Nova Scotian customers protected; this province, not

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The main focus of our intervention on the Muskrat Falls project was to have a robust and independent review of the project before it was sanctioned. We now see how such a review can protect the ratepayers of Nova Scotia, at our expense.

It is problematic when Newfoundland and Labrador ratepayers learn more about our project from the Nova Scotia regulatory process, rather than from our own, and when Nova Scotians are better protected than we are.

On Nov. 29, the Nova Scotia Utility and Review Board (UARB) approved the Maritime Link. The renegotiated agreement brings the share of Muskrat Falls power going to Nova Scotia to a range of 44 to 57 per cent, up from the original “20 for 20 principle,” where Nova Scotia would pay 20 per cent of the cost for 20 per cent of the power. Emera and its subsidiaries were successful in enriching the benefits of the Maritime Link for Nova Scotia ratepayers.

In negotiations with Nalcor, Emera achieved the concessions required by the UARB in its decision of July 22, 2013. Nova Scotians were well served by the robust regulatory regime in Nova Scotia. Sad to say, Newfoundlanders and Labradorians are not so well served by their publicly owned, but self-governing Crown corporation, Nalcor, and by the province’s weakened and ignored Public Utilities Board.

The UARB has been empowered to protect the interests of consumers against their public utility, Nova Scotia Power Inc. (NSPI), a wholly owned subsidiary of Emera. Emera is a publicly traded corporation working in partnership with Nalcor Energy, a non-regulated Crown corporation, to build the Maritime Link. The government of Nova Scotia allowed the UARB to balance the interests of ratepayers and the proponent, a privately owned company, at arm’s length from government.

The government of Newfoundland and Labrador took a divergent course of action. They joined hands with their Crown corporation and made it immune from regulatory control.

They took away the powers of our own PUB, so it could not protect the interests of ratepayers. They sanctioned the Muskrat Falls project prematurely and weakened the ability of Nalcor to negotiate a better agreement with Emera. The result is that we are exposed to a one-sided agreement, tilted in favour of Nova Scotia and decidedly disadvantageous to this province’s ratepayers.

Intervenors in Nova Scotia told the UARB that the proposed Energy Access Agreement was not strong enough and that the obligations imposed on Nalcor were too imprecise, that the commitment of energy was insufficient and that the price charged by Nalcor was too high.

They also argued that “forgivable events” relieved Nalcor of obligations to supply power if the power was required in this province due to its own load growth or due to insufficient rainfall. Emera argued that such events would not relieve Nalcor of its responsibility to supply power. The UARB reviewed a host of objections from intervenors, along with the rebuttals provided by Emera and NSPI. These rebuttals provided assurances that the Energy Access Agreement was designed to protect the interests of Nova Scotia ratepayers and that the alleged “loopholes” did not exist.

The Energy Access Agreement (EAA) presented to the UARB was submitted with the understanding that it was not final and that its language was subject to further refinement.

The board’s approval of the Maritime Link was subject to the condition that the interpretations given by the proponent during the

hearings would be accepted and enforced by the UARB and that the interim agreement would take precedence over the final agreement. The UARB will be the “enforcer” auditing the agreement to ensure compliance with the “representations” and “clarifications” in the interest of Nova Scotia ratepayers. The new government in Nova Scotia has announced amendments to the Maritime Link Act to give it the full authority to ensure compliance with all board conditions.

The energy commitment to Nova Scotia has risen dramatically. But more significant is the fact that the Energy Access Agreement will be interpreted by the UARB of Nova Scotia. The UARB will be guided by the representations given by Emera during the recent hearings.

Not only has Nova Scotia succeeded in enriching the original agreement; now they will interpret how the agreement is implemented. This UARB interpretation of the draft EAA will supersede any contractual improvements which Nalcor will negotiate before Oct. 1, 2014, which is when the agreement is to be “finalized.”

To make matters worse, Nalcor is obligated to share in cost escalation of the Maritime Link, for which Decision Gate 3 costs won’t be available until Dec. 15.

