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.
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.