reaching implications for our financial future. I have stated repeatedly that it has and will continue to siphon off badly needed revenue from the province's treasury and will bleed consumers far down the road. Any way you look at it, the province and the vast majority of our citizens will be much poorer. I truly believe there are multiple options that can be developed incrementally and we are taking a poorly-conceived project to fruition only to have it sink us. The lack of comprehensive analysis by the government and its flunkie, NALCOR, is beyond frustrating, as is their autocratic decision to spend billions prior to sanction.

  • Maurice E. Adams
    September 07, 2012 - 13:12

    Readers can find a graphic showing Nalcor's 10-year forecast error track record (prepared using data from Nalcor's Exhibit 103) near the bottom of www.vision2041.com Home page (it is the graphic 2nd from the last).

  • JM
    September 07, 2012 - 12:26

    Mr. Meeker, This is a very solid piece of writing. The commentary on the submission to Regie is also very informative. I have spent many hours researching the subject area, and it is very complex. There remains some very basic questions which are unanswered. Some basic questions include: 1) The Nova Scotia block commits 1 TWhr of power for 35 years. When you look at Muskrat Firm Energy (4500 GWhr) and Newfoundland predicted demand increases (0.8% per year) there will be a deficiency in 2035. How will this deficiency be met, and who will pay for the additional generation? 2) Muskrat produces ~600 MW in winter. There is 167 MW committed to Nova Scotia as part of the Emera deal. If we supply to Labrador Mining, then alderon alone will take 100 MW. This leaves 330 MW left for island use, which is less than Holyrood. If we sell power to Alderon, will there be shortfalls in winter on the island? 3) If the Water Management Agreement with CFLCo will be used to provide additional power in the winter then how is this managed with HQ. Hydro Quebec get first rights to the water per the Upper Churchill Agreement. If they request 5200 MW, which is their right, how will Upper Churchill generate more power for Nalcor? It is unclear how the WMA will help meet our demands in winter, when the upper churchill plant is at 99% utilisation during peak winter hours to meet the 1969 and GWAC contracts. 4) Now that the final deal has been negotiated with Emera, what is the final transmission tarrif payable to Emera and other transmission providers to wheel energy from Bottom Brook to New England. This should be on a $/kwhr basis. How does this compare to the rate charged by Hydro Quebec presently to wheel recall power from UC to New England via the QH transmission system. If Nalcor do not want to release the exact informatio, a ratio would be acceptable. For example the cumulative Emera Tariff is 50% of the HQ tariff. 5) What is the final rate on a Cost per kwhr basis if the final cost is 15% more than DG3 numbers. 6) What is the final rate on a cost per kwhr basis if the final cost is 15% more than DG3 numbers, and the island demand grows at 0.4% per year instead of 0.8% per year. 7) When will the PPA be finalised. At DG3 when the project is sanctioned, or after all construction is completed. 8) Is the bonus's paid to Nalcor executives linked to the project coming in on budget? 9) Due to the level of local construction activity, are Nalcor meeting their NL and Labrador benefits targets? 10) If we build the link to Labrador and connected to the larger North American grid, can more wind power be used in lieu of Muskrat. Can the wind be used to save UC power, using the same philosophy as the MF / UC water management agreement. 11) Have they asked Hydro Quebec if they can buy power at the North American benchmark rate? This is roughly 40 $/MWhr, and half that of Muskrat Falls. 12) If there is a ice storm, and the transmission lines down the Northern Penisula go down, what it the total limit of our liability to Nova Scotia, Emera and their customers. 12 Basic Questions which have not been answered. Keep up the good work. . 5)

  • Darryl
    September 07, 2012 - 10:18

    In 1999, Brian Tobin and Lucien Bouchard were in Labrador to announce a potential lower Churchill agreement. I still remember the statement Tobin made at the time. He said if this project did not go ahead we would have serious power shortages within 10 years. When I hear Kennedy, Dunderdale, Marshall and Martin make the same claims today I take it with a grain of salt.

  • Muskie
    September 06, 2012 - 15:10

    NDP inflating Hydro rates By Joseph Quesnel,Frontier Centre First posted: Friday, August 24, 2012 05:15 PM CDT Manitoba politicians’ appetite for costly mega projects may be turning the province on a path towards ruin. Earlier this month, Tom Adams, an independent energy and environmental advisor, completed a report for the Frontier Centre for Public Policy, highlighting how economic realities may prove the undoing of major projects such as the Wuskwatim hydroelectric project near Thompson. Premier Greg Selinger opened the dam July 5th. The problem is while it was once expected that electricity exports were going to subsidize Manitoba’s power consumption, the opposite is coming to pass. Enormous cost overruns are also a significant problem. Forecast originally as costing $900 million, the project is now estimated to be, according to Manitoba Hydro, around $1.67 billion................................... http://www.winnipegsun.com/2012/08/24/ndp-inflating-hydro-rates