A challenge for Nalcor

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In her brief, insightful letter to the editor, April 4, Helen Webster of St. John’s posed several bang-on questions: “Why is Nalcor getting this ($776 million) funding while the provincial government is short cash? Why is Nalcor important enough to become a financial sinkhole for the province?”

Why indeed! Regrettably, an answer is obvious.

The recent Williams administration staked the economic future of the province on energy (mainly hydropower) exports — remember, the “energy warehouse” catchphrase? And the present Dunderdale administration now barrels ahead mindlessly.

That simplistic policy’s basic flaw is to misconceive electricity as a commodity, readily and cheaply transportable to distant markets (say, like oil). In fact, hydropower’s true nature is more that of a catalyst (say, like steam) of much value only at near-site usage — e.g. for heating, light, manufacturing, etc.

The only means whereby electricity can be long-distance transmitted

is so enormously capital-expensive

that any supply to distant markets must be subsidized, in this case partly by government and partly by ratepayers.

Thus, Muskrat Falls’ particularly high unit generation costs (cents/per kilowatt hour) cannot be recovered from foreign sales (or even local mining operations) let alone render a profit. Nor has Nalcor as yet even secured such contracts, non-profitable though they would be — the alternative simply being power wastage.

Nalcor’s current actions in pursuance of an “energy warehouse” fantasy obviously stem largely from satisfying internal aspirations, regardless of financial harm to the general populace of the province.

Before descending further in this Nalcor “sinkhole,” Ms. Webster and the rest of us should insist on a detailed review of this harebrained policy. No ifs, ands or buts!

My personal pitch to Nalcor would be: either demonstrate full gainful utilization of Muskrat Falls power locally or else desist and permit the government to attempt something sensible (for example, a province-wide rapid-transit transportation policy).

J.F. Collins

St. John’s

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Recent comments

  • It appears that UBER CAPITALISM or horribly gone-wrong Crony Capitalism will run the Muskrat Falls Contract.
    April 16, 2013 - 14:06

    I feel quite certain that "UBER" Capitalism is the terminology that can describe the drive that is running the Muskrat Falls Contract. Uber Capitalism is another word for horribly gone-wrong Capitalism or "Crony" and "Price Gouging" Capitalism. It can be described as the type of Capitalism that crashed some of the largest banks during the 2007 Great Recession, a recession which is still ongoing. And as we learned last week with the charge that the Banks are Outsourcing jobs, it continues to this very day in the Banking Industry. Merrill Lynch, Bearn Stearns, Countrywide Financial, IndyMac Bank, etc. were some of the names of Banks that collapsed. It also was responsible for bringing down countries like Iceland, Ireland, Greece and Cyprus, etc. We have been told right from the moment that Muskrat Falls Project was launched as a go that the cost would be $6.2 Billion but we were to expect cost over-runs which would run the contract upwards to $12 Billion dollars. My question what would make a project with a projected cost of $6.2 Billion run up to $13 Billion if there wasn't price gauging to be introduced, and given the fact the overall economy has not turned around in North America, then why? In my opinion it can only be crony capitalism that would cause that to happen. We need all eyes on this project to protect the hydro consumers of Newfoundland and Labrador and the province itself against being shafted and the project ending up in bankruptcy. There are many examples of UBER or Crony Capitalism on the Internet, please read about them.

  • whoa
    April 16, 2013 - 12:59

    I hope this isn't the same Collins that was a Finance Minister.

  • Wondering
    April 16, 2013 - 12:26

    To think that a Quebec engineer tries to encourage us to appeal to the good nature of ordinary Quebec people for redress on the Upper Churchill. And that Nfld engineers, who know the risks, lack of power demand, and high cost of MF can doom it to failure, stay silent! There's the old saying 'Nflders are too green to burn' Go figure.

  • Wondering
    April 16, 2013 - 12:18

    Again for the past year, there is reduced oil consumption and power production at Holyrood,(bad news for the promoters of MF power) proof that their forecast power needs is flawed. And this forecast is the rationale for the 10 billion MF. I suggest Maurice show, on his vision 2041 site, the oil consumption and oil cost side by side with total system peak demand and system power used. We can see even with the robust housing construction in the last 5 years , there is no increase in province wide power needs.

  • Maggy Carter
    April 16, 2013 - 12:05

    Kudos to Mr. Collins and others for their efforts to educate the public regarding the perils of costly, remote hydro projects. Unfortunately I think this ship has sailed. I do hope, however, that there will exist sufficient documentation on the forced march of the project such that - in the event of financial collapse - future generations will be able to look back and understand where and how things went so horribly wrong. That all of the key internal documents will be preserved for posterity is by no means assured given Bill 29, the legislative exemption of NALCOR from public oversight, and the secrecy that has shrouded the project from the start. Every time the price of oil takes a huge step back as it has in the past week, it must keep the people behind this project awake nights. The sad irony is that our own government has placed us in a conflicted position. On the one hand we hope oil prices stay low so that our cost of living in this province doesn't continue to soar, while on the other we might like to see oil double in price in order to get us out of debt and to bolster the economics of Muskrat Falls. Beyond the human tragedy in Boston yesterday is the prospect that the world economy may again take the kind of hit that followed 9/11. If that happens, the demand for power in Newfoundland and eastern North America might once again shrink to the point that Muskrat becomes an economic millstone far sooner than even its critics thought possible. We can hope otherwise, but it is worrisome that somewhere in the Muskrat fiasco is a harsh lesson that we failed to learn from the Upper Churchill and a dozen other throws of the dice by arrogant, ambitious politicians egged on by apathetic and overly trusting voters. If so, the cutbacks we have witnessed in recent weeks are but a harbinger of the fiscal frustrations yet to come.

