Covering all the bases

Russell
Russell Wangersky
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When you’re talking formal logic, there’s a term called “tautology.” What it means is a statement that is always inherently true.

Some of the classic forms? “Either A or not A,” which you can see in something along the lines of “This candidate will win or will not win.”

Since the term “candidate” means someone is necessarily running for a spot, it stands to reason that they will either win or not win.

Keep that in mind when you read Manitoba Hydro International’s (MHI) conclusion about whether or not Muskrat Falls was the least-cost option of the two power generation possibilities they were told to consider on behalf of the Public Utilities Board.

“As a result of the investigations based on the material, data and assumptions provided by Nalcor, MHI finds that the infeed option is the least-cost option of the two alternatives reviewed. There are, however, risks associated with the assumptions used for certain key inputs such as load, fuel prices and cost estimates which may impact the cumulative present worth analysis for the two options.

“The risks associated with these inputs are further magnified considering the length of the period (2010-2067) used in the preparation of the cumulative present worth analysis.”

The provincial government has classed the report as pretty much wholehearted support for the project. In other words, they read the first sentence of the conclusion and stopped there. The project is good — and that’s fine, because that’s what the provincial government believed anyway.

But it’s worth thinking about the report’s conclusions in a different way.

No matter what happens if the project moves ahead, the MHI report will be correct.

If the project comes in on budget and performs with flying colours, MHI will be right.

If oil prices don’t rise the way Nalcor predicts and we end up eating giant electricity price increases all on our own, the conclusion will be right.

If the costs of building the dam, power plant and transmission system go wildly out of whack and the project has to recover massive cost overruns through a much higher rate for its power, MHI will be right.

And if the demand for power doesn’t occur in the way Nalcor is modelling that it will — to the point that we actually have to pay Nalcor for electrical power we’re not even using — MHI will still be right.

It’s hard to conceive of a situation where MHI hasn’t specifically warned that clear risks exist.

In fact, in the guts of the report, MHI came up with a number of circumstances where the comparison tilted different ways, sometimes by billions of dollars.

 

Much to ponder

That’s what happens when you’re looking at a vast array of variables and those variables are magnified by trying to decide what the right course of action is some 57 years down the road.

It is not an easy decision to have to make.

To make the decision that much more complex, go back to MHI’s conclusion about the project and their questions about the risks associated with the project’s assumptions about electrical power load, fuel prices and cost estimates.

Ask yourself this simple question: what else is there to consider in a theoretical power project other than load, fuel prices and cost estimates?

It is a fascinating report, and clearly the closest thing we’re going to see to an independent review of the project — the provincial government has been pretty clear that no one else is going to go any further to question Nalcor’s baseline assumptions, and even the PUB, tasked to review the project, is working on an extremely tight deadline while hemmed in by a reference question that makes it possible to consider only two possible choices.

To reduce it to a more obvious tautology: Muskrat Falls is either the best choice, or it isn’t.

Without being too cheeky about it, the Upper Churchill deal could have received exactly the same vote of confidence.

The consulting business: giving fuel for every single side of the debate. And always right.

 

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

Organizations: Manitoba Hydro International, Public Utilities Board

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  • Doug Smith
    February 09, 2012 - 13:42

    I have only two points . First I would like to commend Maggie Carter for her thoughtful, reasoned comments. They are right on the mark. I would also like to see the thoughts of each member of the House of Assembly in print on Muskrat Falls. Doug Smith,GFW

  • Maurice E. Adams
    February 08, 2012 - 15:02

    MHI said that it was "domestic" load only that had increased more than Nalcor had forecasted, and MHI also went on to say that "domestic" load only accounts for 50 % of our total island, and that when looking at our "total" island load, Nalcor forecasted 1.74% annually TOO HIGH. +++++ And if you look at the last 6 years (instead of gong back 10 years), Nalcor's total island annual forecast error was almost double again (2.6% instead 1.74% TOO HIGH). +++++ That is several hundred percent higher than the no more than plus 50% required by the Decision Gate 2 process, and more than 150% higher than the plus 1% industry forecast error standard. +++++++ And those error rates are for just a few years ahead ---- not 50.

