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Editorial: Do the math

When Muskrat Falls power comes online in several years, ratepayers will pay substantially more for electricity, but Premier Dwight Ball says his Liberal government is working to limit that increase.
When Muskrat Falls power comes online, ratepayers will pay substantially more for electricity, in part because there’s been decreased demand. - Stock photo

To say this province’s Public Utilities Board is busy is an understatement.

The fact is that they’re juggling more balls than an act at Cirque du Soleil.

Right now, the board is handling a major review of automobile insurance, along with a general rate increase application from Newfoundland and Labrador.

In lesser-known applications, the board’s also being asked by Hydro to approve millions of dollars of unexpected penstock repairs at the Bay d’Espoir and a surprise $2.5-million repair at the Holyrood Generating Station. (The Holyrood repairs are needed to solve an ash fouling problem that means the three units have been able to operate at only 60 per cent capacity.)

It’s reams and reams of paper and electronic documents — including information that’s continuing to flow from the investigation into 2014’s #DarkNL power failure.

As part of that investigation, Hydro has to provide semi-annual near-term generation adequacy reports — the PUB is reviewing the utility’s May 2018 report now, asking Hydro to answer 26 separate questions to clarify details of the report.

Just another job on the PUB’s already cluttered desk.

But the report contains some interesting numbers. First, there’s the winter peak demand for power: by now, under the original Muskrat Falls calculations, peak power demand in this province was supposed to have reach 1,714 megawatts. Instead, the highest peak reached this past winter was on Dec. 17, 2017, at 1,563 megawatts. (Muskrat Falls’ architects expected us to surpass that demand benchmark in 2012.)
But more interesting is what the report says about what happens next.

…Under the original Muskrat Falls calculations, peak power demand in this province was supposed to have reach 1,714 megawatts. Instead, the highest peak reached this past winter was on Dec. 17, 2017, at 1,563 megawatts.

“Both Newfoundland Power’s and Hydro’s forecast load requirements for its retail customers currently indicate stagnant or declining energy requirements across the next five years, consistent with weakness in the provincial economic outlook,” Hydro now says. Their forecast, “reflects customer’s anticipation of significant retail price increases for electricity, current economic forecasts for the province indicating declines in capital investment in provincial major projects, and a weaker outlook for consumer spending for the next several years.”

OK.

Why does that even matter?

Well, there are two parts to your post-Muskrat Falls power bill. One is the cost and interest payments for the project — whatever that is, we pay it.

The other part has to do with consumption. Because the cost will eventually be a fixed amount, what we pay per kilowatt hour will depend on how many people are paying it, and how many kilowatt hours are used.

If fewer kilowatt hours are used, the individual unit price for each of the hours used has to increase — because that overall bill still has to be paid. If anticipated demand doesn’t show up, the price per kilowatt hour will rise.

The lower the demand for electricity and the fewer people still here to pay for it, the more expensive it will be.

It’s just math. Very expensive math.

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