Something’s missing here

Russell
Russell Wangersky
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Well, there’s an interesting twist. Last week, an independent review of the Muskrat Falls project, done for the Nova Scotia government, found that power from the project would be cheaper for Nova Scotians than power from any other available source. The review was done by a company picked for the job without a tender call, and was started last September.

The Nova Scotia government has suggested it may enter the study as evidence before that province’s public utilities board, which plans to hold hearings on the Muskrat Falls deal.

Now, however, there’s an even more interesting twist to the twist: Hydro-Québec is saying it might seek to intervene in the utilities’ board hearings, because it feels it has not been properly represented in the new study.

Of particular interest, says Hydro-Québec spokeswoman Ariane Connor, is that the consultant doesn’t outline what the power from Muskrat Falls will actually cost.

“Normally we don’t comment on such third-party reports,” Connor said in an interview with The Chronicle Herald in Halifax. “But having had a chance to look it over quickly over the last 24 hours, we’re very surprised by the analysis and the conclusions of the report.”

Among the other surprises, there’s the fact that the consultant had not even spoken to Hydro-Québec about the price of its electricity before dismissing it as being more expensive than power from Muskrat Falls.

In fact, the report, by U.S.-based Power Advisory LLC, suggested that power from Hydro-Québec would be $402 million more than Muskrat Falls power over the 35-year period of the contract.

Fip that on its head and ask yourself an interesting question: since Quebec has several sites that generate power for far less than Muskrat Falls will, and since Hydro-Québec has signed contracts to supply power for substantially less than the cost of production and transmission from Muskrat Falls, just what kind of discounted power is Nova Scotia actually expecting to receive over the life of the 35-year Maritime Link contract?

Clearly, power that costs $402 million less than a competitor with lower supply costs can provide.

Since ratepayers in this province are being expected to pay for pretty much the whole transmission and generation shooting match — including any overruns on the massive project — perhaps we deserve to know the missing piece. It’s a piece that’s so important that the Nova Scotia government’s consultant can’t even find a way to include it in his report.

How much, per kilowatt hour, will it cost for Nova Scotian energy firm Emera to get power from Muskrat Falls? After all, that number shouldn’t be too hard to calculate: take Emera’s price tag for the Maritime Link, look at the interest rate they’re expecting and the total financing costs, and divide by the kilowatt hours over the 35-year term of the contract.

Then, you have a number. It’s a number that Emera has refused to reveal when its executives were asked directly about it in a Nova Scotian legislative committee, and it’s an important number that Power Advisory must have known in order to make its comparison, and yet must have deliberately left out of the final document.

So, why is it that no one wants to talk about what the effective rate will be? Now that the deal’s done, there’s really no reason not to tell us what we’ve signed onto.

It does seem that, in the absence of that number, the U.S. study is somehow too good to be true.

You have two farmers growing apples, both of them as far away from a Halifax market as Labrador. Farmer A can grow them for less than Farmer B, but customers in Halifax will get their apples from Farmer B for $402 million less than Farmer A would supply them.

What does it look like? Like Farmer B’s offering a pretty big subsidy by offering his apples below cost. That’s OK: Farmer B’s closest customers, the ones that don’t have an option, will pay all the more to cover the cost.

It’s putting me right off apples.

 

Russell Wangersky is The Telegram’s

editorial page editor. He can be reached by email at rwanger@thetelegram.com.

Organizations: Hydro-Québec, The Chronicle Herald, Power Advisory Nova Scotian legislative committee

Geographic location: Muskrat Falls, Nova Scotia, Halifax U.S. Quebec

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Recent comments

  • James G. Learning
    January 24, 2013 - 07:52

    I know what you know because I read your stuff and think. It all makes sense, besides I read Phil Raphaels stuff which says the same thing. No point in even looking for Nalcor figures and logic, it's all cloaked in legislated secrecy. What is going on here is enough to drive those of who know what is going on NUTS!!! I would love to know why the 2041 group even sat at their table. A faint hope to wake up the population I suppose. Well the message has to be well outside of simple information delivery. Now is the time to pressure the Auditor General to kick in his authority before the government legislates him into siclence as well. Not above them to do it, clearly.

  • Maurice E. Adams
    January 23, 2013 - 08:18

    Not including Holyrood, the existing installed NET power generation capacity on the island is 1,500 megawatts, while the 2012 PEAK DEMAND was 1,550 megawatts -- a shortfall of only 50 megawatts. Why then is Nalcor using 2 (and sometimes 3) oil-fired generators at Holyrood producing more than 300 and up to 466 megawatts of power to cover off a 50 megawatt shortfall? Could not a large part of Holyrood's use be all but eliminated if our non-Holyrood generated excess capacity were better and more fully utilized?