  • John Smith
    February 07, 2012 - 20:33

    Well, I guess we had better leave this multi-billion dollar development to the experts like Maggie and Maurice. They seem to have all the answers. They know how to predict the future. They don't care that our bills have increased by 60%since '98...nope, they could care less. They don't care that there will be an energy deficit by 2017, nope they just don't believe it, in their expert opinion. Well...I'm not an expert, and I'm not a government plant, or a tory worshipper. I am just a citizen, who has looked at those whom I deem to be experts. People who have dedicated their entire lives, and occupations to developing energy projects, and forecasting future energy demands. I guess it's my downfall that I would rather place my trust in these well educated, well experienced professionals, then I do the Maggies and Maurices of the world...but hey...that's my perogitive. If the project doesn't go ahead what then? Will the Maggies and Maurices dance in the streets? What will they do when the power rates keep increasing, and the rolling blackouts begin? it takes five to ten years to get an energy project like this up and running, that's why they forecast future energy needs. The MHI report even stated that Nalcor underestimated future demands. Like I said before...we can listen to the know nothing natsayers, or the truth...I know which one I'll be listening to....thanks all the same Maggie and maurice. LOL

  • MAGGIE CARTER WHAT YOU WROTE NEEDS TO BE REPEATED
    February 07, 2012 - 17:34

    Maggie Carter you stated it so well and to the point, I hope you don't mind me using what you wrote, since it needs to be repeated often. Ms. Carter Thanks for forecasting what most likely is going to come down the pipeline on this massive project if it goes ahead. "What Smith et al fail to acknowledge is that massive government undertakings of this nature never go according to plan. When project costs soar, when technical issues are encountered, when no export market presents itself, when the forecasted domestic demand fails to materialize, when gas comes ashore but we no longer need it, when other energy production alternatives become far more economical, then the average homeowner will start to realize that he's been had. Dunderdale and Martin will have retired, new governments will blame the stupidity of old ones, and fictional characters like John Smith will disappear into thin air. The assorted cast of carpetbaggers who are well represented in these forums - people who stand to profit handsomely from the deal - will have filled their boots with cash and marched on to the next public fleecing ".

  • special advisor
    February 07, 2012 - 16:56

    I think asking and answering only 2 main questions about such a shaddy deal isn't good enough and lacks professionalizm. We have MHA's thinking they are oil and gas CEO's and while spending for votes like drunkin sailors and are now ready to risk the souls of the people of the province to roll the dice and flush them down the falls to allow a few special companies to cash in and provide electricity for their own interests. If this deal goes through you can turn your power off and because of this Cost Of services piece, the charge still goes up, except in Nova Soctia of course. Its Garbage go back and bring the people back something to work with, cause this is only half done and not good enough. How much Kool Aid will the tories need to turn the turbines at MuskRatFools? Only a lawyer can save this deal now! How many members do a politicial party need tyo be open and accountable again?????? More then dunderheads BoBBleHeads I take it! Open the House, You didn't have the right to close it! Oh sorry, i Forgot the MRF deal! Making Harper more and more proud by the day! YBT

  • Maggy Carter
    February 07, 2012 - 16:13

    People like Adams and Rogers are to be congratulated and thanked for their well researched and thoughtful contributions to this critical public debate. Smith on the other hand is an obvious plant. His commentary is not only offensive but it seldom adds anything new. He repeats the same few baseless arguments over and over, in lock step with the strategy of NALCOR's 'do or die' public mantra. The comments from JJ are not terribly coherent but he does make one legitimate point. There was a much stronger public reaction to Clyde Well's plan to privatize Newfoundland and Labrador Hydro. However imprudent that plan might have been, it pales in comaprison with the potential for damage to individual taxpayers and ratepayers in the province if this development proceeds without proper scrutiny. Smith assures us everything will be O.K. if "everything goes according to plan". What Smith et al fail to acknowledge is that massive government undertakings of this nature never go according to plan. When project costs soar, when technical issues are encountered, when no export market presents itself, when the forecasted domestic demand fails to materialize, when gas comes ashore but we no longer need it, when other energy production alternatives become far more economical, then the average homeowner will start to realize that he's been had. Dunderdale and Martin will have retired, new governments will blame the stupidity of old ones, and fictional characters like John Smith will disappear into thin air. The assorted cast of carpetbaggers who are well represented in these forums - people who stand to profit handsomely from the deal - will have filled their boots with cash and marched on to the next public fleecing.

