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And now for some news that’s completely beyond your control. Starting next week, Newfoundland ratepayers will see their power bills rise by an average of two per cent. That’s an annual adjustment announced around this time every year.
But that pales in comparison to the sledgehammer we’re going to get hit with when Muskrat Falls comes on stream in a few years.

Nalcor CEO Ed Martin says although costs of the Muskrat Falls hydroelectric project have increased by $800 million, it’s still the lowest cost option.  — Photo by Rhonda Hayward/The Telegram

On Thursday, Nalcor Energy released its long awaited (and oft postponed) new estimates for the cost of constructing the Labrador hydro project.

The grand total: about $7 billion, up about $800 million from the previous estimate. (That’s for this province’s portion; the Maritime Link is Nova Scotia’s contribution.)

Now, given the wild estimates thrown around by increasingly vocal critics of the project — some suggesting up to $8 billion, $10 billion and even more — Nalcor’s number should come as a relief, assuming you accept it at face value. Everyone knew the cost was going up. Less than a billion almost seems like we dodged a bullet.

Nalcor boss Ed Martin told reporters Thursday that about 90 per cent of the contracts for the project have been awarded. That means there’s little left other than productivity to jack up the costs further. And they still expect to get it done on time, by 2017.

This news is not good, of course; it’s just not as bad as expected. But that doesn’t mean this project is looking any less dubious as the days go on.

There are still unknowns. Nalcor plans to sell excess power across the Gulf, but will have to do so at bargain basement prices. The rise of natural gas has driven electricity prices into the dirt, and that means Newfoundlanders will pretty well have to pay for the whole shooting match through their monthly bills.

And speaking of bills, that estimate has also gone up. Martin says the average monthly bill will increase from the original $38 to $46, an average of seven per cent extra. That’s for a pretty modest monthly bill, though. It could get into hundreds of dollars a month extra for many customers.

None of this even accounts for numerous unexpected expenses Newfoundland and Labrador Hydro has encountered recently. Hundreds of millions more will have to be found to pay for proposed new line from Bay d’Espoir, as well as a new turbine for Holyrood.

In short, no matter the spin, electrical generation in this province has turned into a gaping money pit. And with the Public Utilities Board legislated out of the picture for much of it, ratepayers basically have no one to advocate for them — certainly not the government.

So, let the wailing continue, for what good it will do.

VOCM talk show host Paddy Daly probably put it best Thursday when he tweeted: “All we know for sure is that whatever you thought of (Muskrat Falls) before today’s update — you still feel exactly the same way. Right or wrong.”

Organizations: Nalcor Energy, Maritime Link, Newfoundland and Labrador Hydro Public Utilities Board

Geographic location: Labrador, Nova Scotia

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Recent comments

  • Anna
    June 28, 2014 - 16:24

    Maggy, didn't you hear Mr. Williams last week at the NOIA conference, he couldn't understand why everyone was shi--ing on this project. I'm sure in the years to come, me along with other folks will be leaving this province as we won't afford to be able to live here.

  • Stephen
    June 27, 2014 - 23:32

    Nalcor should be worried about pushing rates so high that solar starts making major inroads on grid power. Cloudy and short days can still fill a battery if a solar power system is sufficiently overbuilt. Solar panels are seeing cost drops reminiscent of other electronic goods. Nalcor may find that they have less customers than they expect.

  • Corporate Psycho
    June 27, 2014 - 17:18

    But Danny said it is our heritage fund?

  • Maggy Carter
    June 27, 2014 - 07:31

    For those of us who have offered a different, much higher estimate of the final capital costs for this project, the revised estimate from NALCOR is not surprising and will undoubtedly be shown in time to have been the mere tip of the iceberg. I would like to share the confidence Martin and Marshall claim to have in the 'fixed' prices negotiated on the major construction items, but anyone with even a limited knowledge of these mega projects understands that 'unforeseens' and extras inevitably find their way into the final cost. The rapidly escalating costs of Muskrat, together with the previously undisclosed costs of upgrading the Island system (including the third line and new turbine), has prompted the Telegram to characterize this as a 'gaping money pit'. Even at that the Telegram and other local media are being misled as to the true costs of the project. The $8 Billion, for example, that the Telegram cites as a wild estimate has already, in fact, been indirectly and discretely acknowledged by NALCOR as the actual capital cost of NL's portion of the project to date. The figure of $7 Billion does not include the $1 Billion plus interest during construction. As I have pointed out previously, and as NALCOR has acknowledged in its background documents, IDC and AFUDC are an integral part of the capital costs of the project. (See Muskrat Falls - Sources and Uses of Funds Summary issued by NALCOR dated April 29, 2014.) Clearly we are already at the $8 Billion figure - a fact the media should begin reflecting in their reporting. And while government is wont to minimize the over-run as a mere13% increase on its $6.2 Billion sanction cost, one member of the media - NTV's Michael Connors - was astute enough to point out that it is actually a 40% increase over the original cost of $5 Billion on which NALCOR based its case with the PUB. Moreover there has been virtually no discussion regarding the costs associated with financing the difference between the initial tranche of $5 Billion - as guaranteed by the federal government - and the final cost of the project. If, as many of us expect, the final cost as calculated in 2017 or 2018 reaches or exceeds the $10 Billion mark, this small province of a a shrinking 500,000 souls will be forced to come up with the additional $5 Billion. At least some of that is likely to be financed - once again dramatically altering the underlying economic feasibility of this project. These harsh realities no doubt account for the extreme discomfort in evidence during Premier Marshall's appearance before the cameras yesterday. Marshall repeatedly pointed out that we won't know until (at least) 2017 what the final price tag will be - by which time of course he will be well into his retirement.

    • Ken Collis
      June 27, 2014 - 09:16

      Sorry Maggy, but he's only retiring from politics and will most likely sit on several boards as his payoff.

    • NLTeaParty
      June 27, 2014 - 11:59

      Well thought out and presented Maggy.