Emera will not be sharing overruns on the capital cost at the Muskrat Falls site, the Strait of Belle Isle sub-marine transmission project or the other transmission costs in Labrador and on the island, up to the transfer point at Granite Canal, from which Emera will take Muskrat Falls power. Ratepayers in this province will bear the risk of cost escalation.

The UARB has directed Emera to file with the board all reports submitted to the federal government, including financial and engineering reports.

Reports from the “independent engineer” appointed under the federal loan guarantee agreement must also be filed with the board, including: revised project costs, compared with those budgeted; the status of the work schedule, in relation to the completion date; and the conformity of the work completed with technical and contractual requirements.

This provides Nova Scotians with the transparency and accountability which we do not enjoy.

It is time for an immediate review of the project by an independent panel, not Nalcor’s consultants.

The panel should have access to the reports of the independent engineer, which Nalcor to date has refused to release. It should be a public review by the PUB or a similar objective panel, with open public hearings, and Nalcor should have to appear before it. The review should examine actual costs compared with those budgeted and receive updated overall project costs.

It should also review major changes in global energy economics and the economics of the Muskrat Falls project. It should also recommend the level of transparency and accountability which the people of Newfoundland and Labrador should expect from Nalcor, along with the reporting requirements with which Nalcor should comply. The report should be submitted to the House of Assembly and made available to the public.

Ron Penney is a former deputy minister of justice and former city manager of the City of St. John’s. David Vardy is a former clerk of the Executive Council and chairman of the Public Utilities Board.

Organizations: Public Utilities Board.The UARB, Emera, Maritime Link Nova Scotia Power Inc. Public Utilities Board Nova Scotia Utility and Review Board Nalcor Energy Executive Council

Geographic location: Nova Scotia, Newfoundland and Labrador, Decision Gate

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Recent comments

  • Tony Rockel
    December 13, 2013 - 20:56

    So, Mr Jefford, you've finally woken up! Yes, the people of this province will be crippled with debt FOR AS LONG AS WATER FLOWS AND GRASS GROWS!

  • Winston Adams
    December 13, 2013 - 11:36

    Calvin, as to future load growth for Muskrat Falls,you say you know all about the mechanical side of things, and also cite the fact that new houses have electric heat with 200 amp services. You should know that that efficient electric heating with heat pumps have been the standard for new commercial buildings for 25 years now, and reduce electricity needs in winter some 60 percent. A R2000 house locally has 18 kws of baseboard, needing some 75 amps. This was replaced with cost effective efficient heating needing 18 amps. This house could easily run on 125 amp service. But it is rather late for this debate.

  • H Jefford
    December 13, 2013 - 06:41

    Is this another upper churchill Falls deal, like the one now in place NOW with Quebec which HAS Given Quebec over $100, BILLION DOLLARS for its share of the UPPER CHURCHILL FALLS POWER, To NEWFOUNDLAND'S $1,BILLION DOLLARS Is this a Legal Contract That Is Suppose to be fair and just to both parties NEWFOUNDLAND & QUEBEC THERE APPEARS TO BE SOMETHING GONE ASTRAY HERE !

  • Colin Burke
    December 12, 2013 - 08:21

    My most profound apologies, Mr. Smith. However, I feel that many who comment here may well sympathize with my having failed to realize at once that this one particular error of yours was merely typographical.

  • Jon Smith
    December 12, 2013 - 08:11

    And the winners are: Peter Mackay: Newfoundland's wealth and natural resources transferred to Nova Scotia ( not Quebec) and vindication for ABC campaign. Steven Harper: vindication for ABC campaign. Nova Scotians: who will also benefit from legislation to permit them to buy energy at the cheapest price from whoever can supply it. And the losers: locked in to take or pay at the variable escalating price to be determined by Nalcor without scrutiny by PUB, hidden from view by Bill 29'er. And the cost: a minimum of $450 million per year-(an average of a mere 50% increase in energy cost). And not allowed to benefit from cheaper sources of energy (especially imported energy from the mainland. Wow, Stupid Newfie or what?????

