We’re talking pricey power from Muskrat Falls

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Muskrat Falls will generate 824 megawatts of power. The 40 per cent for the Avalon’s power needs equates to 330 megawatts plus Emera’s 20 per cent power block equals 165 megawatts, for a combined total of 495 megawatts, or 500 for simplicity sake. Remember that 824 megawatts is the rated Muskrat Falls output, not the average, and certainly not the lowest output in winter when we need the most power.

The average output of Muskrat Falls quoted by various source is 600 megawatts to somewhere in the low 700s, thus leaving about 200 megawatts of non-committed power to play around with.

Spot market prices range from three to four cents per kilowatt hour, also the range mining giants will look for in Muskrat power.

One megawatt of power generates 8,760,000 kilowatt hours of electricity in one year, so 200 megawatts at four cents a kilowatt hour equals $70,080,000 in revenue annually. Multiply that by 50 years, and you get $3.5 billion (the maximum total) — thanks for not even paying off the interest payments of Muskrat Falls!

Muskrat power will be 10 cents to generate and another 10 cents for transmission to the Avalon. Mines in Labrador will be getting power at six cents per kilowatt hour less than its cost to generate, and Avalon ratepayers will be forced to make up the difference.  

Twenty (that’s being liberal) cents per kilowatt hour for 330 megawatts plus six cents for 200 megawatts (discounted/subsidized power) equals residential rates of 23.6 cents per kilowatt hour.

Nalcor humoured us in quoting 15.4-cent power from Muskrat Decision Gate 2 numbers. Muskrat power is going to cost at least 8.2 cents more per kilowatt hour than ratepayers were initially told.

Many of the opponents of Muskrat said 20 cents or more power represents the lower scale of this megaproject.  

Emera receiving power at less than its cost to produce will further add to Avalon ratepayers’ woes.

Nalcor demand forecasts are out to lunch for the Avalon — prices more than doubling our current rates will equate level or increasing demand?

The St. John’s Bored of Trade doesn’t seem to recognize the simple economics of steep rate hikes on electricity. Customers will have less money to spend and the cost of producing goods/services will have to go up.

As for the supposed House of Assembly debate involving MHAs only, it’s not fooling anyone, Dunderdale and Co.! Why not have a public forum where Nalcor and the other “experts,” hired or consulted on for Muskrat can be questioned? Invite people from the oil, natural gas, wind, financial, construction, legal industries, scientists, engineers, chartered accountants, etc., to attend.

Nalcor — taxpayers, not Progressive Conservative members, are your shareholders. Lest you forget or your organization be absolved, dismantled and be the subject of a royal commission.

Alec Campbell writes from Mount Pearl.

Geographic location: Muskrat, Labrador, Mount Pearl

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Recent comments

  • Winston Adams
    October 26, 2012 - 08:47

    H Hefford- You seen to forget that Nova Scotia stand in the way and will want their cut and tariffs, just as Quebec. And yos forget that cheap gas in the USA means there are no profitable markets. That could change , but many say cheap gas will be around for a hundred years.Would you tie up your money for decades? Borrowed money paying interest.

    October 25, 2012 - 20:37

    With the building of the muskrat Falls and a Transmission line to the island then underwater to the eastern Mainland, with extra lines to carry the upper Churchill power when the contract now in place with Quebec expires in 2041, Then NFLD not Quebec will Have the power of The upper Churchill. But without the Island route for the power if NFLD has to use the Quebec power grid it will be at Quebec prices,It all goes back to England giving NFLD, Labrador Quebec always considered they own Labrador, To use the Quebec power Grid would be like a monopply Game " OPS YOU LANDED ON OUR POWER LINES YOU MUST PAY" ?$ But IF NFLD Built a Transmission line that can carry the upper Churchill Power,Then NFLD Would Be THE POWER CAPITAL OF EASTERN CANADA

