He who pays the piper ...

Russell
Russell Wangersky
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The devil is clearly in the details. And those details, well, they can sure take a long time to surface.

Right in the midst of the provincial election, the provincial government and its energy company, Nalcor, got a shot in the arm for the Muskrat Falls project following the release of a $250,000 report from Navigant Consulting supporting the project.

"We were happy about getting it at this time because we knew we probably weren't going to get the PUB report until later in the year or until early spring. And I really wanted the people to have something that was independent of all of us for them to consider before we went to the election, so I'm really glad we have it," Premier Kathy Dunderdale said at the time.

At the time, there was criticism of the project because Navigant used Nalcor's own material to undertake the review, and didn't do extensive outside research.

The report even carried its own disclaimer: "'This independent report was prepared by Navigant Consulting Ltd. (Navigant) for Nalcor Energy based upon information provided by Nalcor Energy and from other sources. Use of this report by any third party for whatever purpose should not, and does not, absolve such third party from using due diligence in verifying the report's contents.'"

The fact is, though, for at least some of that material, Navigant may well have been very familiar with the information involved.

Why?

Lower Churchill power projects have been a healthy source of contracts for consultants and lawyers for decades - close to $400 million has been spent on a variety of attempts to bring such projects to fruition.

What's interesting is that, as well as the September review of Nalcor's work, Navigant has undertaken some 30 contracts for this province's provincial energy firm. They are a trusted adviser, regularly called upon for work.

This comes from a PUB request for information, document No. 100, breaking down all the work already done for Nalcor or Newfoundland Hydro by Navigant or by its corporate predecessor, Reed Consulting. Nalcor's notes describe the 31 separate projects this way: "As can be observed in the table below, Navigant has completed a number of assignments for Nalcor on a variety of electricity market related matters."

September 2011 - Independent supply decision review (DG2) prepared for Nalcor Energy

May 2011 - Lower Churchill Ontario Market Update and Strategy Advice Report

September 2010 - Support for Joint Review Panel Hearings and Preparations

May to June 2010 - Advice and assessment of market potential in Eastern Canada & North Eastern U.S.

December 2008 to present - Provide ongoing advice related to the ON electricity market in support of negotiations with OPA

March 2008 to September 2008 - Estimate of Ontario's avoided capital and operating expenses during the 2015-2035 time frame under various LCP import scenarios

November 2007 to October 2008 - Advice on pricing elements and principles for long-term PPAs with OPA, NSPI and NB Power

February 2008 - Eastern Market Assessment Report

May to August 2007 - Eastern Canadian market report and update

October 2006 - Ontario Capacity Prices

August 2006 - 2006 Ontario Wholesale Power Market Assessment (Multi-Client Study)

July 2006 - U.S. Northeast Market Plan for Lower Churchill Project

June 2006 -Review of ON Supply Mix Directive

April 2006 - Review of New England Ph1/11 HVDC facilities and identification of parties holding transmission rights

March 2006 - Ontario Market Developments Report - March 2006 update

2006 - Review of IESO Reliability report

March 2006 - Review of OPA Supply Mix Report

February 2006 - Eastern Canadian Market Assessment Report

November 2005 - Quebec Transmission issues

June 2004 - Overview of Ontario, Quebec and Maritime Electricity markets

December 2002 - Gull Island Contract Analysis

October 2002 - Ontario summer 2002 wholesale market assessment and market price forecast

January 2002 - Summary of Northeast Transmission Projects

December 2001 - Presentation for LCP on export market assessment

December 2001 - Ontario wholesale market assessment

December 2001 - Overview of New England Power Market

February to March 2000 - Reference Pricing Issues: Review of Reference Pricing, Hedging and Market Influence Issues

October 1999 - Labrador Hydro Project export market price forecast update

May 1999 - Average pricing forecast

October 1998 to January 1999 - Assessment of market pricing mechanisms for LCP

May 1998 - Churchill River Project export market study

Some of the contracts are more interesting than others - like, for example, the fact that Navigant was hired to help Nalcor prepare to put the Muskrat Falls project forward to the joint federal-provincial environmental panel.

