It’s an interesting point — asked about the 20 per cent cost overrun at the new Royal Newfoundland Constabulary building in St. John’s (now pegged at $57.5 million instead of
$48.3 million), Liberal MHA Eddie Joyce suggested ratepayers could see similar increases on the Muskrat Falls project.
“People are going to pay for it,” he said.
Joyce pointed out that renovations at Confederation Building started at $20 million and have reached $48 million.
He might also have pointed out that even Nalcor, which is overseeing Muskrat Falls, has had a hard time staying on budget.
The company was going to spend $14 million drilling three test wells at Parson’s Pond — it drilled two, and the bill still came in way over budget at $23 million.
Meanwhile, there are finally firm numbers in Nova Scotia as to what consumers there will pay for Muskrat Falls power.
If everything stays on budget, the Nova Scotia Utility and Review Board has been told Muskrat Falls power will cost consumers 12.5 cents a kilowatt hour when the project is up and running. “Surplus power” — what’s left over to be sold to other customers — is expected to be even cheaper, at just five cents a kilowatt hour.
Meanwhile, the cost of Muskrat Falls power in this province has been pegged as high as 21.4 cents a kilowatt hour, a number Nalcor has argued is not relevant to the discussion of the project, because costs from the isolated alternative would be much higher, based on the future oil prices they were citing when the project was reviewed.
Imagine the irony: if it wasn’t for the regulatory roadblocks that Premier Kathy Dunderdale has said publicly that this country shouldn’t have, a U.S. customer could buy Muskrat Falls power for a nickel a kilowatt hour, turn around and sell it right back into our market for far less than we’ll pay for it.
One thing’s for certain: by whatever mark you use, the blended rate of all power sources in this province, at 16.4 cents per kilowatt hour with Muskrat Falls’ high-cost power added in, will still be significantly higher than the 12.5 cents Nova Scotia will pay for Muskrat power, and much higher than Nova Scotia’s seven-cent-or-so blended rate.
And the effect of cost overruns on the whole equation?
Well, Nalcor was asked that question directly by the PUB during its review of the project: “What would the interconnected alternative rates be if the Muskrat Falls cost exceeded the current cost estimate of $5 billion by: 20 per cent, 40 per cent, 60 per cent and 80 per cent?”
Nalcor didn’t answer directly, choosing to argue that any overrun would be matched by overruns on any other generation projects, making the question moot.
One thing that isn’t moot: if there are cost overruns — and if recent experience is any sort of measure, there will be — then Joyce is right.
People will pay for it. Through the nose.