Were electricity costs not supposed to rise?
The provincial government made a decision not to increase electricity costs as a result of Muskrat Falls power replacing Holyrood power.
My last electricity bill (April 2019) indicated the cost of electricity was 11.391 cents per kilowatt hour, before discount and harmonized sales tax.
The Liberals released a plan for power rates (The Telegram, April 16, 2019) where the proposed rate will be 13.5 cents per kilowatt hour in 2021. This corresponds to an 18.5 per cent increase.
What was not mentioned in the Liberals’ plan was what the per kilowatt hour rate would be after 2021 — another 18.5 per cent increase to 16 cents per kilowatt hour?
In the above Telegram reference “the Liberals’ plan will require $725.9 million total in new revenue and annual savings in power production, all to be applied to keep rates down.”
But Liberals are planning to increase electricity rates.
The Muskrat Falls project will cost $12.7 billion, including financing. Financing $12.7 billion at 3.5 per cent requires an annual interest cost of $444,500,000. The Liberal plan does not explain the difference of $281.4 million (between $725.9 million and $444.5 million).
The revenue from electricity rates received by Newfoundland Power is about $660 million annually. If this figure is increased by 18.5 per cent as suggested by the Liberals’ plan, electricity rate payers will be paying an extra $122 million annually.
As the extra income of $122 million is less than the above difference of $281 million, there is no need for any cost increase in electricity rates.
To put the above argument in a different way, the Liberals’ plan suggests various new revenues totalling $725.9 million annually plus electricity rate increases of $122 million annually with an interest cost expense of $444.5 million annually. The extra income is well above expenses.
Previously, the provincial government made a decision not to increase electricity costs as a result of Muskrat Falls power replacing Holyrood power.
They should have kept their promise as the analysis of the above figures indicates that they could have.