Former Nalcor Energy president and CEO Ed Martin’s comments about the Muskrat Falls project being similar to buying a house must have shocked economics professors at Memorial University, with the exception of Wade Locke.
Martin’s comments also likely surprised anyone who has, or had, a mortgage. Surely, someone who reaches the position of president and CEO of a Crown corporation must be familiar with Economics 101.
The house analogy is actually a good one. I’ve used it previously in several columns about the foolhardiness of the Miscreant Falls project. Unlike Martin, I’ve never earned $685,000 per year, but I do remember a lot of what I learned in economics courses. (Never in Wade Locke’s.)
In an interview with CBC Radio’s Fred Hutton, Martin compared the Muskrat Falls project to obtaining a mortgage to buy a house. He said, fairly enough, it is wise to advise your children to buy a house rather than pay rent for the rest of their lives.
It sounded good to that point. Everything that came afterward warranted an F.
If Junior decided to buy a house and came to you for advice, you would undoubtedly say, “Make sure you know the price.”
In contrast, Martin and his pals at Nalcor and his chums in the Confederation Building signed the province’s ratepayers to a half-century mortgage without even knowing the price.
“Oh yes they did — it was $6.2 billion,” Wade Locke and other project cheerleaders might say, quickly adding that the price rose — doubled — due to factors beyond their control.
Wrong answers, to both questions. Perhaps Martin, Wade, Williams, et al. could do better in Economics 101 if it were multiple choice:
13. The Public Utilities Board (PUB) fulfilled its function by conducting an extensive and independent review and analysis of the proposed Muskrat Falls hydroelectric project prior to it being sanctioned by the Progressive Conservative government in 2012.
In Martin’s house analogy, the PUB would be Dad (or Mom, or both). Their experience and objectivity would be invaluable, were Junior smart enough to seek their advice.
If the PC government of the day had not disempowered the PUB from its legislated function, the Muskrat Falls project would not have gone ahead.
Predictably, the Muskrat Falls Inquiry is barely a few weeks in and already the blameworthy politicians have a scapegoat: the Nalcor reports and consultants’ studies that apparently never made it to the Confederation Building. “We didn’t know,” will become a common refrain. (See: Kennedy, Jerome, testimony at.)
They would have known, if they hadn’t stopped the PUB from doing its job.
Does anybody buy a house without knowing what their biweekly payments will be? … Well, yes. Nalcor, Ed Martin, Danny Williams and the PC government do.
But back to Ed Martin and his buying-a-house analogy. Your next bit of advice to Junior would invariably be, “Make sure you know exactly what your biweekly payments will be, and for how long.”
Does anybody buy a house without knowing what their biweekly payments will be? Or monthly payments, if they don’t grasp the concept of compound interest?
Well, yes. Nalcor, Ed Martin, Danny Williams and the PC government do. They essentially got a mortgage and bought Muskrat Falls without knowing what ratepayers’ bills would be. In fact, this being 2018, six years have passed since the project was approved, and the (now Liberal) government and Nalcor still don’t know, or won’t say, what ratepayers’ monthly bills will be. The question is invariably deflected with a reference to “mitigation.”
A guy who says, “Don’t worry about what your payments will be, Junior, just buy the house,” wouldn’t be nominated for Father of the Year.
Another memo to Martin: occasionally, renting can be advantageous.
For instance: “Don’t buy that house, Junior. I’m going to retire and move to Florida in a few more years, and then you can have my house.”
Granted, 2041 is still a couple of decades away, but in terms of the house analogy, Newfoundlanders were oh so close to living mortgage-free.
Brian Jones is a desk editor at The Telegram. He can be reached at email@example.com.