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Letter: The woe of Muskrat Falls

['The construction site of the hydroelectric facility at Muskrat Falls, Newfoundland and Labrador is seen on Tuesday, July 14, 2015.']
['The construction site of the hydroelectric facility at Muskrat Falls, Newfoundland and Labrador is seen on Tuesday, July 14, 2015.']

Nalcor’s recent annual meeting revealed that the hemorrhaging at Muskrat Falls has stopped and the cost escalation is now expected to be a modest $600 million over the past nine months (Nalcor’s cost estimate — $11.4 billion, June 2016, and current estimate to exceed $12 billion).

The additional $600 million is yet another stark reminder of the overall staggering burden of Muskrat Falls. Many people, including our premier, are acknowledging that ratepayers cannot absorb the extraordinary cost of Muskrat Falls — the electricity rate increase to pay for the project is simply not affordable! The more uncompetitive the cost of electricity, the more businesses that close or move out of province, the greater burden on our diminishing population, and the more we conserve and use alternative energy. In acknowledging the unaffordability, the government appears to be signalling that much of the burden will have to fall to taxpayers. This means that the cost of Muskrat Falls will be subsidized by other sources of government and/or Nalcor revenues. To the extent the project is subsidized by either, it will simply mean further cuts in government services or additional taxes. The end result is the same: in one way or another we have to pay.


The Nalcor annual meeting also confirmed that it is and was an option to import power from Churchill Falls. Nalcor stated that it plans to save money by using recall power at Churchill Falls to replace high cost power at Holyrood. The actual cost to produce this power at Churchill Falls is approximately 0.2 cents per kilowatt hour.


The confirmation by Nalcor of the feasibility of Churchill Falls power clearly demonstrates that had Nalcor acted according to its mandate to secure least-cost power for Newfoundlanders and Labradorians, it would have never built a generation plant at Muskrat Falls. Nalcor would have pursued a long-term power purchase from Churchill Falls and its principal beneficiary, Quebec, for the period to 2041. After 2041, of course, Newfoundlanders and Labradorians would have had access to very cheap power. Unfortunately, we have been denied such a favourable outcome by our own government, despite having invested 40 years waiting to get that very benefit.


Now this benefit is lost for many decades to come. This will most certainly be our biggest loss — something we should never forget.
In closing, we were reminded by Nalcor CEO Stan Marshall that there remains much difficulty with Muskrat Falls. Part of that difficulty is the ongoing water management challenge. The courts have ruled in Quebec’s favour, which has put a major wrinkle in Nalcor’s assumption that it could control reservoir levels at Churchill Falls to achieve its 824 megawatts’ generation capacity at Muskrat Falls. If this decision stands, Nalcor will be left with little choice but to cut a deal with its archenemy — Hydro-Québec.


This will be yet another costly reminder of the folly of Muskrat Falls, and confirm again what Nalcor should have done from the start — bought power from Quebec.

Gabe Gregory
St. Philip’s

 

 

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