  • Lucien Beauregard
    April 16, 2013 - 11:28

    Muskrat Falls Project is a good projet ! However ! However, who cares about the motion that Nalcor filed in Québec Superior Court against Hydro‐Québec to address inequities in the 1969 Upper Churchill Power Contract pricing ? Year after year, Hydro-Quebec makes more than 1½ billions $ net profit while reselling Churchill Falls energy. This was three years ago, on February 23, 2010! Since that: Nothing! Silence ! Dead ! The only thing we know is that Nalcor hired two Montreal lawyer’s firms to represent CFLCo. Apparently case is supposed to be heard in fall 2013. It is just sad that Nalcor didn’t hire the Montreal Lawyer, Mr Jean Louis Baudoin. This ex-judge of Quebec Appeal Court, had been involved in the modernisation of the Quebec Civil rules about Inequities in Contract. Anyways….! Let’s suppose that the motion follows his normal progress. Let’s suppose that Hydro-Quebec and Nalcor Law Firms needs more time to study the case. Let’s suppose that the case is so complicated that Jurists from all around the world have to be consulted. Who, at the end of the day, will win the trial ? Hydro-Quebec is the most powerful organisation in Canada ! So, probabillties that Nalcor win the trial are very low. And even if it wins, Hydro-Quebec will never accept to share with Newfoundlanders and Labradorians the Churchill Falls revenues. It will appeal for the judgement and it will be a never ending issue. Hydro-Quebec is owned by Quebec Parliament and by Quebecers, so, what is the Quebecer’s opinion? Will they accept that Hydro-Quebec continue to extort immorally Newfoundland and Labrador until 2041 ? Maybe not ! The trial could end with a strong favourable outcome for Newfoundland and Labrador ….. 1.- If here and now Newfoundlanders and Labradoreans get involved in the process. If they don’t stay silent anymore. If they clearly indicate to Nalcor, to Newfoundland and Labrador Parliament, to Quebec Parliament, to Hydro-Québec, to Quebecers that this injustice may not continue. 2.- If Newfoundlanders and Labradoreans shows a strong determination to no tolerate and endure any longer the contract terms, remembering to Quebecers that Churchill Falls Power Plant is located in his territory and under his technical control. 3.- If Newfoundland and Labrador run all over Quebec an information campaign to explain to Quebecers, how unfair is the content of the Churchill Falls Power Contract. Actually, Quebecers are ignorant about the content of the contract, that’s why at first glance they will refuse the Churchill Falls Power Contract to be reopened. Hydro-Quebec keeps secret the content of the contract. Quebecers believe that you robbed them the Labrador coast. Quebecers believe that Hydro-Quebec paid the Churchill Falls Power Plant. Quebecers don’t believe that you receive only ¼ ¢ per kilowatt-hour. Quebecers don’t believe that Hydro-Quebec alone might extend the contract for an additional 25 years. Quebecers don’t believe that the renewal clause fixes the purchase price at 1/5 ¢ for the 25 year period commencing in 2016. Quebecers believe they can ignore your earnest plea for justice. However with a good information and awareness campaign, the Quebecer’s opinion will turn around by 180 degrees. And then, Quebecers will become supportive to Nalcor’s motion. In the worst case, they will remain positively silent! Arguments are already all provided in the Nalcor News release. Newfoundland and Labrador just have to communicate it clearly and simply in french language to Quebecers. Lucien Beauregard, P. eng. Quebec

  • Maurice E. Adams
    April 16, 2013 - 10:54

    Government's idea of a 'review' is Navigant, the Zip Line crowd, or MHI (who had already previously sanctioned Muskrat Falls). That is government's idea of independence --- hire a company and claim that its findings are not biased, when it had already previously supported the position that government wanted. Government is using taxpayers' dollars to hoodwink them --- over and over again. If Muskrat Falls had merit, it would have withstood the independent scrutiny of the Joint Federal-Provincial Review Panel and our own PUB. It did neither.

  • Cyril Rogers
    April 16, 2013 - 10:42

    As usual, J.F. Collins calls a spade a spade and thankfully we still have enough people of integrity who will stand up for what they believe. It is indeed an incredible "fantasy" for the Dunderdale administration to simply rubber-stamp the sanctioning of this deeply-flawed project....Danny Williams' pet dream. They are going ahead in the face of all kinds of evidence to the contrary and have sold their souls to corporate greed...while selling the people of this province a pipe dream. They somehow seem to think that they can build a $10-12 billion dollar monstrosity and make it pay....only in a world of voodoo economics would this work. I still hope out the faint hope that they will come to their senses and pull the plug on this colossal blunder.