  • Winston Adams
    December 11, 2013 - 16:36

    Calvin, you ask What is it about non renewable resource (that is oil fossil fuel) that I don't understand? So you make the case that Muskrat is renewable. But renewable at what cost? How cost effective is it? It is similar to growing cucumbers in Nfld, it is technical feasible , but not economic. So the question is how cost effective is Muskrat? Solar is renewable, but not cost effective on the Avalon, or most of Nfld. WInd is renewable, less cost effective than island hydro , but cost effective and feasable up to 150 MW , compared to Muskrat. Efficiency is equal to renewables, at about quarter the cost of Muskrat. There is analysis to screen the most cost effective ways. Holyrood production is about 19cents per kwh. Efficient heating, insulation upgrades, air tightness and other measures are generally less than 10 cents per kwh for energy saved. So why spend 40 cents per kwh for new Muskrat energy? This is how the USA and some Canadian jurisdictions are reducing demand, and doing it very cost effectively. I guess you know that and ignore it? Granted , the present chart on Vision 2041 showing that Nalcor is seriously off on their forecast may change , but is is a troubling trend, for a 10 billion project. Everything hinges on the forecast being right, and they have ignored so much in their analysis.

  • Winston Adams
    December 11, 2013 - 12:43

    Calvin, you are likely wrong to say electricity needs are going to increase.You say anyone in the electricical field knows this. Too bad they know little of the mechanical and other fields. example, 25 years ago the state of the art was R2000 houses. Few build them. They are now the standard and mandatory for efficiency with about 27 percent energy reduction. These don't generally include heatpumps, which gives another 25 percent reduction on energy for winter months. The state of the art now is NET ZERO houses, so these will be the standard in 25 years from now, and need hardly any electritity from the grid.Meanwhile Nalcor assumes there will be no gain in efficiency for houses! Go figure. Yes electric cars will add some load, at present we have 3 in Nfld. And the govn here are not promoting them.

    • Calvin
      December 11, 2013 - 14:45

      I work for an electrical and mechanical engineering firm Winston, I know all about the mechanical side of things. How many houses are built these days without electric heat? How many new homes go up every year, in our province and outside, with another 200A electrical service? The population of the world is increasing, these homes are going to continue to be built. And again you ignore the fact that fossil fuels won't be around forever. Not many electric cars in the province right now, what happens when the gas runs out? It is going to happen in my lifetime, mankind is going to have to come up with alternatives to fossil fuels. When all the gas stations remove their pumps and put in EV charging stations EVERYONE is going to be looking for extra power to fuel transportation around the world. Ignore the politics of it for a minute, if you are capable.

  • Steve
    December 11, 2013 - 11:59

    Ron Penney speaks the truth here. PC's, you are on notice - voters will remember. Once the government took our PUB out of the picture, it was clear that the project was not in the public interest.

  • saelcove
    December 11, 2013 - 11:03

    williams said no more give aways what happened

  • Ed Power
    December 11, 2013 - 09:23

    You can relax now, Mr. Pseudonymous Smith, your job writing pro-Muskrat screeds from the bowels of the Nalcor building is done. It was a tough job, I'll allow, slathering lipstick on this pig, but you and your well-paid friends in the Nalcor Newspeak Office have done it. We have our multi-generational financial millstone firmly in place now, securely fastened with a loan guarantee based upon questionable financial projections. Well done! Thankfully, with the seal population at record levels, we will have access to a good source of local low-cost oil to power our lanterns and heaters when the cost of "cheap" Muskrat power reduces us all to penury. Now, if some brilliant student or prof at MUN can just figure out how to power a TV set with seal oil, we might be able to watch the Muskrat ribbon-cutting ceremony in all of its glitz and glamour. Perhaps CBC and NTV could run a simulcast of the Joey Smallwood Churchill Falls opening ceremonies so that we can watch Santayana's words come true before our very eyes. Or maybe Karl Marx's observation on the lessons of history would be more apropos.....

