Nal­cor and num­bers


Dear edi­tor,

Nal­cor En­ergy (through one of its pub­lic in­for­ma­tion brochures) is re­port­ing that “ be­tween 2017 and 2036, the av­er­age an­nual fuel oil ex­pense for the Holyrood plant is pro­jected to be $384 mil­lion, for a cu­mu­la­tive to­tal of $7.7 bil­lion.” Ac­cord­ingly, these pro­jected costs are be­ing used, in part, to ar­gue that Muskrat Falls must go ahead. But are these “pro­jected” costs cred­i­ble? For the 10-year pe­riod be­tween 2001 to 2010, Holyrood’s av­er­age an­nual fuel oil costs were not $384 mil­lion, but in­stead only $96 mil­lion, for a cu­mu­la­tive to­tal over a pro­jected 20-year pe­riod of only $1.9 bil­lion.

Dur­ing that 2001-2010 pe­riod, the av­er­age fuel oil us­age was less than 2.3 mil­lion bar­rels per year, with the ac­tual fuel oil us­age go­ing down from 3.3 mil­lion bar­rels in 2001 to less than 1.4 mil­lion bar­rels in 2010.

That’s a us­age re­duc­tion of 59 per cent over the last 10 years.

Fur­ther­more, the an­nual fuel us­age for the last six years ( for ev­ery year from 2005 to 2010) re­mained well be­low the 10-year av­er­age of 2.3 mil­lion bar­rels per year.

So, even if the cost per bar­rel of oil from 2017 to 2036 did in­crease (as they did from 2001 to 2010) by as much as 150 per cent, the past 10 years has shown that an in­crease in the price of oil alone does not equate to re­li­able cost pro­jec­tions 20 years down the road.

From 2001 to 2010, while in­ter­na­tional fuel oil costs in­creased from $30 to $75 per bar­rel (an in­crease of 150 per cent over 10 years), the ac­tual an­nual fuel oil cost for Holyrood in­creased by a to­tal of only about two per cent over that same 10-year pe­riod — from $98.4 mil­lion in 2001 to $100.6 mil­lion in 2010.

If New­found­land and Labrador’s 200,000 house­holds were to cover the en­tire av­er­age an­nual fuel oil costs for Holyrood, that would amount to an av­er­age cost per house­hold of only about $40 per month.

Even if the cost per bar­rel of oil over the next 20 years dou­bled, the cost of fuel oil us­age at Holyrood (ex­clud­ing any cap­i­tal cost up­grades) would mean only a cost per house­hold of an ad­di­tional $40 per month.

Over the next 20 years, even if Holyrood’s oil costs were to in­crease by four times as much as the av­er­age cost over the past 10 years, a $400 monthly elec­tric bill would in­crease by only an ad­di­tional $160 per month.

If Muskrat Falls is go­ing to mean a dou­bling of a $400 monthly house­hold elec­tric bill from $400 to $800, and even if oil us­age costs for Holyrood quadru­ples, Holyrood oil costs will only in­crease a $400 per month elec­tric bill by an ad­di­tional $160 per month ( four times $40) — to $560 per month.

So, even if Holyrood’s oil us­age costs over the next 20 years did in­crease by as much as 400 per­cent, a 400 per­cent in­crease in Holyrood’s costs would still be less than half that from Muskrat Falls (an in­crease of $160 per month com­pared to an in­crease of $400 per month for Muskrat Falls).

So, is Muskrat Falls the “ least cost” op­tion? Is Nal­cor’s 20-year cost pro­jec­tions for Holyrood (at the con­sumer level) cred­i­ble?

You be the judge. Mau­rice E. Adams


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