Ratepayers and risks

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On Jan. 21, the Town of Wabush was reported as “calling on government to release the third hydro line for Labrador West from the PUB process.” It was also reported that the town had “received confirmation from Liberal Leader Dwight Ball supporting their call to exempt that part of the project to allow power for further industrial development in the region.”

Since then, Alderon CEO Mark Morobito has also gone to the public airwaves suggesting that failure of government to step up to the plate and to construct the transmission line could mean that Alderon’s Kami iron mine project would have to be put on hold.

While clearly there are times when government should use taxpayers’ dollars to foster economic development, taxpayers and ratepayers should note that the Jan. 27 edition of The Business Post also reported that the CEO of Vale (the world’s largest iron ore producer) said that “projects … without full funding are at risk.”

He also said that while existing producers “enjoy a number of advantages over newcomers, including greater availability of cash and a lower dependency on external funding … new entrants … are dependent upon external financing during periods of volatility and high risk.”

With respect to Alderon’s Kami mine project, The Business Post also said that Alderon's Chinese shareholder (Hebi) “is the off-take partner for 60 per cent of the first phase of production at the Kami project.”

If Alderon is dependent on its single Chinese shareholder for the sale of 60 per cent of its production, does that in any way add to the risk associated with the Kami project?

While Alderon’s CEO is reported as saying that “Alderon still has to raise a further $1.5 billion to build the mine,” he also confirms that, “We have no revenue and we have one project.”

Accordingly, I would suggest that our government would have to be well steeped in the same virtual/

fictional economic philosophy that Nalcor is using to justify Muskrat Falls if it were to put $240 (plus) million of taxpayer/ratepayer dollars into the construction of a third transmission line for a project that is far from being fully funded and which has only one market (a Chinese company that may or may not purchase 60 per cent of its most lucrative production).

While, when it comes to Muskrat Falls, government has long been accused of drinking economic Kool-Aid, I thought — or at least, had hoped — that our opposition parties would not be so quick to support excluding the PUB from exercising its legislated mandate and that they would instead look for and demand a more transparent and evidence-based approach to the expenditure of public funds.

If Premier Tom Marshall plans to really press the reset button and to do more than just carry on with the failed policies of his predecessor, then he must ensure that government takes a more evidence-based approach to policy making and the expenditure of public funds.

The construction costs associated with a possible third line to Alderon’s Kami mine project must be referred to the PUB for a thorough, transparent and evidence-based review.

The PUB is this province’s democratically established institution that has the legislative mandate, the experience and the objectivity to do the job.

This is not a problem for government, but yet again, another opportunity for government to choose a new path — one that respects its own quasi-judicial institution and puts its duty to the taxpayers and ratepayers first. Reset? Or regurgitate?  Taxpayers and ratepayers will decide.

Maurice E. Adams writes from Paradise.

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Recent comments

  • Jon Smith
    February 05, 2014 - 12:27

    Where will the power come from for the third line? Muskrat power is booked for Holyrood replacement and sold to Emera and NS consumers at subsidized rates. The recall power at Upper Churchill is being wheeled through Quebec (making history) under a contract with Emera. So the power will have to be bought back from Emera or bought from Hydro Quebec at the bus in Churchill. Will the newfoundland consumer have to subsidize the transmission line to wheel Quebec power bought back at exorbitant rates? Stay tuned.-the worst may not have come to light yet with respect to the Labrador power mess.

    • FictionOrFact
      February 05, 2014 - 16:25

      So let's debate where it will come from: (1) 40% of Muskrat is slated for the island (Holyrood replacement and load growth) and another 20% to Emera - these are the only firm contracts for Muskrat power - there is another 40% remaining. (2) The Energy Access Agreement signed with Emera last fall for surplus, non-firm energy clearly states that NL customers come first, so that's not an issue. (3) The current arrangement with Emera has them selling what Nalcor doesn't use here at home (about 80 MW in the winter - more in the summer)- so if it is used in Labrador then Emera does not take it to market on Nalcor's behalf - there is no selling and buying back that you illude to. Seems to me there is more than enough to meet the expected 60MW demand that Alderon is talking about. By-the-way, I happen to agree with Mr. Adams that the PUB is the right venue to debate the merits of a new line to Lab West

  • Just sayin
    February 02, 2014 - 20:30

    And to think, our power blackout would have been much lees severe if they had build the third line to the Avalon, for about 220 million. The said in was needed in 2011, then pulled back the application once Muskrat got the green light. Can be sure Johnson will give them hell over that!

  • Just sayin
    February 02, 2014 - 20:25

    Seems there is no one watching out for the average ratepayer. Tom Johnson? I bet not one in 5000 knows he is our appointed advocate. Industry get the red carpet and homeowners get screwed on electricity rate protection. We need a Consumer Group association to intervene at the PUB for better protection. Johnson was pro Muskrat and pro business ( reduced rates for them while residential rates went up). Should Johnson even represent us at the blackout inquiry? I suggest not.

  • Fred Penner
    February 01, 2014 - 07:33

    You are quite right in that the line should not be built unless it is economically feasible to do so. However, I note that you require an evidence based review. Your ability to obfuscate and select only the "evidence" which suits your premise has been well documented.... especially as relates to Muskrat Falls. Your conclusions therefore are based on a superficial understanding but they do make for good press!

    • Maurice E. Adams
      February 04, 2014 - 11:05

      Fred, the forum through which the general public (taxpayer/ratepayer) is able to have access to all sides of the issue and thereby have fair and transparent access to relevant information (not just the few slanted tidbits that Nalcor chooses to release) is our Public Utilities Board. Muskrat Falls is deemed "economically feasible" only because ratepayers are forced , by law, to pay for it ---- lock, stock and barrel, no matter what the cost, no matter if it is needed or not, no matter if it is affordable or not, no matter if it is reliable or not. So there is more to such major taxpayer/ratepayer paid-for projects than 'economic feasibility'. But of course, you know that, but nevertheless, it is you who chooses to misrepresent and obfuscate.