  • Winston Adams
    October 25, 2012 - 15:01

    Help me out here, someone. The PUB was excluded from considering Demand Side Management in its terms of reference. Demand management is generally when they offer incentives and be able to control certain loads at the customer premises at critical times. This may be what Our Premier refers to as rationing. It is used in many areas without problems. But personally I don't see a lot of benefit to it. But DSM was excluded anyway. I presented an analysis to the PUB under the Technology factor, to get around this. Technology improvements gives energy efficiency benefits. It is one of many inputs into the power companies forecast formula. And whereas they argue we have reached saturation, I argue we have only scratched the surface. My question is can Nalcor refuse to address this under the cover of Demand Side Management, as efficiency is a legitimate input into existing forecasting formulas. Ed Martin's blog site won't answer my questions or post my questions on this. And our MHAs probably lack understanding of it to make it a issue. While to me, it is the best and lowest cost option, and can be proved with little effort, it is not being addressed, and can reduce instead of increase our monthly bills. On what grounds can they exclude this? Where is their analysis?

  • Maggy Carter
    October 25, 2012 - 13:21

    @Winston Adams - You are correct, of course, in your assessment that the model used by NALCOR and government to estimate electrical rates for homeowners does not take into account the law of diminishing returns. You might recall some years ago that government was forced to back away from higher liquor prices in the face of slumping sales. The NL Liquor Corporation had determined that for every dollar of added taxes, it was getting back less than a dollar in incremental sales - i.e. diminishing returns. If electrical rates rise rapidly (as they are projected to do in the wake of Muskrat), many consumers will balk and will find avenues to reduce their demand. Once it becomes clear to NALCOR that further rate increases are unproductive - i.e. driving annual revenues downward - it will need another source of money to meet its debt obligations for Muskrat. Its only recourse will be to the provincial government which will be forced to raise taxes in order to facilitate supplementary cash contributions to NALCOR. Now, as we all know, ratepayers and taxpayers are - for the most part - one and the same. So, while those with the means might adopt measures to reduce their utility bill, they will still be subsidizing Muskrat through their income taxes. Given that Newfoundland already has one of the highest debt loads in the country, and given that Muskrat will effectively double that debt, does anyone care to speculate how high provincial tax rates could go?

  • Winston Adams
    October 25, 2012 - 11:45

    TO DERRICK AND 'INTERESTED'--- --You are spot on. This is why this will fail, unless some unforeseen electriciry need comes along--- but we should not invest 10 billion dollars on hope. Those who can afford it will convert to energy efficient heating. Arross Canada, these systems jumped 46 percent in sales in 2011 over 2011. A few years ago i calculated that pellet stove heat would cost 25 percent less than our elecrticity cost . i bought one, in part for backup. But with efficient electric heat, the savings is 65-70 percent in operating costs compared to regular heaters. i installed the effcient electric heater, got 70 percent reduction on the heating component. Haven't yet installed the back up pellet stove. And this is where MF is stupid. The more that convert, the less power they will sell, and because it is take or pay deal, the lower their revenue , the more they will have to put up rates, so even those who convern will pay more,. Those who are unable to convert will get hammered. To Interested- where do you live? I may be able to suggest a contractor to help you.

  • We need answers and we need them now.
    October 25, 2012 - 11:11

    John would you please answer the question in its true form on what the rate to the householders' will be in 2017. That is the answer that matters to the ordinary hydro rate payer of Newfoundland and Labrador. The big problem with this proposed contact is the lack of information that matters to those of us who are going to have to pay the piper. The already very rich developers who are waiting with baited breath for the final go-ahead of the project don't give two hoots about the average citizen who will have to pay for this project. Contracts on the people's natural resources should not be negotiated solely by the politicians and their business friends.We, the electorate, have to rise up and stop such corruption!!! When we make politicians Saviours that is usually what happens. The people also known as the electorate have to take control or the Saviours will dispose of all our natural resources. We see it now with the giveaway of our FISH, MINERALS, OIL and HYDROELECTYRICITY, it appears politicians from NL don't know how to draw up contracts any other way? Of course, we know other personal factors come into play since we have witnessed it here in this province since the beginning of time. Why else would a province with so many natural resources and the best location in the World have the worse economy in North America? For instance, It galls me when I hear those with control over the fishery say it is because of our location and low fish stocks, when the World is at our doorstep every day under the auspices of Ottawa. The time has long arrived to take ABSOLUTE CONTROL out of the hands of politicians!!!

