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Newfoundland and Labrador power rate mitigation possible, but potentially slow: report

Liberty Consulting laid out what it thinks the amount of money available for rate mitigation will be over the next two decades.
Liberty Consulting laid out what it thinks the amount of money available for rate mitigation will be over the next two decades. - Screen grab
ST. JOHN'S, N.L. —

It’s a hard decade ahead, but a report on rate mitigation options submitted to the Public Utilities Board (PUB) shows potential for rate mitigation options as time passes. 

The report, the second filed by Liberty Consulting since the PUB’s review of rate mitigation options began, looked at what measures the government needs to take to prevent the doubling of electricity rates in the province when the Muskrat Falls hydroelectric project is complete. 

The biggest sources of money to go toward subsidizing electricity rates in the province are the equity returns from the project and sale of “excess” Muskrat Falls power, the report says. 

The province has put $3.7 billion in equity to finance the project. Should the province’s share of returns go toward electricity rates instead of into the provincial coffers, about $90 million will be available each year, starting in 2021, ballooning to $569 million by 2039. 

The province’s share of Muskrat Falls export revenues will generate another $35 million to $45 million annually, according to numbers from Nalcor provided to Liberty. 

The interior of the Muskrat Falls hydroelectric dam powerhouse. - Contributed
The interior of the Muskrat Falls hydroelectric dam powerhouse. - Contributed

Those two sources account for 75 per cent of the money needed to offset electricity rate increases, according to the report. 

One recommendation from Liberty ponders integrating Nalcor’s power supply division with Newfoundland and Labrador Hydro. In 2016, Nalcor CEO Stan Marshall created the power supply and power generation portfolios to split the effort to complete Muskrat Falls. 

Liberty says there is “no significant barrier” to combining the power supply division and Newfoundland and Labrador Hydro “to produce a unified operating entity.” Should the two merge, Liberty estimates 113 full-time jobs could be eliminated, “many of them at Nalcor and Hydro’s higher compensation levels.” The merger would save $12.7 million at first, growing to $21 million a year by 2023. 

Another merger is less agreeable, according to the report. 

When it comes to combining Newfoundland and Labrador Hydro with Fortis-owned Newfoundland Power, Liberty says the savings aren’t there. 

“Our analysis of the economic effects of asset transfers from Hydro to Newfoundland Power showed negative rate consequences for customers,” reads the report.

Ultimately, the report shows that about $50 million will be available to offset consumer rates in 2020, with the number growing to approximately $750 million by 2039. 

In April, the Liberals outlined their rate mitigation plan, which called for a total of $725 million in savings needed to keep electricity rates at around 13.5 cents per kilowatt hour. Of that, the province needs $200 million from Ottawa, which as it stands remains uncommitted by federal parties heading into the coming federal election. 


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