How $300-M line will be covered is uncertain

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Ashley Fitzpatrick
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PUB will address rates: minster

Staff at Newfoundland and Labrador Hydro can’t say when a detailed plan and cost projection for a new power transmission line from Churchill Falls to Labrador West will be submitted to the Board of Commissioners of Public Utilities (PUB).

The government has directed Hydro to build the line, roughly estimated to cost $300 million.

Hydro will be responsible only for the line’s plan, design and construction, but the cost of the whole project will be put before the PUB.

The PUB will have to determine how the cost will be covered — and how it will be recovered from user rates.

“Hydro respects the PUB process and regulatory oversight for projects of this nature, and it’s not appropriate for us to comment on the outcome,” stated a spokeswoman for Hydro, in response to questions Thursday.

A price for use can be set by the board, in addition to the industrial power rate charged to companies, like Alderon Iron Ore, for the power used from the line.

It would help, over time, to cover construction costs.

Former MHA Danny Dumaresque said the pressure of the up-front costs on Hydro will be great and high costs could fall to residential ratepayers in Labrador, through Hydro rate increases. “There’s absolutely no way can these small number of ratepayers afford to pay for this and neither should they,” he said in a recent interview.

The entire province benefits from the taxes and revenues from the power-hungry Labrador West mines, he said. Similarly, he argued, the entire province should pay for the power line making the newest mines possible.

Natural Resources Minister Derrick Dalley said the government will, at least for now, remain silent on the question of how the cost of the line will be covered while the PUB completes its work. That work typically includes opportunity for public questions and expressions of concern.

“We’ve approved the construction, design of the line, but in terms of the evaluation of the cost, certainly the impact on ratepayers, that’s the process that we’re following with the public utilities board,” Dalley said.

As for the many questions about how costs will be distributed among ratepayers, he pointed towards the government’s planned power system review.

“There’s a lot of uniqueness with our current system, but as we move from an isolated system to an interconnected system, we’ll provide opportunity for debate and discussion as we move forward (on) the best way for looking at our rates and who pays for what,” he said. “But that’s a longer-term discussion. ... Right now, the decision we have made is to move this forward to the PUB.”

The government’s commitment to construction of the new power line is not under fire.

“I think the government is doing the right thing. I think they’re making the proper decision to move forward. Obviously all rates are set by the public utilities board. The process here will be no different,” said Labrador MP Yvonne Jones, in an interview Wednesday evening.

The new power infeed was required, she said, to advance Alderon’s Kami iron ore mine , with its promise of 500 full-time jobs post-construction, but also for overall growth — feeding other potential manufacturing and resource development opportunities in the region in future.

Jones said the line infrastructure, through Hydro, will be something on which the province can make a profit over the course of its useful life.

“But at this time, the demand for power is not a residential demand. It is an industrial demand and I see this being paid for by industrial customers,” she said.   

In fact, given the trying times in Wabush with the idling of the iron ore mine there, Jones suggested the provincial government step in and have Hydro scrap its proposed rate increases for residential Hydro customers, already under review by the PUB.

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  • Brad Cabana
    February 21, 2014 - 06:54

    Jones is dead wrong. It's a foolish decision to build a line before the Water Management Agreement passes the test in Court. Imagine building the line and having zero power to send down it. That is the reality facing us. It's long over due for these politicians and Nalcor to get a grip on whose money they are blowing, without the backing for it to actually do anything.

    • FictionOrFact
      February 21, 2014 - 12:58

      Cabana is dead wrong! The power to supply the mines in Labrador west will come from NL's existing rights from the Upper Churchill - 525 MW in total. The WMA has NOTHING to do with this line, nor does Muskrat Falls for that matter.