  • Pierre Neary
    January 22, 2013 - 20:26

    The fact that no one wants to say what the effective rate will be is a little scary.

    • R. Horo
      February 11, 2013 - 17:35

      For those who choose to read the text of the consultant's report, they clearly state the basis for their assumed rates from HQ: "we have assumed that Hydro-Quebec receives the New England market price" (p.6 of 39). This means they don't have to consult HQ for their prices (which won't be forthcoming anyway), but instead assume HQ would be indifferent to either selling to NS or to the US. Given NS's limited set of options for supply, it's more likely HQ would actually want a higher price.

  • Winston Adams
    January 22, 2013 - 15:56

    Maurice , thanks for that, I was wondering when the 2012 peak demand info would be released. It is essentially flat. Several economists, as well as you, pointed out that our population was steady, no growth and aging. As you have noted, even bigger houses are using less electricity. The red flags are there, so it is obvious how Ross Reids got his new job. To perk up power demand on the island, we need more 25 year olds who need more houses. You know, like The Field of Dreams -- build it and they will come. We will have surplus power, we are building it. Ross has to make them come! A flat peak demand is terrible news for MF proponents. And as Cyril Rogers, you, and( Russell at the Tely now says) , the demand forecast for the island was never reasonably proven. I have continuously harped on what efficiency can do. I just came across a large study that is the bible for their efficiency program. We know that heat and hot water consumes 80 percent of our domestic use. And that these can be reduced about 60 percent or more with cost effective systems. But lighting consumes only about 8 percent, and when you use efficient lights , you just shift the load to the heating, about 80 percent of it. So it is obvious that dealing with the heat and hot water load should be a priority---- unless you are a power company who then loses revenue and profit from reduced sales. So what does a power company do? They promote the use of better lights and keep on with the old heaters. Imagine, a program that will save 18 times more energy with lights than with efficient heat! This is possible when you save almost no net energy. It is trying to get blood from a turnip. Robbing Peter to pay Paul. This is why other jurisdictions are doing 10 times more for ratepayer savings, because they are not intentionally misleading the public to such a degree. New housing here must now equal to R2000 standard, that is 38 percent energy reduction, and that is without heatpump. I have a new test unit of R2000 with heatpump, 3000 sq ft, and it uses the same peak demand as an average 1000 sq ft house. And Nalcor assumes no improvement in energy use for housing for the next 20 years!!!! They are going with the same efficiency Plan in the current rate Application, with no meaningful savings for households. We are being misled, funded by our own ratepayer money---- and no one opposes it.

  • Curious
    January 22, 2013 - 14:58

    Another question. I like the farmer example. Then I thought, isn't that the definition of dumping. That Nalcor would be exporting power at below cost of production, below what they charge in NL, and below what competitors are charging. Couldn't competitors sue the province or Nalcor for damages or at least challenge them before some trade panel?

  • Maurice E. Adams
    January 22, 2013 - 14:10

    FYI:---- The island's Peak Demand (MW) for the last 10 years ------ 2003 (1,595)--- 2004 (1,598)--- 2005 (1,595)--- 2006 (1,517)--- 2007 (1,540)--- 2008 (1,520)--- 2009 (1,601)--- 2010 (1,478) --- 2011 (1,544) ---- 2012 (1,550) ------- and the island's already existing installed NET capacity is 1,958 MW.

  • Cyril Rogers
    January 22, 2013 - 10:50

    A few points, I'd like to comment on. FIRST, any power sold to Emera for the export market would come with a hefty price tag for transmission costs....so, no, it would be better to let it flow over the dam, as it would still cost us more money to subsidize those sales than we'd get in profit. SECOND, NP may want to purchase power from Hydro Quebec but the recent bills passed in the house do not permit it, to the best of my knowledge. Someone please correct me if this is wrong. THIRD, arguments for power being "needed" here on the Island are questionable at best...so why even build a transmission line, let alone a dam, until such time as this is actually verifiable. Why don't we review our transmission capacity, possible stranded power currently available, and, as well, the likelihood of the Corner Brook mill closing, thus freeing up enough power for decades at current rates of growth? None of this has been adequately addressed by the reviews to date and the cloud of secrecy surrounding NALCOR ensures they will never tell us. FOURTH, EMERA'S interests are fully protected while we absorb all the risk. Their transmission line effectively gives them power that will cost them not more than 7-8 cents per kw, versus the cost per kw, delivered to their transmission facilities, in the range of 22-25 cents. Who subsidizes that cost? It doesn't take a rocket scientist to figure that out.

