Muskrat Falls: now even pricier

Randy Simms
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The cost of the Muskrat Falls project is going up — again. Nalcor CEO Ed Martin says the increase, a mere $800 million, is nothing to worry about and doesn’t constitute any kind of fatal blow to the ambitious hydro development.

All along there have been predictions that Muskrat was going to cost a lot more than the original $5-billion estimate, and today it stands at $6.99 billion, not including the cost of the Maritime link — the electrical highway being built by Emera to bring power to Nova Scotia from Labrador. The link is still pegged at $1.5 billion, so if nothing changes the total comes in at $8.49 billion.

Premier Tom Marshall is comfortable with all this because the increases are small compared to other megaprojects in the province.

“I look at some of the other projects and I’m very comfortable. I look at what’s happening with Vale and their project and with Hebron,” he’s said.

There are a couple of significant differences with those projects. The Vale project at Long Harbor and the Hebron oil development are primarily using private money, while Muskrat Falls is being fully funded by the public.

Vale will sell its nickel for a profit and the Hebron shareholders (you and I have a cut) will sell their oil for a profit. In fact, if they can’t make a profit the entire thing collapses. That’s the risk and reward of investing in a market economy.

But the owners of Muskrat Falls — us — will sell our product to off-island customers at a rate so low that it can’t produce a profit.

Unlike the other megaprojects Marshall mentioned, the risk of Muskrat Falls failing is nil because market forces have nothing to do with it. Muskrat Falls is not a business venture, so it doesn’t matter what the final costs are. Ratepayers in this province have no option but to “meet the nut,” as entrepreneurs say.

Muskrat was going to increase  light bills in the province anyway, so the latest increase means it will cost us even more. There are no outside customers to absorb additional costs.

The latest cost hike did result in a policy change, though. The provincial government now proposes to use any revenue from the sale of Muskrat Falls power to offset increases to ratepayers. It’s not the same as having private investors build the Lower Churchill so they can make big profits and pay big royalties, but it will provide a little relief.

How much, you ask? Well, that depends on those pesky light bills, and we don’t know what those are going to look like just yet.

And there’s another rate hike coming, too. Improvements are being made to the Holyrood generating station. A new 100-megawatt generator is being installed at a cost of $119 million and Hydro is building a new transmission line from Bay d’Espoir to the east coast. Hydro vice-president Rob Henderson says upgrading the line between Bay d’Espoir and the Avalon will increase capacity and relieve congestion.

Wait a minute — could those two projects have provided for most of our future energy needs? Could we have avoided using Muskrat entirely and kept the project as part of a much larger development called the Lower Churchill? Could we have kept the lights on and made money, too?

The province’s energy plan outlined a strategy to do just that. The Lower Churchill was to be a money- making proposition for the people of the province and Muskrat Falls gets little to no mention. There are even suggestions on how to meet our energy needs without having to touch the Lower Churchill.

I don’t know what happened, but that strategy was abandoned faster than Frank Coleman could leave politics.

Come to think of it, I do remember something about why the original energy plan was ignored.

What was that, exactly? Oh yes, we wanted to end Quebec’s stranglehold on our energy future.

Yeah, right.

Randy Simms is a political commentator and broadcaster. He can be reached at

rsimms@nf.sympatico.ca

Twitter: @RandyRsimms

Geographic location: Hebron, Nova Scotia, Labrador The Vale Quebec

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  • Mike
    July 10, 2014 - 16:52

    One thing this world needs to do is start focusing on sustainable energy sources - not for profit but because it's the RIGHT thing to do - in fact it's the only thing that makes sense LONG TERM. Long term is not 25 years or even 100 years, what about in 1000 years time? The things we do now will have an unavoidable and irreversible impact on future generations and we need to start thinking of them. As the world continues to develop further - the demand for energy will become greater and greater. Imagine if all ~7 billion people on earth consumed as much electricity as the average Newfoundlander... Yes you can bet that current supplies are not even remotely close to close that deficit. The world is continuing to develop (just look at the progress China has made in the last 20 years) and if we continue to rely on petroleum and coal to supply these needs this world will really start to feel effects. Listen - A natural Gas burning facility is not a long term sustainable option - Hydroelectric power cannot be done everywhere but where it can - it should be. Hydro is the only sustainable, non-polluting and substantial source of energy we have. Nuclear is the next best option but that has obvious drawbacks as well (but at least it doesn't fill the atmosphere with various forms of carbon). I'm not looking forward to energy price hikes but it's honestly the thing we need to truly start using energy more wisely...

