“Mining is an energy intensive industry, and it is important to understand the possible power requirements
of these Labrador developments, based on current publically available estimates, and information from the companies involved,” says the provincial government in one
of its latest studies, all of which miraculously support the need for Muskrat Falls power. “A reliable, competitively priced supply of power is essential for these projects to advance.”
Now, I’ve been out of the province for a while, and blessedly away from the spin and counter-spin of all things Muskrat. And if anything, the Muskrat world is more confusing than ever: just take a look at Jerome Kennedy.
Last spring, he was basically calling the opposition a bunch of idiots. Now, he says, those same idiots are the only people this province needs to examine and debate the technically complex Muskrat project, and that bringing independent experts into the mix would just confuse things.
It’s something like having someone hand you a contract to sign, telling you “you’ll understand this stuff better than any old lawyer would.”
The government is clearly ramping up its PR engine over the project, spitting out reports faster than a long-haired cat coughs up hairballs.
But the reports are more notable for what they don’t say than for what they do.
Read the tea leaves — I mean, the reports — and you’ll see some interesting hints.
One of the things you’ll notice is that it sure looks like we’re going to have a special set of power rates for miners.
“Government is developing an industrial rate policy for Labrador,” a report on electricity and mining says.
“The proposed rate policy will provide reliable and competitively-priced electricity for existing
and new industrial customers in Labrador. IOC and Wabush Mines currently obtain power at less than $5/megawatt hour (Mwh) based on agreements relating to the Twin Falls power facility, which expire in 2014. Competitive pricing on power is particularly important in the Labrador Trough, where developing projects are competing for investment against those in directly adjacent Quebec.”
Watch that $5 per Mwh number: power from Muskrat Falls will cost $7.6 per Mwh, and that’s before the costs of power lines to connect the Muskrat generation to the Labrador grid. The way it’s phrased right now, the suggestion seems to be that the $5/Mwh number is somehow “fair” pricing for miners.
But there’s a strong argument to be made that IOC and Wabush Mines are a special case, and that anyone else trying to pile on at that price is simply a carpetbagger.
You have to think about why IOC and Wabush Mines have their rate. It has to do with the fact that the companies were granted water rights years ago, and built their own Twin Falls generating station, well before the Churchill Falls project.
When the Upper Churchill was being designed, it became clear that, if the water from Twin Falls was diverted into the Smallwood Reservoir, it could be much more effectively used to generate electricity.
The companies agreed to hand over their legally granted water rights in exchange for receiving power at comparable rates. (Another part of the deal was that Newfoundland Hydro had to keep the Twin Falls plant in working order, all its systems packed in grease and basically ready to go at the flip of a switch if the deal failed somehow, something Hydro’s done for years.)
Other companies seem to suggest they deserve the same deep-discount rate for power, even though the industrial rates in the rest of the province are considerable higher. (Which is, perhaps,
why the province is “developing an industrial rate policy” for Labrador. Chances are it will not be the $6 or $7 per Mwh that island industrial customers are used to.)
And maybe those other companies would have a case — if they had a fixed asset they built themselves, and commensurate water rights, to trade back for that benefit.
Problem is, they don’t.
They just want cheap power.
And the provincial government apparently wants to help with that.
“Competitively–priced power for development will facilitate industrial development in Labrador for which the province will realize significant benefits. These benefits are estimated in the 2012 report ‘Economic Impact Analysis of Iron Ore Mining Industry in Labrador 2011-31’ by Wade Locke Economic Consulting, and include mining tax, corporate tax, employment, indirect taxation and impact on service industries.”
One essential thing to keep in mind is that lower prices for mining companies will, in fact, allow those companies to grow their profits, employ workers and pay taxes and royalties to the provincial government.
The other thing it will do — especially if the mining companies pay substantially less than you and I do for their “competitively-priced” electrical power — is mean that we will essentially be subsidizing their profits (and the “profits” obtained by the provincial government in the form of taxes and royalties) with every single electrical bill we pay.
So why not call the impending increase in the cost of power what it really is?
It’s a new electrical tax to be split between already-wealthy mining firms and the provincial government.
If mining companies need power, let them pay for it.
We’re already giving them premier access to a non-renewable resource.
Do they really expect us to ice that cake for them, too?
Think of it this way: what’s the difference between selling power to Hydro-Québec at deep-discount prices and seeing them resell it for a profit, and selling deep-discount power to mining companies so they can sell the resulting iron, once again for a profit?
Either way, we’re the patsies.
Russell Wangersky is The Telegram’s
editorial page editor. He can be reached by email at rwanger@thetelegram.com.
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