Muskrat Falls: now even pricier

Published on July 5, 2014

The cost of the Muskrat Falls project is going up — again. Nalcor CEO Ed Martin says the increase, a mere $800 million, is nothing to worry about and doesn’t constitute any kind of fatal blow to the ambitious hydro development.

All along there have been predictions that Muskrat was going to cost a lot more than the original $5-billion estimate, and today it stands at $6.99 billion, not including the cost of the Maritime link — the electrical highway being built by Emera to bring power to Nova Scotia from Labrador. The link is still pegged at $1.5 billion, so if nothing changes the total comes in at $8.49 billion.

Premier Tom Marshall is comfortable with all this because the increases are small compared to other megaprojects in the province.

“I look at some of the other projects and I’m very comfortable. I look at what’s happening with Vale and their project and with Hebron,” he’s said.

There are a couple of significant differences with those projects. The Vale project at Long Harbor and the Hebron oil development are primarily using private money, while Muskrat Falls is being fully funded by the public.

Vale will sell its nickel for a profit and the Hebron shareholders (you and I have a cut) will sell their oil for a profit. In fact, if they can’t make a profit the entire thing collapses. That’s the risk and reward of investing in a market economy.

But the owners of Muskrat Falls — us — will sell our product to off-island customers at a rate so low that it can’t produce a profit.

Unlike the other megaprojects Marshall mentioned, the risk of Muskrat Falls failing is nil because market forces have nothing to do with it. Muskrat Falls is not a business venture, so it doesn’t matter what the final costs are. Ratepayers in this province have no option but to “meet the nut,” as entrepreneurs say.

Muskrat was going to increase  light bills in the province anyway, so the latest increase means it will cost us even more. There are no outside customers to absorb additional costs.

The latest cost hike did result in a policy change, though. The provincial government now proposes to use any revenue from the sale of Muskrat Falls power to offset increases to ratepayers. It’s not the same as having private investors build the Lower Churchill so they can make big profits and pay big royalties, but it will provide a little relief.

How much, you ask? Well, that depends on those pesky light bills, and we don’t know what those are going to look like just yet.

And there’s another rate hike coming, too. Improvements are being made to the Holyrood generating station. A new 100-megawatt generator is being installed at a cost of $119 million and Hydro is building a new transmission line from Bay d’Espoir to the east coast. Hydro vice-president Rob Henderson says upgrading the line between Bay d’Espoir and the Avalon will increase capacity and relieve congestion.

Wait a minute — could those two projects have provided for most of our future energy needs? Could we have avoided using Muskrat entirely and kept the project as part of a much larger development called the Lower Churchill? Could we have kept the lights on and made money, too?

The province’s energy plan outlined a strategy to do just that. The Lower Churchill was to be a money- making proposition for the people of the province and Muskrat Falls gets little to no mention. There are even suggestions on how to meet our energy needs without having to touch the Lower Churchill.

I don’t know what happened, but that strategy was abandoned faster than Frank Coleman could leave politics.

Come to think of it, I do remember something about why the original energy plan was ignored.

What was that, exactly? Oh yes, we wanted to end Quebec’s stranglehold on our energy future.

Yeah, right.

Randy Simms is a political commentator and broadcaster. He can be reached at

rsimms@nf.sympatico.ca

Twitter: @RandyRsimms