  • Nichol
    July 06, 2014 - 22:25

    Remember how this project was sold to us?....40% would replace Holyrood, 20% to NS in return for the Maritime Link, and 40% was for export. This premise was fundamentally flawed 8 years ago, when US wholesale electricity prices started dropping like a stone, due to low NG prices resulting from huge supply increases. The US now has assured NG supplies to last 100 years, and much more than that inferred. NS ratepayers are guaranteed subsidized prices from Nalcor, and who will buy the 40% for export? Hydro Quebec has over 30 terrawatt hours of surplus electricity. Ontario has surplus energy as do others. Quebec's energy review commission may recommend the cancellation of the last two phases of the Romaine project, which was a planned 1550MW production at a cost of $6.2 billion. That is a cost per MW well below half that of Muskrat. Remember when the NL PUB was abruptly cut out of the MF process? They were not allowed to examine a real alternative for Holyrood replacement, which could have been a very clean LNG combined cycle plant of 500MW capacity for well under $1 Billion, including LNG storage. That, combined with Bill 69, which ensures no competition for Nalcor, with all the costs to be paid by the NL ratepayers, says it all. Muskrat Falls alone cannot compete in the marketplace. It is a very high cost, isolated project, with a relatively small production rate of 824MW annually. Things do not look good at all for the small base of some 275,000 NL ratepayers....in fact the word disaster doesn't quite do the job.

  • Nichol
    July 06, 2014 - 22:23

    Remember how this project was sold to us?....40% would replace Holyrood, 20% to NS in return for the Maritime Link, and 40% was for export. This premise was fundamentally flawed 8 years ago, when US wholesale electricity prices started dropping like a stone, due to low NG prices resulting from huge supply increases. The US now has assured NG supplies to last 100 years, and much more than that inferred. NS ratepayers are guaranteed subsidized prices from Nalcor, and who will buy the 40% for export? Hydro Quebec has over 30 terrawatt hours of surplus electricity. Ontario has surplus energy as do others. Quebec's energy review commission may recommend the cancellation of the last two phases of the Romaine project, which was a planned 1550MW production at a cost of $6.2 billion. That is a cost per MW well below half that of Muskrat. Remember when the NL PUB was abruptly cut out of the MF process? They were not allowed to examine a real alternative for Holyrood replacement, which could have been a very clean LNG combined cycle plant of 500MW capacity for well under $1 Billion, including LNG storage. That, combined with Bill 69, which ensures no competition for Nalcor, with all the costs to be paid by the NL ratepayers, says it all. Muskrat Falls alone cannot compete in the marketplace. It is a very high cost, isolated project, with a relatively small production rate of 824MW annually. Things do not look good at all for the small base of some 275,000 NL ratepayers....in fact the word disaster doesn't quite do the job.

  • Nichol
    July 06, 2014 - 22:22

    Remember how this project was sold to us?....40% would replace Holyrood, 20% to NS in return for the Maritime Link, and 40% was for export. This premise was fundamentally flawed 8 years ago, when US wholesale electricity prices started dropping like a stone, due to low NG prices resulting from huge supply increases. The US now has assured NG supplies to last 100 years, and much more than that inferred. NS ratepayers are guaranteed subsidized prices from Nalcor, and who will buy the 40% for export? Hydro Quebec has over 30 terrawatt hours of surplus electricity. Ontario has surplus energy as do others. Quebec's energy review commission may recommend the cancellation of the last two phases of the Romaine project, which was a planned 1550MW production at a cost of $6.2 billion. That is a cost per MW well below half that of Muskrat. Remember when the NL PUB was abruptly cut out of the MF process? They were not allowed to examine a real alternative for Holyrood replacement, which could have been a very clean LNG combined cycle plant of 500MW capacity for well under $1 Billion, including LNG storage. That, combined with Bill 69, which ensures no competition for Nalcor, with all the costs to be paid by the NL ratepayers, says it all. Muskrat Falls alone cannot compete in the marketplace. It is a very high cost, isolated project, with a relatively small production rate of 824MW annually. Things do not look good at all for the small base of some 275,000 NL ratepayers....in fact the word disaster doesn't quite do the job.

  • Henry Jefford
    July 05, 2014 - 21:46

    The Muskrat Falls will still be the most reliable and overall cheapest to operate than the Duffs Hydro, That burns that much oil it is listed as one of the top ten DIRTY AIR POLLUTERS IN THE WORLD ? HOW MUCH CRUDE OIL MUST IT BURN ? BUILD THE MUSKRAT FALLS BUT! WITH TRANSMISSION LINES ENOUGH TO ALSO CARRY THE UPPER CHURCHILL FALLS POWER WHEN THE ONE SIDED CONTRACT NOW IN PLACE THAT HAS PAID QUEBEC ONE HUNDRED BILLION DOLLARS ? TO NFLDS ONE BILLION DOLLARS IS IT A FAIR CONTRACT OR WHAT ? NFLD IS SHAFTED AGAIN

  • Corporate Psycho
    July 05, 2014 - 12:57

    The people of NL voted for "new energy". They will be left to choose between power or food.