Muskrat Falls: talk about risky business

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By Alec Campbell

Muskrat Falls is politically, rhetorically and emotionally driven by its proponents. Facts, reality and objectivity seem to have taken a backseat.

Let’s go back to the initially quoted residential kilowatt-per-hour price of 16.4 cents and how this will affect your power bills. Homes in this province consume, on average, 17,222 kWh annually. At the current rate of 11 cents per kilowatt hour, that equates to $1,894. For the same amount of power using the Muskrat Falls initial rate we get $2,824 — an increase of $930.

Nine hundred and 30 dollars isn’t a small or nominal amount to be overlooked.

Do Nalcor’s projected residential demand forecasts accurately reflect such a large energy cost increase?

A 20 per cent energy cost increase results in a five per cent demand decrease; therefore, using the 16.4 cent kWh figure, demand should drop by 12.5 per cent.

That would reduce demand from the current 7,600 gigawatt hours to 950 GWh; Long Harbour only uses 780 GWh, for comparison.

Paying the price

Peak power is during the winter — if your winter power bill is $400 a month today, that balloons to

$600 by 2017. A $50 weekly increase for the same amount of power

during the winter won’t affect demand?

I love the argument that the price of power is going to increase anyways as justification for Muskrat Falls. Have proponents calculated the two per cent annual Muskrat Falls rate increase into the equations?

Twenty-four (the number of years between Muskrat Falls start and the 2041 Upper Churchill contact expiration) times the initial 16.4 cents kWh equals 26.4 cents per kWh.

The 50 per cent initial increase for Muskrat Falls in 2017 will cause a phenomenal and aptly called rate shock with a bonus two per cent each year thereafter.

So, 26.4 cents per kWh by 2041 is the cheapest option for residential ratepayers in this province? Ouch!

The approach Nalcor has taken with regards to residential rates with such an insurmountable increase in just four years is like using a sandblaster on a soup cracker.

Emera and Nova Scotia have a few months to back out of the Maritime Link. If Emera backs out there will be no federal loan guarantee, nor any long-term power purchase agreements or partners outside a small captive domestic market.

Without a Maritime Link, the only other option would be to sell excess power to Quebec. Hydro-Québec will have 870 megawatts of the Romaine River hydroelectric project completed in 2016, 1,550 MW by 2020. Romaine provides 726 MW more generation than Muskrat Falls for about the same cost. With the energy glut in America coupled with Romaine, Quebec won’t re-quire any Muskrat Falls power.

If Nalcor insisted, I’m sure Hydro-Québec could offer three of four cents per kWh for the remaining 494 MW of Muskrat Falls, post-Avalon demand.  

Unanswered questions

How much would it cost just for the required import transmission infrastructure in this province? What rate will Hydro-Québec give us until 2041 for imported power? Has the option of buying power from Hydro-Québec been sidestepped by political motivations?  

How much will Labrador to island transmission infrastructure cost be reduced to if Emera back out of the Maritime Link?

Nalcor has said profits from Muskrat Falls will be used to finance Gull Island, not to reduce rates or go into the provincial

coffers. There doesn’t seem to be any control over this Crown corporation by our provincial government.  

Private financing with no provincial or federal partners, legal issues,  Manitoba and B.C. recent hydro projects going 100 per cent over budget, small domestic market.

Running six deficits from 2010-2015 should also give the private markets pause for concern about the backers of Muskrat Falls’ financial ability.

The Progressive Conservatives in this province can’t even offer the political stability they had when their former leader bolted. I don’t think capital markets will be bothered with such uncertainties and unanswered questions involving this province and Muskrat Falls.

Alec Campbell writes from Mount Pearl.

Organizations: Hydro-Québec, Maritime Link, Progressive Conservatives

Geographic location: Long Harbour, Quebec, Nova Scotia Romaine River America Gull Island Manitoba B.C. Muskrat Mount Pearl

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Recent comments

  • Winston Adams
    October 12, 2013 - 12:52

    I am not personally worried about the cost of MF power on my heating bill. Three years ago I installed a "minisplit heat pump" and cut my winter heat energy use buy 70 percent. It can heat, per 1000 sq ft area of a good construction house for 250.00 per year, Hst extra. That right, that's per year!. It saves enough to pay for itself in 7 years, and I'm almost half way there. As these get used more, demand on our system grid will drop more than 1 percent per year. That is in addition to the drop from the shock price you mention. Suggest you read my submission too the PUB on this. It mentions pilot studies done elsewhere , and the one I did here.

  • Stephen D Redgrave
    October 11, 2013 - 07:34

    This whole situation has a bad odor, but we're in it now on the assumption that wishful thinking will see it through. There is far too much money involved to stop this power train from taking on a life of it's own with a will to survive at all cost. The one sure thing about energy products is sustained growth and demand. Whether or not deals are in place to transmit and purchase our power--the fact that we have the capacity to produce, means everything to the ones who have it under their control. Off Island generating stations will be in place while technology for efficient transmission(super conductors) continues to improve with each passing decade. We can only hope , and push, for a direction that is suitable for everyone. It's like 'The Field of Dreams'--"build it, and they will come" . Hopefully they're not coming to 'rape and pillage'

  • Jon Smith
    October 10, 2013 - 10:07

    What have we learned from the Upper Churchill- Diddly-squat. This time the windfall goes to Nova Scotia. Revenge of the ABC'd Harper and Mackay regime accomplished. A re-incarnated Joey could not have possibly fallen for this repeat of history. The subsidy of mainland power to be paid by NL ratepayers will far exceed any windfall that Quebec gained from Upper Churchill. Anybody out there sensitive about the term "Stupid Newfie"

  • Maurice E. Adams
    October 10, 2013 - 07:47

    Well done Mr. Campbell. If we purchased just a very small part of Hydro Quebec's excess energy (power that they cannot sell), we could save about $20 billion between now and 2041. Scrap the Muskrat Falls dam. It is by far the biggest cost, highest cost power --- and not needed.

    • doug
      October 10, 2013 - 19:58

      well said ,mr.campbell and mr.adams,,when will nflders. get there head out of the sand and wake up to the fact that this government is hiding all the facts of this nightmare for their own benefit and ego trip..the big companies are all getting rich and all the royalty money from oil is being squandered,while people are in dire need of health care and our roads and infrastructure is failing,,, 2015 can,t come soon enough,,,but again they will try and buy our votes with our money,,,,shame on them