  • Winston Adams
    December 11, 2013 - 09:00

    You say we must look at the current changes in global energy economics vs Muskrat Falls. We have the bottom falling out as to the cost of electricity production from cheap gas, so the gravy from export sales is mighty thin. Now there is the likelyhood of a perfect storm of low oil prices by June of 2014. Add to this is the fact that New England is REDUCING demand by energy efficiency measures, to the eguivalent of one new Muskrat Falls every year, at a cost 1/4 that of MF power. Yes, we can look at all that, or keep the blinders on, like John Smith, as usual. John's argument that the power cost is justified for Nfld's need alone is a poor one . See the trend , Holyrood's production is 10.5 percent of the total, whereas a decade ago it was 30 percent. There is a nice chart on the VISION 2041 website showing how Nalcor's forecast is failing, a diversion of trends of what they forecast and what is happening. Not much comfort there, as to the stand alone argument that we , on the island, need this power. That one chart says more than the 10,000 pages John Smith cites.

    • Calvin
      December 11, 2013 - 09:46

      Hahaha, Winston you are blindly trusting this chart in the same manner that John is trusting his report. What is the difference? Imagine if the crowd in Quebec had protested the Upper Churchill project like this. Anyone working in the electrical field knows that usage is going to increase over the years and decades, not decrease. Electric heat in homes and the rise of the electric vehicle alone are going to mean revenue for Newfoundland from this project. Fossil fuels are a NON-RENEWABLE RESOURCE, what is it about that phrase that you don't get?

  • Joe
    December 11, 2013 - 08:36

    It's funny the way the followers of Kathy like to attack Mr. Penney and Dr. Collins. You would think they were dyed in the wool Liberals and not strong supports of the PC Party for decades. But Jay and Johnny would have you think that 30 to 40 years of service and running the show means they now know nothing. We'll see who the geniuses were in a couple of decades or sooner. Till then Jay and Johnny keep drinking the Kool-Aid.

    • Jay
      December 11, 2013 - 13:14

      Joe, And you can keep drinking yours. If the best you can do is speculate on what may happen a few decades from now then your opinion is just not relevant.

  • Jay
    December 11, 2013 - 07:54

    I love how the old cronies continue to crucify the present Tories about Muskrat Falls. Vardy, Penney, Jigger Jim, Cabot Martin, and the rest of Peckford's Tories were all in favour of Muskrat Falls back in the 80s when oil prices were a lot lower and interest rates were a lot higher. That was before they left the province in a mess for somebody else to clean up. Now it seems they've had a collective epiphany about the project, and it's now a terrible idea. What happened? Or are they just still mad at Danny because he wouldn't let them line up at the trough when he got elected? I look forward to reading the next monthly installment of the Vardy/Penney file when they say the same thing over and over again

    • Dolf
      December 11, 2013 - 08:54

      It would'nt occur to you those other cronies who supported the idea ages ago realized too we just couldn' afford it!

  • John Smith
    December 11, 2013 - 07:28

    Ron....time to give it up my friend...the project is going ahead...despite the ravings of the lunatic fringe. For months and months and months our PUB poured over the Muskrat Falls project, they were given 10,000 pages of information, and hundreds of exhibits(still available on the PUB site), they were given an extension, they were given additional staffing, they were given an extra million dollars above their budget....what more were we to do? The bottom line, Ron, is that Muskrat comes in 2.5 billion less, than the nearest alternative, and that is without NS, the link, or the loan guarantee. So, no matter what happens with NS, it is pure gravy. A few weeks ago you were saying that there were no markets for the power, now when NS says they want to buy more are saying that's no good either? Which is it Ron? This project is devised to provide our province with additional power, not NS or any where else. We will have some additional power which we could spill over the dam, or make 400-500 million a year on...I choose the latter. You and your buddies have lost the Battle Ron, and your voices will not even be a footnote, when power starts to one will care or remember the 2041 group....

    • Colin Burke
      December 11, 2013 - 08:34

      "Poured over," Mr. Smith? Did you mean "pored over" or are you implying the PUB peed on it, which some might deem even more fitting?

    • John Smith
      December 11, 2013 - 11:31 know you are speaking the truth when the best the naysayers can do is cite your typos....

  • Maurice E. Adams
    December 11, 2013 - 07:14

    Agreed. Only an open, independent and transparent review can give NL ratepayers a chance at being protected from a 50-year, multi-billion dollar blunder.

  • Corporate Psycho
    December 11, 2013 - 07:05

    NL has been sold out again. Bill 29 will hide the details from us. This project should be halted now.