  • Maurice E. Adams
    February 07, 2012 - 14:24

    To THANKS.... Thank you for your comments. ++++ You mentioned the 62 year giveaway of the Upper Churchill. +++++ Well unfortunately, if Muskrat Falls goes ahead, the massive Upper Churchill revenue loss to NL and the continued benefits to Quebec will not end in 2041. ++++ I would suggest the opposite. +++++ The NL 2007 Energy Plan was supposed to ensure that our future energy resource developments would also have to make this province the principle beneficiary of Upper Churchill power post 2041.++++ Instead, the Muskrat Falls option specifically screens out the use of Upper Churchill power post 2041 ---- even though Nalcor itself forecast that the island (not including Labrador's needs) could use about 15% of Upper Churchill power by 2041 (and Labrador will need about another 20%).+++++ So if by building Muskrat Falls we will have filled our own provincial energy needs (market) post 2041 by very high cost Muskrat Falls power, what will that mean? ----- post 2041 we will have no other possible market for Upper Churchill power OTHER THAN AGAIN GO THROUGH QUEBEC. +++++ So Muskrat Falls will guarantee that come 2041 we will again be at the mercy of Quebec ---- because we will have filled our only alternative market (our own emerging energy market) --- with very high cost Muskrat Falls power. ++++ So Muskrat Falls, instead of achieving the objectives of our 2007 Energy Plan, Muskrat Falls will have handed Quebec, once again, the way in which Quebec will be in the drivers seat and be the only market for the sale of Upper Churchill power (and once again, ON THEIR TERMS). +++++ again because of our own doing. ++++ With Muskrat falls, post 2041, Quebec will have the continued use (and benefit from) our zero cost Upper Churchill power (Nalcor has screened out Upper Chuchill power post 2041 for our island use), while we will be stuck with 20-30 cent/KWh Muskrat Falls power (and virtually no revenues).

  • John Smith
    February 07, 2012 - 14:00

    I think people are really missing the conclusion of the MHI study. It was not a negative report, by any means. What they did say in a nutshell is that if everything goes according to plan, then the Muskrat deal will come in 2.2 billion cheaper than the isolated island plan, BUT, if we have a worse case scenario, and oil falls to 20 dollara a barrel, and the CB mill closes, and no buisness opens ect...then we will break even with the musrat deal. So, the conclusion was very positive. We will never see 20, or 50 dollar a barrel oil ever again. We will have business and industry come here over the next 20-50 years. We will need increased energy, we need to get away from thermal, and oil fired polutting jennys. Read the report. Oh, and I bet JJ stands for Just a Jerk. LOL

    • JJ
      February 07, 2012 - 14:56

      Oh did I hurt your little feelings. Someone must have put another dime in the music box because the monkey is dancing again. LMAO. Perhaps the Tory worshiper can tell us how much of a better deal MF is compared to other alternatives, oh that's right, you can't because no one bothered to look into it. In fact, all the sources you quote made it a point to say that they didn't look any other alternatives. That's called distancing yourself from the report. Lets just stop and wait to see a if little Johnny gets the point or will the monkey keep dancing. It's entertaining either way.

  • JJ the risks have not changed in the Muskrat Falls Project
    February 07, 2012 - 13:02

    JJ said "Every time someone says Muskrat Falls the same performers come running out to say the same things over and over'". But JJ nothing has changed within the proposed Muskrat Falls Project. The risks are still there and also the enormous cost for a project that will produce only a little over 850 mega watts of hydro energy. AND besides JJ there is no sign of NALCOR backing down on this despite the conditional report on the risks which was presented by Manitoba Hydro. Everyone needs to speak up on this risky project.

    • JJ
      February 07, 2012 - 15:07

      Words have accomplished nothing so far. The only action being taken is by Nalcor to move the project ahead. How many times have we had governments that reached a point where they thought they didn't have to listen to the electorate anymore - too often. Since they're not listening then maybe it's time for action. There is no proof that this project can't wait a few months or even a year. Anyone who is really concerned about this project should be willing to at least protest at Nalcor or confederation building. There was more action when Clyde Wells tried to privatize Hydro.

