Green light (almost)

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It’s a vote of (qualified) support. Nova Scotia’s Utility and Review Board (UARB), the equivalent of our Public Utilities Board, has given the Maritime Link the go-ahead, saying the project appears to be marginally better, in most scenarios, for Nova Scotia ratepayers.

But at the same time, the UARB has said more needs to be done to protect that province’s power consumers: “It is the board’s obligation to protect the interests of Nova Scotian ratepayers. … The board has considered how it should address this significant risk to the viability of the Maritime Link project as against the other alternatives. It could, under the Maritime Link Regulations, simply reject the application, but that would not be the responsible result and would not be a productive outcome of the regulatory process.”

What the board is concerned about is the fact that what makes Muskrat Falls power potentially the lowest-cost option for Nova Scotians is not only the power N.S. ratepayers will get in exchange for the costs of building the Maritime Link — it also depends on ratepayers in that province getting access to market-based power from this province to, on average, bring down costs.

“The fundamental assumption which underpins the application is that N.S. customers will enjoy a blended rate for electricity which is comprised of a weighted average of the costs reflecting the N.S. Block and the projected amounts and prices for market-priced energy over the 35-year term.”

So, the UARB has put a condition on the approval: that the project’s Nova Scotia partner, Emera, get a signed contract guarantee with Nalcor to offer up market-priced energy consistent with Emera’s cost projections.

“The board concludes that the availability of market-priced energy is crucial to the viability of the Maritime Link project proposal as against the other alternatives. More importantly, the board finds that without some enforceable covenant about the availability of the market-priced energy, the ML project does not represent the lowest long-term cost alternative for electricity for ratepayers in Nova Scotia. … Accordingly, the board directs as a condition to its approval of the ML project that Nova Scotia Power Maritime Link obtain from Nalcor the right to access Nalcor market-priced energy when needed to economically serve Nova Scotia Power and its ratepayers; or provide some other arrangement to ensure access to market-priced energy.”

It will be interesting to see how this all plays out, especially because the Nova Scotia board also bases its analysis on answers to questions about who’s responsible for addressing other risks in the project.

The board referenced, for example, a statement by the project’s Nova Scotia proponents: “The contractual arrangements between Emera and Nalcor do not allow for non-delivery of energy. If the energy is not delivered, Nalcor is liable to pay compensation damages to Emera. If the non-delivery is as a result of government action, the Government of Newfoundland and Labrador has guaranteed payment by Nalcor the compensation damages. Risks relating to Muskrat Falls are borne by Nalcor.”

And the board said it had been told that even a lack of water would be Nalcor’s problem. When asked about reduced water flow for the project — where “reduced water flow was described as being due to contractual water rights issues, climate change, or other reasons” — the Nova Scotia Power subsidiary responded: “Lack of precipitation is expressly not a force majeure event and is therefore not a forgivable event under the Energy and Capacity Agreement. The N.S. Block will not be curtailed for that reason.”

With HydroQuebec launching court action in Quebec over its contract rights and hydroelectricity in Labrador, things get even more complicated.

Well, well. Interesting times ahead.

Organizations: Nova Scotia Power, Utility and Review Board, Public Utilities Board Nova Scotia board

Geographic location: Nova Scotia, Muskrat Falls, Newfoundland and Labrador Quebec

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  • FINTIP
    July 23, 2013 - 15:02

    We all know that even when the light turns green, you need to check both ways before proceeding. Otherwise you are at risk of being blindsided by a big truck barrelling through the intersection. In this instance unfortunately, Ms. Dunderdale didn't even wait for the green light before proceeding with the single largest expenditure in the Province's history. Despite being cautioned by many intelligent, knowledgeable people regarding the economic, engineering and legal risks of the project, she opted to push ahead. She did so in the midst of competing mega projects and in the absence of any urgency whatsoever from a demand point of view. With a billion or more already spent, she and NALCOR are still facing major roadblocks. Two of these have been known for quite some time, but only became official yesterday. The first is the regulatory demand that the original agreement between NALCOR and Nova Scotia Power be sweetened even more for the latter at the expense of Newfoundland ratepayers. The second is a legal challenge by the Province of Quebec that, if successful, would absolutely cripple this Province's ability to proceed with the project. Ms. Dunderdale has dismissed the Quebec move as 'desperate'. Those of us who have actually read the Upper Churchill contracts remain skeptical. To be sure this was an unconscionable agreement made possible by the unchecked ambitions of an uneducated, egomaniacal premier in one province and a devious, exploitive, street-smart corporation in another - the latter backed by a horde of provincial and federal politicians. The contracts were anything but tidy. Beyond the obvious - that they were stacked in favour of Hydro-Quebec - they are noteworthy for their omissions, ambiguities and outright contradictions. If justice was truly blind, this Province might have stood a good chance of turning back this new attack from Hydro-Quebec. But justice is rarely blind. This Province has a long, depressing history of suffering at the hands of a justice system manipulated by other governments. The Supreme Court of Canada appeal decision that ruled this Province's efforts to right the Churchill wrongs as 'ultra vires' was met with shock among legal scholars at the time. But it did not shock the more pragmatic, politically astute pundits who well understood the influence of Quebec on the Supreme Court bench and the absence of any influence by its small, inexperienced, naive neighbour to the east. So when Dunderdale dismisses this latest court challenge - even as her own officials admit they have no idea yet what it contains - she demonstrates her ignorance of history. Indeed, she might well be whistling past her own political graveyard.

  • Maurice E. Adams
    July 23, 2013 - 06:50

    Very good, informative editorial. Well done.

    • Eli
      July 24, 2013 - 19:58

      ....and the response by FINTIP. Well done guys.