  • Derrick
    October 25, 2012 - 10:48

    When the price goes to 20 cents + we will have lots of spare power as the well off will convert there heating systems, the poor will burn wood.

  • Maurice E. Adams
    October 25, 2012 - 10:39

    You will note WHAT POLL, that I said "ratepayer's" website (I am a ratepayer), not ratepayers' (I used an apostrophy "s", not "s" apostrophy). The former is 'singular' (just a single ratepayer), the latter would have been plural (more than one). Nothing misleading there. You just need to read more carefully. .... Nevertheless, I could (and perhaps, should) have used the plural as my website contains articles, letters, links, comments from/to many other websites and ratepayers/voters. In terms of objectivity, you will note that the very first (not the last Option) is to 'sanction'. Also, this 'ratepayer's' website contains a link to the "IbelieveinthepowerofNL" website --- the website of mostly businesses that support Muskrat Falls. While my website clearly tries to show the other story/side of Nalcor's well-crafted illusion, I have made every reasonable effort to be fair. Can't say the same for the other side, (you don't see the Millionaire's for Muskrat linking their website to mine, do you now. They only have one way ratepayers can particpate in their site ---- only through contacting them as a 'supporter'. Just like Nalcor --- narrow perspective. If your point of view is not with them --- you are excluded.

    • What Poll
      October 25, 2012 - 12:41

      You will note Maurice that you said "a ratepayer's", indicating that you were not taking ownership of the site. To let people believe that it was someone else's website when in fact it's yours. Why didn't you just say up front it was your website rather than hide behind "a ratepayer". Perhaps you should word your posts more carefully. I saw the poll and my first question was 'what is being asked'. All it says is "Have your say". Four options to respond with but no question for which to respond. The biggest problem is that it is not a random poll. Odds are the only people visiting the website are those with similar opinions as you or the John Smiths that will vote often to influence the tally. Also, It is poor questionnaire design because the options are not exclusive of each other (a person could support all those options). Of the options listed, only one supports gov't making a decision on it's own while the other three call for more public input. The other three options do not mean they're against gov't sanctioning the project. Most interesting is that there is no option to say 'no' to the project. Without doubt the results will be unreliable.

  • Winston Adams
    October 25, 2012 - 10:12

    Little John, if the blended rate will be 16.5 cents tell us what the rate to the household will be in 2017? 16.5 cents is a 50 percent hike from the 11 cents we pay now. And any decline in demand on the island will drive rates higher, since it is take or pay.The powers that be, and you , must think we are all some stun. And look at the way you debate. Anyone who don't agree with you are-' out to lunch, ignorant, very strange, have no evidence or facts,lunitic fringe,weak, fool.' Seems you have the character of a bully, would you disagree? And when I give you facts, you act dumb, and go off as a veritable font of misinformation. You know what that means. One of your phrases. LOL ,LMAO (more of your usual sign offs. Most readers know most of your comments are without facts, poor arguments not supported by evidence, and loaded with insults. Very bully like. Maybe in person you are a very sweet guy, or gal , or whatever. Many suggest there is no real person - John Smith. Are they right.

  • David
    October 25, 2012 - 10:05

    The cost doesn't matter ---- not the cost to build it, and not the cost of the power it would generate. That whole subject has been swept completely under the rug. This pile of dung has been sold by Danny Wiiliams, master bullying orator, and now by his former, cowering serfs now in government, simply on the baseless "vision" of a milieu of general greatness and destiny it would instill on this economically barren lump. We have signed up for a decade-long migraine headache, and a permanent future of regret and being the brunt of even more jokes....all so that a handful of pathetically small-minded politicians can continue to avoid having to look for some productive work for themselves in the real world. Wise up folks...you're being grifted out of everything you have, and everything you might ever have.

  • Of Course
    October 25, 2012 - 09:43

    We're talking pricey power no matter what. Everyone seems to have agreed that cost is going to go up regardless of the alternatives but MF does seem on the high end.

