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Letter: We need to focus on selling surplus power

Members of the local media along with various Nalcor officials and employees were given a tour of the Muskrat Falls energy facility at Soldier’s Pond located just east of Butterpot Park on the Trans Canada Highway (TCH) just outside St. John’s Wednesday.
Nalcor’s facility at Soldiers Pond, east of Butterpot Park on the Trans-Canada Highway. — Telegram file photo

The public debate over Muskrat Falls has been raging for years now. Full disclosure: I was excited when the project was announced and had confidence in the experts at Nalcor, including Ed Martin and his team, to properly assess, plan and carry out the project. The assumptions and estimates they used to forecast key variables such as future demand and oil prices seemed reasonable to me at the time.

Fast forward to today, and many of those key assumptions simply haven’t panned out. Oil prices are lower than predicted, expected future demand for electricity has flattened out, and most critically, the cost of the project itself ballooned out of control.

In November 2015, Dwight Ball and the Liberals swept into power and faced a bleak economic landscape of dramatically lower oil revenues combined with the soaring costs of Muskrat Falls. They rightfully recognized the project was past the point of no return while promoting a balanced approach of cost cutting and tax increases and avoiding mass public layoffs, which might have overly spooked the average consumer.

So, that brings us to today. The date is rapidly approaching when the Muskrat Falls bill will come due. The knee-jerk reaction is that the ratepayers must cover the full cost. On the surface, it appears a perfectly rational approach. The cost has to be covered. And those who use more pay more.

However, this approach ignores the hard and fast economic laws of supply and demand. The cold truth is rates can never be raised enough to cover off the full cost of Muskrat Falls. As rates rise, demand for the product will fall. Long before we raise enough revenue to cover the cost of Muskrat Falls, increasing rates will actually reduce the total revenue produced from the sale of electricity.
Furthermore, raising rates sends all the wrong signals to the purchasers of electricity. Residents will conserve, switch to alternative sources of energy, or just leave. Commercial/Industrial demand will wane as costs become prohibitive to be competitive in global markets. Muskrat Falls requires us to sell more electricity, not less.

What we need is a balanced approach in which some reasonable rate increases form part of the answer. The key to getting ourselves out of this jam may well be the Maritime Link and the ability, for the first time in our history, to sell surplus power we generate to the mainland. Raise as much revenue as possible from non-Newfoundlanders and we here at home will reduce our share of the cost to manageable levels. If we sell enough surplus power, we will realize a day when local electricity rates will be more than competitive — stimulating local demand, attracting industry, and reversing the downward spiral we find ourselves in.

Muskrat Falls is already forecast to produce surplus power. Let’s get busy finding “mainland” customers. Let’s erect wind turbines and generate even more power to sell. Can we purchase additional cheap power from the Upper Churchill and sell that, too?

Politically, the problem will be convincing local folks that it makes sense to sell electricity abroad at cheaper rates than we are paying at home. This can be overcome through honest and transparent communication and education. We are not “dumb” and we will get it. Couple that with a rate cut every time we sign a new contract with a mainland customer and us ratepayers will get on board with the program — fast.

Finally, and this admittedly feels strange, we must refrain from encouraging electricity conservation and constraint. We now live in a world where the more electricity consumed, the better. Energy conservation is fine, as long as we provide the right incentives to encourage switching from alternative sources of energy to electricity.

We are a hardy, resourceful people. We have proven it in the past and are about to again. My initial optimism for the Muskrat Falls project has been dimmed by today’s realities. But my optimism for our people and our ability to turn lemons into lemonade is undaunted.

Next year is election year. Listen carefully to all the parties and their ideas. Vote wisely. It’s our job to collectively find the best path forward.

Weston Raske

St. John’s

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