NL economist compares Site C dam to Muskrat Falls
‘It really gives you an opportunity to see just how bad the project here is’
In British Columbia, a hydroelectric dam called Site C has been generating controversy for a long time.
The newly minted NDP government in BC is having the project reviewed by the British Columbia Utilities Commission. The BCUC made a call for submissions on the project and Newfoundland and Labrador economist David Vardy made a submission comparing the beleaguered project to our own resident hydroelectric boondoggle, Muskrat Falls.
“My main reason for doing this really was I wanted to get more national attention for what is happening here with the Muskrat Falls project,” Vardy told the Labradorian. “I’m very concerned about it and I have been for quite some time, as a threat to the future sustainability of the province because of the size of the debt relative to the population.”
Vardy, the former chair of the Public Utilities Board in the province, submitted a 30page paper comparing the two projects, focusing on a number of key areas. He compared and contrasted the project sizes relative to the population of the provinces, which is an area of concern.
“British Columbia has a population of 4.5 million people and is expected to have growth in that in the next 20 years. Whereas our population has been declining since the moratorium and is projected to decline, further within the next 20 years. Here the cost is about $27,000 per capita compared to $8,000 per capita in BC.”
The financing of the Muskrat Falls project was another area Vardy focused on in his report, which he said will create an economic and financial burden on the province that appears to be beyond the capacity of Newfoundland and Labrador on its own, even with the federal loan guarantee increased from $5 billion to $7.9 billion.
“I wanted to draw attention to the financing scheme that’s used here,” he said. “It’s very hard on the consumer, it puts a big burden on the consumer to pay for the cost, whatever it may be, and impose a big cost burden on Newfoundlanders and Labradorians that we will have to carry a long time in the future.”
He said because consumers have to buy the power from Muskrat Falls through NL Hydro and Nalcor, it puts the consumers in a position whereby they would be foregoing better options to buy power in the marketplace.
“We are captured to pay for the loan guarantee and to make enough to keep the payments going on the debt that we have incurred,” he said.
Financing for Site C is a problem as well, Vardy said. They secured a provincial loan guarantee instead of a federal one and the province doesn’t have as much equity invested in it. They’re basically deferring a lot of the expenditures into the future, he said, shifting the cost of these projects to future generations.
Vardy also touched upon public safety, cost escalation, and the need for a public inquiry here in Newfoundland and Labrador, among other issues. He said with the media attention on Site C he wanted to draw attention to what he sees as a similar project.
“We have two projects going on, in many ways very similar but in many ways very different. When you use Site C as a benchmark for the Muskrat Falls project, it really gives you an opportunity to see just how bad the project here is,” he said. “Their project is very controversial; a lot of people are arguing about it, a lot of people in BC think it’s too big of a project. Of course, for us Muskrat Falls is even bigger, relative to our population size and relative to our need for energy.”
He said what is going to happen here is the cost of Muskrat Falls power is going to be so high that people are going to find alternatives.
“People in rural areas will cut more wood; people in urban areas will buy heat pumps and put more insulation into homes because we are not going to pay those rates Nalcor is projecting.”
Vardy said this would make Muskrat Falls a stranded asset with no demand for it. Sales into export market will not be enough to cover operating costs, he said, and the project will be shut down.
Lack of public engagement is a big issue Vardy went into as well, and the need to allow due process when major public policy decisions are made.
“Governments should be cautious about curtailing public debate,” he wrote in the report. “Powerful crown corporations should be accountable and transparent. In the case of Nalcor, its behaviour has been less open and transparent than investor owned corporations who must make disclosures to their shareholders, disclosing information which Nalcor has been free to keep to itself, under the guise of protecting “commercially sensitive” information.”
He said he wrote the report as a way to provide help to the BCUC but was mostly doing it to help people here in Newfoundland and Labrador to highlight the case, which has not gotten the national attention he said it deserves.
Vardy gave 14 recommendations to the BCUC, including that they be guided by the policy objective of supplying least cost, reliable power and that they must be vigilant to reflect the interests of present and future generations.
Former PUB Chair David Vardy