Some top decision-makers and the increase in costs still to be addressed
The Commission of Inquiry Respecting the Muskrat Falls Project has held more than 40 days of public hearings, but the work of the inquiry team is far from over.
New information has been provided through the inquiry to date. It includes facts relevant to the decision to go ahead and build the now-over budget and behind schedule hydroelectric megaproject, currently estimated at $12.7 billion.
There are the high-level cost comparisons for power options, with auditors questioning the certainty Muskrat Falls hydro was ever really the best option.
There’s the use, by Nalcor Energy and the provincial government, of third-party “cold eyes” reviews challenged at times by the report authors themselves while on the stand.
The public has now heard about an amount to cover “strategic risk” not being shared as part of debate on possible project costs (estimated once at $500 million, mean); previously unreleased day rates for the Muskrat Falls’ project director and deputy director; and a report on the possible importation of natural gas not shared before by Nalcor Energy, to name a few pieces of information.
But the Muskrat Falls Inquiry has yet to dig into the specifics around costs, including contracts, productivity rates and changes in project plans.
Testimony from SNC-Lavalin’s lead estimator was cut short, tied to back-and-forth behind the scenes related to the ongoing construction and civil disputes. The estimator, Paul leMay, is expected to be recalled before the end of the year.
Commissioner Richard LeBlanc has said the first part of the inquiry is easy compared to what is to come, dealing with construction, company wrangling and huge cost increases.
It’s impossible to say how many people are following the inquiry proceedings and to what degree.
The commission webcasts (muskratfallsinquiry.ca) received about 36,000 views by the middle of the last week, with an average of about 875 views per day.
A “share your comments” page on the inquiry website had received 85 submissions as of mid-week this week. They included suggestions on different areas of investigation, “tips,” but also technical comments (about sound levels on the webcast, etc.).
The demands on inquiry staff have grown. Before the start of public hearings in September, for example, all local news outlets noted staff were sifting through more than 2.5 million documents (some including hundreds of pages), considered potentially relevant. That figure has significantly increased.
“As the commissioner noted last week, we have received approximately 4.4 million records since the inquiry commenced its activities,” stated an email from a staff member, in response to questions Wednesday. “This represents 4.4 terrabytes of server capacity, as each of these documents is “content-searchable.”
In comparison, there are few changes in staffing. There was specifically the hire of an additional administrative assistant, and a part-time student contract (for an individual working two days per week) was extended.
A financial update is being published quarterly online. At last update, accounting to the end of September, the cost of the inquiry passed the $5-million mark, including just under $3.9 million paid to “professional services,” including inquiry co-counsel, audit adviser, the forensic auditor and lawyers for the parties with standing.
Staff told The Telegram the inquiry’s costs are still expected to come in below the amount budgeted by the province ($33.7 million over two years, but that includes the government’s expected costs in participating; the inquiry team originally proposed the cost at about $25 million over two years).
The next stage, and challenge ahead
Public hearings are still in the first phase, dealing largely with the province’s power needs and the decision to go ahead with the Muskrat Falls project over other options. An early version of the hearing schedule suggested the first phase could finish Dec. 6., but that was pushed back to Dec. 20.
The schedule was updated again this week. It shows the second phase of hearings — dealing with the rise in estimated cost during construction — is now set to begin in February, instead of January as once scheduled. January is being used for further research and interviews by inquiry staff.
Dates for the third, final phase of the review and final submissions will still land months ahead of the deadline for the final report from Commissioner Richard LeBlanc to the government, at the end of 2019.
But as the work continues, construction on the energy project is ongoing, with new disputes arising and a separate process to ramp up to help decide how the province might help pay for it all.
For the ratepayers, a Nov. 15 filing to the Public Utilities Board (PUB) for a “cost of service methodology review” — essentially to decide how the PUB will approach the province’s new, interconnected power system — is worth noting.
