We note the recent announcement by Premier Tom Marshall of an oversight committee of deputy ministers, chaired by the clerk of the council, to monitor the project and report to cabinet. This was confirmed by a ministerial statement on March 24.
We should take no comfort in that announcement. Government officials who serve at the pleasure of government will not provide the independent analysis we so desperately need on a project of this magnitude. How can we expect public servants to critically analyze a project which has been sanctioned by government and is its most important initiative, when they owe their jobs to that very government?
This project has been plagued from its inception by a failure to use the regulatory bodies already in place to subject the project to critical and independent analysis.
The Joint Environmental Assessment Panel, appointed by the provincial and federal governments, advised both governments that the economic case for Muskrat Falls had not been made. That was ignored.
We asked the provincial government to reverse the decision made to exempt the project from the normal review by our own Public Utilities Board, whose job it is to approve all capital expenditures proposed to be made by public utilities. Government’s response was a half measure — to refer a question to the board on whether Muskrat Falls was the lower cost of two alternatives. Government then refused to grant an extension to the PUB so it could complete its work and the PUB wisely said that it had insufficient information to provide an informed response to the question.
Look to Nova Scotia’s example
Contrast this with what is happening in Nova Scotia, where their Utility and Review Board has been given full authority to review the Maritime Link, which has insisted that Nalcor provide a guarantee of energy at market rates far below what we will be paying and has assumed an ongoing monitoring role on project costs.
How can this make any sense?
Oversight for a project of this magnitude requires a number of mechanisms, each of which must be independent, transparent, authoritative and timely. The committee struck by government fails on all four counts.
We understand that the auditor general is not currently undertaking an audit of Nalcor or of Muskrat Falls and that any report prepared by the auditor general must be approved by the CEO of Nalcor before it can be submitted to the House of Assembly and placed on the public record.
In our letter of Feb. 22, we recommended that the auditor general be asked to undertake a special audit of Muskrat Falls, pursuant to Section 16 of the Act, and that restrictions imposed on the auditor general in his audits of Nalcor Energy, through the Energy Corporation Act, be removed by the House of Assembly. The auditor general would then be able to review the financial controls that are in place and determine whether best practices in financial management are being applied to the Muskrat Falls project.
The House of Assembly should also make changes to the Access to Information and Protection of Privacy Act (ATIPPA) and the Public Tendering Act (PTA), to place Nalcor under the same accountability rules as apply to other Crown agencies, including Newfoundland and Labrador Hydro. We are pleased with the Independent Statutory Review of ATIPPA announced by the premier on March 18 but this is unlikely to have an impact on oversight for the Muskrat Falls project because of its time frame.
In addition to the oversight over public expenditures provided by the auditor general, we believe that the prudence of decisions on an energy megaproject of this magnitude needs to be subject to review by energy experts who have designed and built similar projects. This can be accomplished through one of two alternative mechanisms. The most sensible approach would be to grant authority to the PUB to assume the same role on Muskrat Falls as the Nova Scotia Utility and Review Board has with respect to the Maritime Link. The PUB would bring to bear the expertise of energy experts and provide for cross-examination of Nalcor and outside experts, on the public record.
Independent panel of experts
The second alternative would be to appoint an independent panel of persons with expertise in hydro projects, major construction projects and regulatory oversight of public utilities, to provide oversight of Muskrat Falls and report publicly to the people of the province on the project.
We understand that the bid from Astaldi for the dam and powerhouse was one-third less than the next lowest bid. We have asked for confirmation from Nalcor but it has declined to confirm that information. Significantly lower bids can be problematic for a project this size, over one billion dollars, particularly so when the company in question hasn’t done a project before in North America. This is an example of a contract which requires very careful independent monitoring.
A veil of secrecy has been maintained over the project based on a misguided but convenient assertion that such secrecy is necessary to ensure competitive bidding. This veil must be lifted so that we know what the true costs of the project are to date and what the true costs of the project are likely to be on completion.
Premier Marshall owes it to his successor to ensure that the necessary independent oversight of the Muskrat Falls project is in place well before he takes office in July.
Ron Penney is former provincial deputy minister of
justice and former city manager of St. John’s. David Vardy is a former clerk of the Executive Council and
former chariman of the Public Utilities Board.