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Thursday, fresh from having one mining company announce it was shutting operations in Labrador, the province gave a different, nascent mining venture a boost, courtesy of the province’s electrical customers.

The provincial cabinet ordered Newfoundland Hydro to build a third power line to Western Labrador, a move that will no doubt bring great cheer to Alderon Iron Ore company, a new mining enterprise that has said it needed a secure electrical supply in order to seek financing for its project.

To be clear: this is a public policy decision and certainly one that governments are meant to make.

You can even understand (even if you don’t approve) why the government is vastly reducing the Public Utilities Board’s oversight of the project; the clearest reason is the time involved.

Under the framework announced yesterday, the design and construction of the project will all be in Newfoundland Hydro’s hands. The only role for the PUB will be making sure that people will pay for it.

But there are some caveats here. First, endlessly dealing out the power system’s regulator is a shortcut (perhaps necessary — that’s debatable), and it’s simply bad policy — especially because removing the PUB from oversight roles has become something of a trademark of this administration.

The PUB has a job to do. Its mandate is clear: “The board is responsible for the regulation of the electric utilities in the province to ensure that the rates charged are just and reasonable, and that the service provided is safe and reliable.”

Removing that oversight means that mandate doesn’t get met.

Another caveat is that the primary driver of this new Labrador power line is private business. No doubt, the folks at Alderon are expecting to pay some special industrial rate for power and some portion of the line’s cost, meaning the cost for the new line will tilt more towards those paying full price for electricity.

And that power is costly: the number starts at around $300 million, but those are old figures — it will likely be substantially more. It’s easy to support the goal of more reliable power for Western Labrador, especially if you’re willing to ignore that the tab goes straight to the customer.

The power will also have to come from somewhere, either recall power from the Upper Churchill or from Muskrat Falls, where there are already questions about the project’s ability to reach its stated capacity and meet its existing commitments.

There’s a third problem as well.

You could call it the other shoe: a new line is also needed to connect the eastern Avalon to off-Avalon power sources, bringing more reliability to the Avalon portion of the grid.

That line has been ballparked at around

$650 million.

It all makes for interesting math: we’re already on the hook for billions of dollars of Muskrat costs, and these two new lines easily add a billion dollars to the projects that have to be financed, and ultimately paid for, by electrical ratepayers.

And on top of that, the regulator has so far been reduced from regulator to bill collector. Not reassuring at all.

Organizations: Public Utilities Board

Geographic location: Labrador, Alderon Iron Ore, Avalon Muskrat

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Recent comments

  • Not so heavy metal logic
    February 15, 2014 - 09:08

    JAckson Wong got us all looked after with his smart hot water tanks, don't need another line for the avalon now, the great storm and sunny side fire Caught us unawares, without the power to keep people's usage under control (regardless of infrastructure), das all. Enforced conservation and demand shaping is the future. Without mining, we can't flood the world markets with cheap metal, so geeks can make more useless tech, and selling back to us for thousand on the dollar. Gotta get those lines build to the mines, the more control we have over residential users, the more power can be used in mining. The more jobs, higher wages, to pay our higher lighbills as we compete with miners on the grid, so our wages will have to drop.... No, less fed income tax then...ok, JACK RESIDENTIAL RATES?