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RUSSELL WANGERSKY: The high cost of servicing communities

Hydro Place in St. John’s, headquarters of Nalcor Energy and subsidiary Newfoundland and Labrador Hydro.
Newfoundland and Labrador Hydro HQ in St. John’s. — Telegram file photo

You could call this chapter 47 in “Why are things so expensive in this province?”

It’s a story about rural parts of Newfoundland and Labrador that have shrinking populations, and how we have to absorb the costs of infrastructure services that isolated residents couldn’t bear on their own.

Usually, that issue comes to mind when looking at the cost of primary and secondary education in rural areas; how, due to long distances between towns, some areas end up with remarkably small student/teacher ratios, essentially making the cost of providing education — on a per-student basis — much higher.

Or ferry boats: the high cost of the interprovincial ferry service, combined with keeping fares at a manageable level for residents who need the service, mean that taxpayers across the province pick up as much as 90 per cent of the operating costs of a ferry trip. Capital costs of ferry construction? That’s pretty much 100 per cent subsidized by the taxpayer.

But here’s one you might not have thought of: electricity.

Essentially, replacing the submarine cable will cost $16,304 per customer on the cable system.

This year, Newfoundland and Labrador Hydro expects to hire a consultant for about $300,000 to inspect the set of submarine power cables that bring power from Farewell Head to Change Islands, and from there to Fogo Island. The first set of cables is 5.1 kilometres long — the second one is 5.3 kilometres long.

Here’s what work Hydro’s planning to do: “The existing submarine cable system interconnecting Change Islands and Fogo Island to the Island Interconnected grid was installed in 1988 and is now 30 years old. Nexans Canada Inc., a worldwide leader of electrical cables, estimates that the average life expectancy of submarine cables of this type is between 30 to 40 years. Hydro’s current assessment routine for this equipment includes infrared imaging of the cable termination points and visual inspection of the exterior of the cables by underwater divers.”

The Fogo and Change Islands submarine cables are the same vintage as the submarine supply cables to Bell Island; the Bell Island cables had to be replaced in 2014 by Newfoundland Power at the cost of $14.5 million.

Using the Bell Island budget as a marker, Hydro expects the replacement of the Fogo Island cable to cost $30 million. Sometime during the next few years, even if it’s not as early as next year, the cable will have to be replaced.

Here’s where the math gets interesting: there are only 240 electrical customers on Change Islands — there are approximately 1,600 more on Fogo Island, bring the total to 1,840 customers. Essentially, replacing the submarine cable will cost $16,304 per customer on the cable system. Obviously, they won’t carry that cost alone; when the work is done, the bill will be spread out across all of Hydro’s customers, rural and urban alike.

But serving such a diverse population is an expensive process. This year alone, Hydro plans to spend around $76 million on its transmission and rural operations segment, or about 64 per cent of its expected capital costs for 2019.

There’s no real question about whether the Fogo and Change Islands work will eventually be done. The cables will obviously be replaced if that’s what’s required. It’s certainly the cheapest way to supply power to the islands, but it’s in no way cheap.

And that’s the rub: our far-flung geography makes some things so expensive that their costs cannot be borne by the people who live there. Instead, those costs go onto everyone’s tax bill, and often, onto the continuing increase in the size of our provincial debt.

The rock of costs is meeting the hard place of no money. And something will have to give.

Recent columns by this author

RUSSELL WANGERSKY: Under the influence

RUSSELL WANGERSKY: Chicken soup as therapy

Russell Wangersky’s column appears in 36 SaltWire newspapers and websites in Atlantic Canada. He can be reached at — Twitter: @wangersky.

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