Despite calls from all three provincial parties, the federal government says there are no on-going negotiations between Ottawa and Newfoundland and Labrador with regards to electricity rate mitigation related to the Muskrat Falls project.
On Wednesday, Premier Dwight Ball, PC Leader Ches Crosbie and NDP Leader Gerry Rogers each mentioned their plans to get the federal government involved in negotiations to soften the blow of the $12.7-billion Muskrat Falls project.
With the project over 92 per cent complete, no such negotiations have begun, according to a statement from the federal Department of Natural Resources released late Friday evening.
The statement points to the two federal loan guarantees as the extent of federal involvement to date, which have “provided significant financial support to the projects in the form of $9.2 billion in loan guarantees, which will reduce costs to electricity consumers in the two provinces by lowering debt servicing costs.
At the same time, Ball is walking back previous statements about how government will handle the debt associated with the Muskrat Falls project, but maintains a promise to pay for the project without raising electricity prices or taxes.
On Wednesday, at the campaign launch event for Liberal candidate Paul Antle, Ball said the Muskrat Falls debt will not be covered from electricity customers in the province.
“This then becomes a government issue and we’ll deal with this debt like we deal with every other debt that we’ve been left,” said Ball.
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While initially the statement was taken to mean that debt from Muskrat Falls would be put squarely on the public debt, which would likely increase the cost of debt servicing and taxes, the premier somewhat clarified the approach on Friday.
“As discussed with our credit rating agencies, this does not require wholesale changes to the project’s financial structuring, such as a debt transfer from Nalcor to the Government of Newfoundland and Labrador,” Ball said in a statement.
“The Government of Newfoundland and Labrador and Nalcor are treating the Muskrat Falls Project as a policy problem instead of a pure ratepayer problem, which can be solved without raising taxes and by staying on the path to return to surplus by 2022-23.”
But details of those upcoming policy changes remain scarce.
“There are a myriad of different factors and tens of policy considerations that factor into this analysis,” read the statement.
“In the coming weeks and months, we will be announcing new policy decisions that form the foundation of how we will continue to mitigate Muskrat Falls.”
The premier did not mention the forthcoming announcements when speaking to reporters following his original announcement, made on day one of the Windsor Lake byelection.
The Premier maintains the Public Utilities Board will play a key role in electricity rate setting in the future.
The province did not reach out to credit rating agency DBRS before going public with its plan.
Travis Shaw, vice-president of public finance with DBRS, says the agency reached out to the province on Thursday to seek clarity on what the rate mitigation plan entailed.
As it stands, DBRS says its outlook on the Muskrat Falls-related debt remains the same.
“We will continue to treat the debt related to Muskrat Falls as being self-supported and not part of the tax-supported debt base,” said Shaw.
Essentially, DBRS still expects the Muskrat Falls-related debt to be collected from electricity sales, meaning government has not implemented any changes to how the debt will be handled as of Friday.
Like the people of the province, DBRS awaits the details of the electricity rate mitigation plan.
“Government has voiced its desire and commitment to introduce a rate mitigation plan to help to mitigate the impact of the Muskrat Falls project costs on electricity rates in the province,” said Shaw.
“That’s something we continue to watch closely and we’ll wait to see the details.”
However scarce the rate mitigation details remain, DBRS saw fit to maintain the province’s credit rating at A-low, for the third report in a row. Shaw says government is keeping on track with its plan to return to surplus in 2022-23.
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