Another interesting facet?

At least 10 of the projects specifically mention work on Lower Churchill power projects.

And how did Navigant get the job as "independent reviewer" of the project? Here's Nalcor's explanation, from PUB document No. 96: "Navigant submitted a proposal to Nalcor on May 20, 2011 to undertake the Independent Supply Decision Review. The contract between Nalcor and Navigant was executed June 30, 2011."

Was it a truly independent analysis?

OK: Nalcor certainly believes that it was.

Here's Nalcor boss Ed Martin, talking to the Canadian Press news service last September: "I think for anyone to believe that a company like Navigant would not give an independent assessment - that's what they do. They're one of the biggest. They're one of the best and they've given us a report that we can stand by."

Arm's-length?

Now, that might be a whole different kind of question.

Russell Wangersky is The Telegram's editorial page editor. He can be reached by email at rwanger@thetelegram.com.

Organizations: Navigant Consulting Ltd., Nalcor Energy, NB Power Multi-Client New England Power Canadian Press The Telegram

Geographic location: Ontario, U.S. Northeast, Quebec Canadian Market Maritime Gull Island Labrador Churchill River

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Comments

Comments

Recent comments

  • The alternative is to develop Muskrat Falls when the Economic Green Light indicates the time is right.
    January 24, 2012 - 08:48

    John Smith, you asked what is the alternative? The alternative is taking time out to see how the 20 Great Economies we were intertwined with evolves from the economic mess they created from Crony Capitalism. When we decipher the direction they are heading, and if we determine it is, indeed, an economic recovery in an honest capitalistic fashion and that we will have markets for our energy or that we have industry coming to our province that can utilize the energy at a kilowatt hour rate where the project will pay for itself, then we have the Green Light. Not before then.

  • David
    January 23, 2012 - 11:19

    I'm the Real Piper and I'm just looking for loose change - it's good luck to give to the real piper! :)

  • Skeptical Cynic
    January 22, 2012 - 21:15

    He he pays the piper indeed... can the columnist provide an actuarial breakdown as to the economic viability of Muskrat Falls that counters the findings of Navigant and Dr. Wade Locke? Otherwise this conspiracies-and- insinuations schtick is growing really stale... this is no more about jounalistic due diligence than it is about Wangersky trying to cover his jounalistic ass for the historians. Time to get a new topic to wax poetic about Rusty, this one has lost its legs.

  • ed power
    January 22, 2012 - 19:10

    With all due respect to the pseudonymous John Smith, the fact of the lengthy relationship between Nalcor and Navigant is troublesome. If you have a long standing, and highly profitable, relationship with a client, you are hardly likely to want to be seen as the bearer of bad news. You would be inclined to massage the data most favourably and include enough caveats to ensure that if the thing should blow up in their faces you could point to the "buts...." that were included in your report. To ensure that the review was indeed "armslength", Nalcor should have contracted an agency with no direct Iinks to the company or the project, and given them the data that was required to conduct an indepth analysis. As it is, we are left more questions than answers, and the taint of collusion. In situations such as this, it is prudent to follow the sage advice of "Deep Throat" to Woodward and Bernstein during their investigation of the Watergate break-in, "Follow the money...."

  • Please listen to the show aired this morning on CBC Radio "Who Rates the Rating Industry
    January 22, 2012 - 17:13

    Mr. Wangersky, if you didn't listen to Michael Enright's CBC's Radio Show "Sunday Edition" this morning and its discussion on Who rates the Rating Industry, I suggest that you and your readers take the few minutes that are required to do so in the following address: http://www.cbc.ca/video/news/audioplayer.html?clipid=2188866521 This piece will certainly give you some idea on how corrupt and farsical the whole Global and Economic systems are. When are we, as a people, going to rise up on the knowledge that we have already garnered to over-thow the corrupt systems that are keeping 1 per cent of the World's population ultra rich, while the largest percentage struggle to put food on their family's table and a shelter over their heads? And by the way Mr. Wangersky Thanks for writing this article "He who pays the Piper". This aritcle made some connection with me to the Radio Show I just mentioned tiled "Who rates the Rating Agencies"?

