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Russell Wangersky: This just in — and it isn’t good


I am as sick of it as you are. So by all means, put down the newspaper or turn off the computer, head into your bedroom closet and curl up in a ball. But turn the heat down in the rest of the house when you do. You’ll be glad you did.

Russell Wangersky

But week after week, news about the issues arising from the ill-fated Muskrat Falls project crop up, and as much as it hurts, we have to keep track.

The latest piece is a new analysis of Newfoundland and Labrador Hydro’s ability to meet the province’s power needs until Muskrat Falls comes on stream, put together by the Liberty Consulting Group.

The new Liberty report says the province’s utilities think power demand will actually fall, though the consultants caution that the power load forecasts might be too conservative.

The flattening-out of demand still presents interesting problems for the everyday consumer. Under the unbreakable take-or-pay contract Newfoundland and Labrador Hydro has already signed with Nalcor, we have to pay for a guaranteed amount of Muskrat Falls power (enough to pay for the project) whether we need the power or not.

So, even if we can get power more cheaply from somewhere else, Hydro has to buy the Muskrat power, whatever the cost. Even if we didn’t use it, we’d have to pay for the power we weren’t using.

That means, ironically, the lower the demand, the more price pressure there will be on the ordinary consumer.

That is something we were told wasn’t going to happen, just like we were told that huge increases in construction costs and delays wouldn’t happen either. “World-class project,” we were told, remember?

In the coming year, Hydro actually expects peak demand to drop below 1,800 megawatts, and then drop again before leveling off for 2018/19 and 2019/20. (So far, through January and February, the highest actual peak demand the utility has registered has been 1,708 MW on Feb. 8. Consumption has only edged above 1,700 MW twice during two of the coldest months of the year.)

Hydro has also scaled back its recent forecasts. Compared to its forecast in June 2015, peak demand in 2019/20 is now expect to be 88 MW less than what was forecasted by the utility just 18 months earlier. And compared to the 2011 expectations? Well, Nalcor Energy’s handouts then indicated we’d be in an energy deficit situation by now. We’re clearly not.

Given the new forecast, Liberty suggests we won’t need additional power sources before Muskrat Falls comes on stream — even if it isn’t fully operational until 2022-23.

And 2022-23 is one scenario Liberty’s looking at — based, in part, on the shortage of information about the status of the project.

“What is the chance that Muskrat Falls is further delayed?” the consultants ask. “Liberty does not have the data necessary to answer such a question. On the other hand, the limited information available to the public, which admittedly can be misleading, seems to suggest that further increases and delays are likely.”

And it goes on: “We acknowledge that we are susceptible to criticism for speculating on the Muskrat Falls schedule in the absence of hard data. But the lack of hard data is in fact one of the major reasons for our schedule concerns. We do not subscribe to the ‘no news is good news’ philosophy, especially for large construction projects. And the lack of visibility amplifies these concerns.

“There is a wide range of potential outcomes for the in-service date of Muskrat Falls and prudent decision-makers must gauge the risks of those various outcomes. Hopefully, new and better information will become available. In the meantime, pessimism is likely to prevail, and rightly so.”

What does it say when even a consultant hired by the province’s Public Utilities Board can’t get clear answers?

Well, it doesn’t say good things.

So where does that leave us, hiding in our happy closet?

“The scenario that emerges from Hydro’s forecasts can be characterized as (a) sustained economic weakness for several years, which is then likely to be exacerbated by (b) significantly higher consumer costs from the (at least) doubling of electric rates when Muskrat Falls comes in service,” the report points out.

Enough said.


Russell Wangersky is TC Media’s Atlantic regional columnist. He can be reached at russell.wangersky@tc.tc — Twitter: @Wangersky.

 

 

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