  • Cold Future
    October 25, 2012 - 09:40

    John Smith comes up with funny numbers. The present price per Kwh from hydro selling to NL power is about 4.5 cents. 16.5 cents would represent about a 12 cent per Kwh increase. which would more than double the present consumer rate from NL power of 12 cents with taxes in. New rate would then be approximately 26 cents tax in. How can you more than double the rate and only increase the monthly bill by $20????.

  • John Smith
    October 25, 2012 - 08:49

    Mr. Campbell your figures on the sale of power are completely incorrect, and are out to lunch. The blended rate at soldier's pond will be around 16.5 cents a KWH. This will mean about 20 dollars a month extra on the average bill. At todays oil prices it costs more than 16 cents a KWH to produce power at Holyrood.Our cost for power have increased by 70% since 1998...and are going up by a furhter 7% this march...why are you not outraged by those figures? If Nalcor came out and said your bills will increase by 77% you would freak out...yet that has occurred...and you and the rest of the ignorant don't seem to care...very strange. With muskrat we will get away from the ever increasing power bills, we will stableize our rates, we will get away from spending hundreds of millions a year on dirty bunker C. As well...saying the demand forcasts are out to lunch, with no evidence or facts to back up your lunatic fringe allegations just weaken your already weak argument, and make you sound like a fool...

    • Not so fast
      October 25, 2012 - 09:08

      Nice twist John Smith - comparing the blended rate of Muskrat Falls Power to the non-blended rate of Holyrood. Try comparing apples to apples. This project is a loser for the ratepayer. The only ones excited about it are those that will benefit - the PC's that will hand the business including many corporate donors a huge bag of taxpayer money to build it and the businesses that will get their power for less than what the residential ratepayers are charged. Sickening.

  • Winston Adams
    October 25, 2012 - 08:13

    Maurice , you usually argue that Holyrood produces at full capacity 2 percent of the time and on average 40 percent in winter. At those figures MF will offset most or all of Holyrood. For your argument here you use Holyrood at full capacity. It seems you are inconsistent. But the high cost of MF power is a valid one. Energy efficiency for domestic heating alone can offsets Holyrood 2011 year production two fold. The cost is about 1/4 that of MF. It is a moot point if Nalcor forecasts a slight increase in demand if energy efficiency at much lower cost can reduce demand more than double the rate, achieving a net reduction and offsetting oil consumption. The other point to this is how much and how long can we continue on the efficiency road. it appears more tha 40 percent of all production is the potential, and could avoid new generation for 2 decades or more. I don't see the point in arguing against MF is a lower cost and less risky alternative is not shown. I beleive it is necessary, for environmental reasons to get off oil burning. MF is one way, The second way is efficiency supplemented if necessary with small hydro and wind. Efficiency has more than 10 times the potential of small hydro. And wind has technical limits as to system stability.

    • Interested
      October 25, 2012 - 09:46

      You said previously that you installed something that lower your heating cost. What was it and where can I get one. I was considering a switch to a wood pellet stove but I hear finding pellets can be hit and miss.

  • Maurice E. Adams
    October 25, 2012 - 08:05

    Latest POLL RESULTS from a ratepayer's website ( www.vision2041.com ):----------- [Option 1 -----10%]. [Option 2 ------- 15%] [Option 3 ---------(REFERENDUM) 50%] [Option 4 -------- 25%]........ HAVE YOUR SAY ---- vote.

    • What Poll
      October 25, 2012 - 09:39

      More misinformation. Pretending that it's a ratepayers website when in fact it's your website, that's just deceptive. Not to mention that it's statistically inaccurate and the options are biased. Sure adds to credibility.

  • Maurice E. Adams
    October 25, 2012 - 06:56

    Keep in mind that this began with the mantra that "we need MORE power" -- not less. .........Now Holyrood's "NET" capacity alone is 466 MW. .....In winter Muskrat will have to 'effectively' (because the agreement with Emera gives them the right to take their 20% at peak times), will tie up perhaps 250 MW....... That is a total right there of about 750 MW......... If Muskrat can only provide an average of 570 MW, (and much less in winter), and Holyrood and Emera alone will need 750 MW, then we will pay Billions to build Muskrat's very high cost power --- to end up with LESS capacity than we already have ...... SO how can government say "we need more power", when with Muskrat, we will end up with less?