  • John Smith
    January 22, 2012 - 10:42

    So what's the alternative? If you guys think that this project is the wrong way to go, what then is the right way? I really don't think we need experts to tell us that. Do we? If you accept the premise that we will have an energy deficit by 2020, then how do you propose we provide this power? Wind is out, for obvious reasons, LNG is out, for obvious reasons, solar, tidal nuclear, coal oil all out for obvious reasons. So. What does that leave? We could sink a bunch of money into retrofiiting the old plant at holyrood, and develop a few small salmon rivers. That will probably get us to 2025. Then we will be back to square one, and have spent billions of dollars for nothing. Is that what you guys propose? That is sheer insanity. If you accept that we will need power, and that is an undisputable fact, then this hydro dam is the absolute best way to go. There is no argument for any other source that works. There is no gas play off our shores. If people think Muskrat falls is expensive they should take a looka t what it would cost to develope a huge LNG infrastructure, just to supply one small plant. Not to mention there really isn't a lot of gas off shore. Maybey 30-40 years worth. Then what? We important gas from the mainland?Why do that? When we can be independant. Have a neverending supply of power, stable rates, non polutting, proven technology, money coming back into the coffers, a cable to the mainland that will enable us to develop wind ect. There are no viable alternatives.

  • William Daniels
    January 21, 2012 - 22:07

    This whole deal will be the biggest debacle NL will ever see. The disclaimer says it all on MR.

  • Cyril Rogers
    January 21, 2012 - 11:39

    Mr. Wangersky, the Navigant assessment is not truly independent, given that it got most of its data from NALCOR. There is a perverted logic here, if NALCOR wants us to accept the validity of the Navigant report. I can state that something is true but, without some sort of collaboration, my assertions may be totally misleading. We are expected to accept the conclusions from Navigant, even though they could very well be based on a false premise. Namely, NALCOR is supplying data based on assumptions and very limited analysis of the other options to this project. The Environmental Review Panel rejected their arguments for this very reason but the government and its cheerleaders expect us to accept this on face value. To that I say: Garbage In....Garbage Out!

    • Who is John Smith
      January 21, 2012 - 15:30

      Well Mr Smith we know you are not a lawyer because of your comment on slander. Need evidence that can stand up against the fact The only facts I see is Nalcor's responses to the PUB which Russel provided, hmnm slander for printing facts. I know your not an engineer or finance type because of your comments on other posts. My guess; political science or just armchair politician. Sounds like it because you are the one being political on these comments. My view is simple lets bring it up a level take iyt away from all the politics Nalcor can defend it project infrontof the PUB without political interference. Seems to be what Dr. Locke believes is best.

  • Eli
    January 21, 2012 - 10:13

    Smelled from the git-go.

  • John Smith
    January 21, 2012 - 09:28

    If you were working with an internationally known company, that has a stellar reputation, and has done good work in the past, wouldn't you ask them to continue to do work for you? It's like Russell and the rest of the know nothing naysayers are trying their very best to create something where there is nothing. Russell is telling us that we should believe that there is a conspiracy betwwen the provincial government, and Navigant, and they are rigging the results. Russell also wants us to believe that all the good people at NALCOR are crooks, trying, for some reason, to put one over on us. Asx well, Russell wants us to believe that Wade locke is in on the conspiracy as well. Don't forget the federal government Russ, they must be in on it too, they looked it over and said it was viable. The MHI revieew will soon be in, i'm sure Rusell and the crack news team at the tele will find they are in the conspiracy as well. Give me a break. I hope Navigant sues the Telegram over this slander. So sad to see what people will do and say to sell a few papers....sad.