Another look: Muskrat Falls and the PUB review

No plan yet where money will come from

Both Liberal Premier Dwight Ball and Natural Resources Minister Siobhan Coady were calling for patience this week on the question of how the province will pay for the Muskrat Falls hydroelectric project. All options are still on the table, they said, with the exception of doubling power rates.

That’s after the premier had already declared that neither ratepayers nor taxpayers would carry the burden, suggesting that at least a rough sketch of a solution was in hand.

It was also after the Liberal candidate for the upcoming provincial byelection in Windsor Lake, Paul Antle, declared that neither taxpayers nor ratepayers would shoulder financial fallout from the project, costed at roughly $12.7 billion.

“Ratepayers and taxpayers will not pay for Muskrat Falls,” Antle declared again in a debate broadcast live on CBC-TV Thursday night, referring to the costs as “Nalcor’s liability” — as though Nalcor Energy is not a concern of the province (it’s a Crown corporation).

As for any suggestion that Nalcor will address the Muskrat Falls liability on its own, no evidence has been presented to the public — including by the Liberal leader — to confirm that.

Antle says it’s government policy that ratepayers and taxpayers won’t cover the cost, but that does not equal a solution.

Unless and until there is evidence presented to show otherwise, the claim that neither taxpayers nor ratepayers will cover the cost is unsubstantiated, and will not be supported as fact by this newspaper.

Existing arrangements, including federal loan guarantee documents, explicitly state the cost of the Muskrat Falls project will be shouldered by ratepayers.

A breach or renegotiation would be expected to come with additional terms and penalties.

In response to previous inquiries about keeping power rates reasonable, Coady referred to testimony to the Public Utilities Board (PUB) by Newfoundland and Labrador Hydro management about internal work on options to address rates. She said Nalcor Energy has an internal committee (outside the PUB’S reach to date) and Natural Resources has a committee for this purpose and they are to report to her on mitigation options this fall.

Thursday, Coady confirmed she has received reports in draft form.

Asked what the reports contain, the minister said only that they speak to options to save on energy supply, generate greater revenue from available power and reconsider the financial arrangements around Muskrat Falls. Committee members have been “putting a lot of things on the board for us to consider,” she said.

Coady also told reporters the government is “not necessarily” committing to a complete plan for handling Muskrat Falls costs before 2021 — after the next provincial election.

“I’m going to be quite frank and say this should not be rushed. I know everyone’s hungry for that final answer, but we have to do the right work here to make sure that we’re making the right decisions,” she said.

The premier similarly called for patience on handling the now-acknowledged “gap” between what ratepayers can afford to pay and the level of payments required.

“I know everyone’s excited to know what that first (Muskrat Falls) payment would look like, but what we need to do is allow the officials, an independent group, the experts at the Public Utilities Board, to help us figure out what that would look like. Then we will make a plan,” Ball said.

Asked if the PUB would have the authority to recommend something like the use of oil and gas revenues to be applied to electricity rate mitigation, the premier said no.

And any plan to come on Muskrat Falls will be an “A plus B” — the first being the PUB’S recommendations and what, if any, might be accepted; the second being decisions by the government on tax dollars, contracts, policy and legislation. The public has had no guarantee of being able to comment on the options before decisions are made when it comes to the government’s half.

Ball and Coady’s comments about not rushing the process might lead people to surmise — incorrectly — that the media, the public and/or the opposition kick-started the increasingly intense discussion around covering Muskrat Falls costs.

In fact, while there has been more public protest activity as of late, activity actually increased after the Liberal government ordered Nalcor Energy to identify hundreds of millions of dollars to set aside to help with Muskrat Falls costs, and had its own MHAS referring to Muskrat Falls as “the biggest tax this province will ever face,” and then had Newfoundland and Labrador Hydro (a Nalcor subsidiary) propose to the PUB a deferral account to help handle Muskrat Falls costs.

The suggestion was that money from ratepayers be set aside now to help offset the jump in power rates to come. The deferral account would take the savings in energy production over the next few years from reduced reliance on Holyrood and oil burning (with cheaper power now available through use of the Labrador island Link and Maritime Link) and set aside the difference to later offset some of the hike associated with Muskrat Falls costs.

An idea was also floated to the PUB for a rate rider that would see ratepayers charged a premium on their rates now, to help cover Muskrat Falls costs down the road.

Neither option would cover all of the costs.

On Aug. 22, Nalcor Energy held a conference call as part of its second-quarter financial update. On that call, president and CEO Stan Marshall said the deferral account option was abandoned at the PUB based on the response from interveners against the proposals.

The questions of what will be included in the approach to tackling Muskrat Falls costs remain.