  • Good Comment Cyril Rogers
    February 07, 2012 - 11:21

    Cyril Rogers your comment is much appreciated here and so correctly stated. I am sure every Newfoundlander and Labradorian would love to see the Lower Churchill Project developed, but not at any Expense and any Risk. Thanks for your input.

  • Cyril Rogers
    February 07, 2012 - 10:47

    JJ, if you are going to comment, why not offer some useful ideas rather than attack other posters. I vehemently disagree with "John Smith's" take on this project but he is entitled to his opinion. As for Mr. Adams, he is a fine gentleman and is just very concerned with the cost of a project that is simply not needed. As Mr. Wangersky points out, MHI has issued a report giving the government the conclusion it wanted but has damned it with faint praise. Their analysis actually confirms many of the fears that the critics have voiced but, given that they could only consider the two specific options---isolated island vs infeed---it was impossible to conclude anything different. However, if you read the report, you will see that they raise a lot of questions about the assumptions on which NALCOR based its conclusions and it is clear that MHI wants to divest itself of any responsibility if and when it goes wrong. By all means, JJ, you should contribute but not simply to tear people down.

    • JJ
      February 07, 2012 - 12:06

      Every time someone says Muskrat Falls the same performers come running out to say the same things over and over. Not one of them a credible source. Day after day they wave their banners (usually political) on these comments sections, nothing changes, just the same old same old. Lets see who's next to stumble out of the Beetle.

  • John Smith
    February 07, 2012 - 08:34

    Well JJ, I have to tell you I don't worship the tories...as a matter of fact I think most of the ministers are boobs. The thing is they are the best of what is available. When you compare them to the Liberals, and the NDP they are light years ahead. I don't understand why Mr. Wangersky finds it neccesary to print so much innuendo and lies. mr. Wangersky knows that our electricity prices have gone up by 60% since 1998...that is a fact. So to say that we will end up paying more is a fallacy...a lie. We will end up paying more if we stay on the isolated island system...fact. We have also learned through many studies now that we will indeed be at an energy deficit by 2017, we will need more power...fact. The PUB has already asked for, and received one extension...fact. Our bills will go up this coming AUG. by 7%... fact. Wind is not an option on an isolated island system...fact. To provide gas to an aging plant in holyrood will cost billions of dollars and will eventually run out. Nalcor has proven that we will have stable electricity prices for the next 50 to 60 years if we go with muskrat, however if we don't our bills will continue to increase. Small wind farms and small hydro will cost billions and leave us at a deficit only a little further down the road. So I just don't understand why people like Mr. Wangersky continue to cast the project, and all the positive studies in a bad light. It makes no sense to me. All Mr. Wangersky is doing is damaging his own reputation, and that of the Telegram. We have had Navigant, MHI, Wade Locke, Nalcor, both levels of goverment all doing their best to explain that while this, like all large projects, is a roll of the dice, it is the best chance we have.

    • JJ
      February 07, 2012 - 10:48

      A man goes to a doctor, Doctor Nalcor, to have his leg wound treated. The doctor says it's better to cut it off than risk dying from from infection. The poor patient asks if the doctor is sure. The doctor says "I consulted with Doctors Navigant, MHI, and Locke, and we all agree that amputation is the best of the two alternatives". The patient says those other doctors haven't seen the wound but Dr. Nalcor says they didn't need to because they relied on his prognosis. "Can't we consider surgery, or stitches or antibiotics" asks the patient. The doctor says "we don't need to explore all the fringe ideas".

  • Thanks Mr. Maurice Adams
    February 07, 2012 - 08:15

    I am so happy for all of us here in Newfoundland and Labrador that we have someone like Mr. Maurice Adams who is willing to devote his time freely to this site to point ou, over and over, the frightening risks of the Muskrat Falls Contract. It is too bad nobody in the past represented themselves and took on the same responsibility regarding the other give-away of our natural resources, for more than 62 years now. If any of the other natural resources that have been developed by our politiians to serve themselves and other the entities and locations that became the primary beneficiaries of our resources, the province of Newfoundland and Labrador would never have been in the mess, either economiclly or structurally, that it has found itself now forover 62 years. LONG MAY YOUR BIG JIB DRAW MR. MAURCE ADAMS!

  • JJ
    February 07, 2012 - 07:47

    Cue John "the Tory worshiper" Smith and Maurice "the parrot" Adams.