  • Cold Future
    January 22, 2013 - 10:21

    Curious, good question but the answer is no because our government has made legislation to force us to pay the higher rates. Only Nalcor can import electricity. Nalcor will not import the cheaper mainland power because they will have the expensive Muskrat Power to sell to the domestic market.Muskrat is a money losing giveaway which the children and grandchildren will pay through thier noses for.Our PUB can't help because the legislation prevents them from reviewing Nalcor rates. And the greatest insult is that you cannot beneficially save energy or change or convert to oil or gas for heat because the annual cost to produce the electrical energy from Muskrat must be paid through electricity rates. If they have to they will jack up the monthy cost of service to ensure the nalcor revenue stream. If you like like you are sold down the river you are not alone.

    • John Smith
      January 22, 2013 - 14:18

      Right...right...this is all a big conspiracy..I forgot how Dunderdale and Ed Martin and Danny Williams are all in on it together...right...right...now I see it all so clearly...LMAO....When the power is sold on the spot market, no one knows where it comes from...it all goes into a pool of power...so if we did buy power through the gulf line we would pay the spot market price, and Nalcor has said they would do this if it was needed.

  • Curious
    January 22, 2013 - 08:45

    If we become linked to NS then couldn't HQ sell power to Newfoundland Power at a lower rate than NL Hydro? Is that possible?

  • Muskratfalls gave away here
    January 22, 2013 - 08:08

    Our province is being run like a bussiness. In bussiness the employee doesn't have the right to question the top brass or they could lose their job across the sea. Its the kind of capitalist cheat that offers very little contribution to their communities and away out of supporting what they they say they do. Its Unreal, to this day we don't know what we are giving away to do this deal we don't need and still don't know what we are expected to pay for electricity. And bill 29 makes sure they don't have to answer the question. Only this province would let this happen right in under our noses. Some one wanted to get into the minig bussiness and place their costs on the poor ole nl taxpayer. Its just amazing. But The Mha's who supported this will for always be scared in the history books and be known as the coat tails that gave the rest of NL away with another loousey deal. The fighting NLer has layed down and turned into a rat. Or maybe thats all we really were. We'll see!

  • John Smith
    January 22, 2013 - 08:04

    Well, when it comes to the excess energy created by muskrat, we have always had two choices...one:let the wter flow over the dam untill we have a use for it...and get ZERO for the power, or make a deal for the power to get whatever we can...even if we can only get a fraction of a penny for the power it is better than the alternative...ZERO. So if we can undercut Quebec Hydro by not letting the water flow over the dam, and getting nothing for it, then yipee!

  • Premier Dunderdale be proactive set up an anti-corruption squad
    January 22, 2013 - 07:58

    As a part owner of the natural resources in my province, I want an ANTI-CORRUPTION SQUAD set up so as to protect the remainder of our natural resources from ruthless politicians. I say this because the electorate of Newfoundland and Labrador, nor our province has ever benefitted from any of the great natural resource developments that have gone ahead over thepast 63 years and have been bringing in Billions of dollars annually for many years to the other provinces coffers to create economies, while our own Newfoundland and Labrador economy died on the Canadian economic vine.

  • Maurice E. Adams
    January 22, 2013 - 07:34

    And where is the Nalcor report that proves that Hydro Quebec was (and is) unwilling to advance by 25 years NL's access to Upper Churchill power --- enough to meet our needs until 2041?...... HQ has excess power, so it is conceivable that it would be in HQ's best interest to swap power that it cannot sell now for access to an equivalent amount of power AFTER 2041. ----- A "win/win" for both provinces------- either no cost or very reduced cost for NL, no need to build the Muskrat Falls dam/generation facility and a cost savings over 50 years in the 10's of BILLIONS for NL ratepayers. .......... Of the $35 BILLION in cash flow --- which is a cost for island ratepayers ---that Nalcor shows over 50 years for the combined dam/generation facility and the Labrador-Island transmission link, 74% of that $35 billion ($26 billion) is associated with the Muskrat Falls dam/generation plant. .......... Would it not be in the best interest of both provinces to defer the construction of the Muskrat Falls dam and for NL to build just a more robust transmission link ALONE (utilizing power from HQ)?