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Letter: What to do about our boondoggle


Now that most people realize Muskrat Falls is a boondoggle — in other words, a work of no value — it is time for us to debate what to do about it.

Some may suggest we do what governments intended: increase electricity rates to pay for it. That would mean electricity costs would double or more, assuming stable demand. But we need to ask, is that reasonable? Any good economist would quickly point out that it is unreasonable to double the cost of electricity, as the negative consequences would be catastrophic. They would also state that any increase in electricity rates will negatively affect demand. So, very simply, our conclusion should be to avoid at all costs what Nalcor has been legislated to do. So, what are our choices?

Muskrat Falls, when finished, will have saddled Newfoundlanders and Labradorians with a huge debt for no economic return. Already Nalcor has acknowledged that the annual increased operating costs of the project will approximate the cost savings of not burning oil to generate electricity. When we factor in population decline and demographic shifts, it is safe to assume the net benefits will be zero. So, how do we want to deal with our boondoggle?

First, we need to recognize that competitive, affordable electricity is a necessity. Therefore, I would suggest that a renewed authority for the Public Utilities Board to regulate be established with a mandate to maintain rates as they are currently (no benefits from Muskrat Falls should mean no increases for Muskrat Falls). That is the only way to reasonably stabilize demand and maintain prospects for economic growth in the future. Increasing electricity costs is not a solution, it will only add to our economic woes.

Paying for our boondoggle will come down to an option to bear the costs as taxpayers or reduce public services. Government can institute a special tax — a boondoggle tax — as a permanent reminder of the folly of Muskrat Falls. The boondoggle tax would be equivalent to the annual net cash cost of servicing the write-off of Muskrat Falls. 

The other solution is massive cuts to public services of the same annual value as a taxing option. Either hundreds of millions in tax or hundreds of millions in public service cuts will have to exist for a few generations until we rid ourselves of the mess.
For decades, Newfoundlanders and Labradorians have enjoyed competitive regulated rates for electricity, and that is what we first and foremost have to maintain. Nalcor’s plan for uncompetitive, unaffordable rates in an unregulated environment will be devastating to the entire economy. This is a path to economic destruction.

Of course, another solution is to let Nalcor go bankrupt. Nalcor going bankrupt likely means Newfoundland and Labrador going bankrupt. This would most certainly cause the federal government to have to bail out either Nalcor or Newfoundland and Labrador.

In any case, how we decide to deal with the mess will have a profound effect on our future. It is time for us to start the debate.

Gabe Gregory
Portugal Cove-St. Philip’s

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