Nalcor Energy subsidiary Newfoundland and Labrador Hydro is recommending Labrador and Newfoundland customers continue to be dealt with separately, even if they are now physically connected. Customers on the Labrador interconnected grid won’t see Muskrat Falls costs.
“The (Holyrood thermal) plant may be required to be available for generation for a period of time after Muskrat Falls Project commissioning,” it also notes, giving no firm date on its closure.
The filing offers numbers for what the final Muskrat Falls costs and potential benefits might look like (with more costs than benefits). It suggests in 2021 (or after full Muskrat Falls in-service, currently expected in the third quarter of 2020), Hydro is forecast to save $97 million on No. 6 fuel (the oil used for the main generators at Holyrood), with roughly $4 million more saved in fuel for gas turbines.
The forecast also suggests $53 million in new power export revenue.
But the forecast suggests Hydro will need $293 million for Muskrat Falls costs, $53 million for Labrador transmission assets and $380 million for the Labrador-Island Link in the same year.
With all puts and takes, required revenue to pay for power will more than double, from $506 million per year to $1.08 billion. And the expectation is still for the average residential customer rate to go to 21 cents per kilowatt hour, without some kind of outside help (theoretically from the province).
Newfoundland Power customers (supplied largely by N.L. Hydro and Nalcor Energy) will not see an increase in rates tied to Newfoundland Power costs through 2020, thanks to a recent settlement at the PUB with that utility. An application by Newfoundland and Labrador Hydro is still before the PUB for an increase in Hydro rates in 2019. That would flow through to Newfoundland Power customers.
Meanwhile, everyone should plan for the future hike with Muskrat Falls’ in-service.
And that cost is not explained by what the Muskrat Falls Inquiry has touched to date.
(NOTE: This is an updated version. A previous version stated there are no power rate increases expected for Newfoundland Power customers into 2020. No increases through a Newfoundland Power request, but a rate hike may still come from an application filed by Newfoundland and Labrador Hydro, where increases will flow through to Newfoundland Power customers.)
Muskrat Falls Inquiry schedule (updated)
Justice Richard LeBlanc has broken down the Commission of Inquiry Respecting the Muskrat Falls Project into distinct sections, with three phases of public hearings.
Phase 1 — Primarily dealing with pre-sanction matters, including the involvement of the Public Utilities Board. Public hearings: Sept. 17, 2018 to Dec. 20, 2018.
Phase 2 — Construction and oversight by Nalcor Energy and government. Public hearings: Feb. 18, 2019 to March 1, 2019 (at Lawrence O’Brien Arts Centre in Happy Valley-Goose Bay); then March 4, 2019 to April 5, 2019, and April 29, 2019 to June 14, 2019 (Beothuck Building in St. John’s).
Phase 3 — Policy and potential systemic matters, focused on looking ahead. Public hearings: July 2-12, 2019 (Beothuck Building in St. John’s).
Final submissions — Aug. 5-9, 2019 (Lawrence O’Brien Arts Centre in Happy Valley-Goose Bay).
(NOTE: Dates remain tentative and can be changed at any time. Schedules updates will be posted at muskratfallsinquiry.ca)
Witness schedule (Phase 1)
Gilbert Bennett — Nalcor Energy vice-president: Nov. 26-29
Jerome Kennedy — former minister of natural resources: Dec. 3-4
Charles Bown — associate deputy minister during pre-sanction: Dec. 5-7
Ed Martin — former Nalcor Energy president and CEO: Dec. 10-14
Kathy Dunderdale — former premier of Newfoundland and Labrador — Dec. 17-20
(NOTE: This is the latest available schedule, dated Nov. 2, 2018. Any schedules updates will be posted at muskratfallsinquiry.ca. Jean-Charles Piétacho, chief of Conseil des Innu de Ekuanitshit and Paul LeMay of the SNC-Lavalin team are also expected to be recalled before hearings wrap up.)
The Muskrat Falls Inquiry