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Letter: Empowering the PUB


The Public Utilities Board (PUB) was prevented from performing its duty on Muskrat Falls and we are now reaping the whirlwind. It is time to strengthen our PUB and restore its power to undertake regulatory oversight and protect ratepayers from abuse by monopoly power, in this case from our Crown corporation, Nalcor Energy.

Consider the example set by British Columbia.

The new premier of British Columbia has sent the Site C project to the B.C. Utilities Commission for independent review, to recommend whether it should continue, be placed on hold or cancelled completely. The Commission has been asked to provide its advice by Nov. 1, 2017. Construction will continue but no major contract awards will be made during the review period.

The terms of reference call for the commission to examine other energy options, including demand side management, which could provide similar benefits, at similar or lower energy costs as the Site C project.

The Site C project is similar in scale to Muskrat Falls and was removed from consideration by the provincial PUB, as was the case here. The new government is fearful that Site C will become another Muskrat Falls.

The undersigned has advocated an assessment of both the cost of stopping the Muskrat Falls project and the cost to complete it, through a benefit cost analysis of the options available to government. 

The public no longer supports the project. Nalcor has not demonstrated its capacity to finish it and costs continue to escalate. Our government should reconsider the need for a fundamental reassessment, similar to what the B.C. Commission is now undertaking.

The appointment of a new chair of the PUB is a good time to revitalize the board and to reinstate its mandate. It is time to ask the PUB to advise on the major decisions confronting government, those that relate to the spiralling costs, including the sensitive clays, the water management agreement and the egregious quality control problems. Many of these problems center on Nalcor’s inexperience and its inability to manage this complex project.

The PUB has been engaged in a hearing dealing with the reliability of supply, both before and after interconnection. This hearing began with DarkNL and is continuing. Many questions surrounding the reliability of power and the availability of emergency power have arisen, without resolution. The exemption of the project from the authority of the PUB has tied its hands, particularly on the North Spur and water management.

Demand forecasts have failed to account for low or negative population growth. With rates surging beyond our capacity to pay, we will all search for less expensive alternatives and the result will be to make Muskrat Falls a useless asset, too expensive to use. Government cannot transfer money from necessary services, hospital, roads and schools to pay for Muskrat Falls. Export revenues will offer negligible revenues, too little to mitigate costs. We are facing an additional $800 million in costs or more, doubling our power bills. This is similar in scale to the impact on households of the oppressive tax increases in the 2017 budget, many of which were rolled back due to public resistence.

The powers of the PUB should be reinstated and Nalcor should become a regulated utility. Government should recruit a new PUB chair with impeccable qualifications, commensurate with the needs of a quasi-judicial body with effective oversight authority.

The PUB must have authority to:

1. Review the unsustainable prospect of increasing ratepayer billings by $800 million (with continuous escalation thereafter for 50 years) against a scenario in which consumers will surely substitute other energy alternatives, leading to an overall reduction in demand and mothballing Muskrat Falls as “stranded” assets.

2. Consider the true economic case for the project against low oil prices and low electricity purchase prices in export markets.

3. Evaluate the reliability of power after interconnection, including the risks posed by the North Spur and other operational risks arising from poor design choice, quality control issues and an ineffective water management agreement.

4. Review the cost of terminating the Muskrat Falls project, either in whole or in part, bearing in mind the unreliability of cost estimates, the risks pointed out in the SNC-Lavalin report of April 2013 and the potential for continued cost escalation.

 

David Vardy
St. John’s

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