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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.

Organizations: Confederation Building, Nova Scotia Utility and Review Board

Geographic location: Nova Scotia, U.S.

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Recent comments

  • James G. Learning
    May 01, 2013 - 09:09

    Hard to imagine in the 21st., century this argument and Project even exists. Average rate and tax payers are being skinned publicly Yet not a peep from anyone on how off the wall all of this is in reality, as in who has the authority and sense to stop this MF thing. Instead we have to wait till 2015 and the Dunderdale Administration turfed (hopefully). There has to be sanity somewhere. Will it be finally up to a small group at the epicentre of this Project to stop it? It sure is looking that way. This risky and not the way such destruction of purse and property should be guarded. the next time I see Ed martin will he be wearing a Crown?

  • The province of Newfoundland and Labrador needs an Anti-Corruption Commission established.
    April 30, 2013 - 16:08

    Why are projects sharply escalating in cost in the province of Newfoundland and Labrador, in a time when the Unemployment statistic is high all over North America and the emergence of the new economy shows no sign of recovering? Would it have anything to do with the Engineering Firms that have control over project costs? Could it be the same malaise that has caused contracts to escalate for no reason, other than corruption, in Quebec? Whatever the malaise, it needs to be investigated before Billions of dollars are unnecessarily spent on over priced contracts.

  • Alec C
    April 30, 2013 - 11:54

    'meanwhile, the cost of Muskrat Falls power in this province has been pegged as HIGH as 21.4 cents a kWh' More like as LOW or at a MINIMUM 21.4 cents kWh for MF power. Law of diminishing returns - higher the electricity prices goes up (+10.4 cents kWh is close to DOUBLE current 11 cent kWh rate) and Nalcor's assumed demand takes quite a steep dive.

  • Maurice E. Adams
    April 30, 2013 - 11:13

    While the cost estimate increased substantially from the DG2, $6.2 billion to the DG3, $7.4 billion (if my memory serves correctly). I also seem to recall that the the DG3 estimate would have been over Wade Locke's 'uneconomic' number of $8 billion, except that that was prevented by Nalcor reducing the 15% DG2 contingency down to 7.5%. So the 20-30% increase in estimated cost todate is NOT a cost overrun, or an increase in contingency, but merely an increase in the estimated cost even before construction is completed. Cost overruns nearer the 30+% mark will blow the existing 7.5% contingency out of the water.

  • Jon Smith
    April 30, 2013 - 10:10

    None of the numbers ever quoted for Muskrat seem to add up satisfactorily-must be the new math. However if the average cost to the taxpayer in this province is $ 450 million per year as quoted by government the subsidy to the Nova Scotia consumer for the free power must be in the order of $100 million to $150 million per year for the 35 year period. The subsidy to other mainland consumers will be only $ 75 million to $110 million per year for the same period and the same block of power. WOW Newfoundlanders have been known to be generous but this has got to take all of the cake ever made!?!!!.

    • John Smith
      April 30, 2013 - 13:38

      There is no such thing as free power. You only show us all how utterly ignorant you are about this project when you make such absurd, inane remarks...

  • John Smith
    April 30, 2013 - 09:36

    Cost overruns have been built into the overall cost of muskrat falls...as can be easily seen from the MHI report there has been 20-30% added to the estimates to allow for cost overruns...and this is the worldwide norm for projects such as this. Maybe Mr. Joyce should do some thorough reading on the subject before he starts his daily pander....

  • Maurice E. Adams
    April 30, 2013 - 07:27

    Cost overruns? Nalcor says the Labrador-Island transmission line (1,100 kilometers) will cost $2.1 billion. Yet Transmission Developers Inc. (from the April 20 G & M) estimates it will cost them $2.2 billion to build a 539 kilometer line from Quebec to NY City (similar capacity line, easier terrain). We ain't seen nothin yet.