The ball is in Nova Scotia’s court

Peter Jackson
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On Thursday, the Nova Scotia Utility and Review Board (UARB) will begin three days of hearings on a new agreement between that province’s energy company, Emera, and Newfoundland’s Crown-owned counterpart, Nalcor.

Last month, the two companies announced a deal to guarantee surplus power to Nova Scotia beyond the original 20 per cent block provided in the original Muskrat Falls term sheet. The new arrangement was spurred by a condition set by the UARB in July when it released its report. The board concluded that building the Maritime Link to Nova Scotia was not cost-effective unless Nalcor could guarantee more power at market rates.

The deal on surplus power is supposed to answer that condition. Unfortunately, not everyone thinks it does — including Nova Scotia’s own consumer advocate.

John Merrick said last week that the deal is still too full of loopholes that could leave Nova Scotia customers high and dry.

“They haven’t come forward with enough of an assurance of an adequate amount of adequately priced, adequately attractive enough energy,” Merrick told Halifax’s Chronicle Herald.

Indeed, the proposed agreement lets Nalcor off the hook when power generation at Muskrat Falls is reduced by natural conditions such as low rainfall. Emera would have to scare up extra power elsewhere in such years, while Nalcor would make up the difference in subsequent years.

It inserts more uncertainty into the equation, particularly since Nova Scotia’s new Liberal Premier Stephen McNeil is also expressing serious doubts about the project.

The Maritime Link has become a major question mark in this province as well, especially since a proposed federal loan guarantee relies on it going ahead — something that Nalcor and Newfoundland Premier Kathy Dunderdale seem reticent to talk about.

In her answers to 20 questions about Muskrat Falls from Telegram columnist Russell Wangersky, published in this past weekend’s paper, the premier skirts around the issue of the loan guarantee. (In fact, she directly answers barely half of the questions.)

“We have always said we designed this project without the notion of a federal loan guarantee and can move forward without it,” she wrote. “That being said, we are very confident we will finalize the loan guarantee and move forward with the support of the Government of Nova Scotia and a favourable outcome from the Nova Scotia Utility and Review Board.”

In fact, while early Nalcor calculations left out a possible loan guarantee, the project would cost an extra $1 billion without it. In releasing its final decision gate numbers, Nalcor included the loan guarantee as providing a critical break on borrowing costs.

Even Nalcor, however, skirts around that fact.

In answering questions raised at its annual meeting in June, the company assured “there are no conditions precedent requiring UARB approval of the Maritime Link in the federal loan guarantee.”

This is misleading.

While UARB approval is not a condition, N.S. government sanction certainly is. Section 3.5A (vii) of the guarantee agreement requires “sanction of all projects, including  (Maritime Link).”

And as it stands now, Nova Soctia’s premier does not seem to be in a sanctioning mood.

The signal we’ve received from Nalcor and the Newfoundland government is that Muskrat Falls is going ahead come hell or high water. Given the sunk costs already racked up, one can see why the impetus is there to continue.

And, heaven knows, maybe all or most of the projected benefits will pan out. Perhaps skyrocketing power rates will be worth it in the long run.

But contingencies in the here and now should not be glossed over or ignored. And answering questions with a heavy dose of platitude and bravado does not instil confidence.

By the end of the week, we’ll have a clearer picture of the Nova Scotia variable.

Peter Jackson is The Telegram’s

commentary editor. Email:

Organizations: Maritime Link, UARB, Government of Nova Scotia Nova Scotia Utility and Review Board

Geographic location: Nova Scotia, Newfoundland

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Recent comments

  • Maurice E. Adams
    November 14, 2013 - 09:47

    Note also that when it comes to future island energy prices, today's Tele story (N.S. energy minister fears impact of Maritime Link) states that the consultants for the UARB states that "enough energy will be available (for NS) because both Nalcor and Emera have committed to building more generating capacity if there are shortfalls". Without the Water Management Agreement Muskrat would produce only 170 MW of power, and Emera will have a legal right to its guaranteed 20% (170 MW). So the replacement needs for Holyrood and the additional 40% for NS will have to be paid for through additional costs to NL ratepayers (NL, under the new agreement) must cover off 75% of any shortfall to NS and provide 100 MW of additional firm power backup for the 25% that Emera must provide.

  • Maurice E. Adams
    November 13, 2013 - 09:48

    Peter, it is incorrect when it is said that "the proposed agreement lets Nalcor off the hook when power generation at Muskrat Falls is reduced by natural conditions such as low rainfall. Emera would have to scare up extra power elsewhere in such years, while Nalcor would make up the difference in subsequent years."......... Nalcor is obligated to make up 75% of any shortfall in any given year and is obligated to provide a "firm" 100 MW power backup for the 25% that Emera is required to provide. That could very well mean the building of additional firm generation by Nalcor (the cost of which would be borne by NL ratepayers). Also, any shortfall made up in future years must be done at an "equivalent economic value". So if energy prices continue to drop (as they have been) Nalcor may then be forced to provide twice as much power to make up an "equivalent economic value" --- potentially another Upper Churchill fiasco (and it is within NS Power's authority to decide, if it wishes, to take LESS power in the early years, which would have the effect of essentially forcing Nalcor to provide (not "non-firm" power), but "firm" power -- which would require more generation -- all paid for by NL ratepayers.