Questions for auditors wrap up
Concerned Citizens, Ed Martin, consumer advocate satisfied after cross-examination
By the time auditors with Grant Thornton were excused from the witness stand at the Muskrat Falls Inquiry on Tuesday, even parties with divergent views on the project were agreeing the appropriate groundwork had been laid for the days ahead.
David Malamed and Scott Shaffer of Grant Thornton first introduced their report to Commissioner Richard Leblanc last Friday, speaking about the consideration of power supply for the province and related cost estimates, before the green light for Muskrat Falls. In highlights, they said the corporation made “potential misstatements” and dismissed two possible options for the supply of power early on (being the purchase of power from Quebec and delaying any major power construction project until 2041, the end of the contract governing Churchill Falls power).
Nalcor Energy’s former president and CEO, Ed Martin, said people should not jump to conclusions on the initial comments.
And since the introduction, through most of Tuesday, lawyers for several parties, including Nalcor Energy and Martin’s own lawyer, Harold Smith, posed questions highlighting the auditors were making observations, as opposed to any judgment calls on what should or should not have been done.
The auditors did not say formal talks should have been pursued with Hydro Quebec, for example.
There was also evidence entered on the use of a “P50” probability factor in weighing contingency to be considered in cost estimates. A P50 indicates a 50 per cent chance of cost overruns, versus a P75, where there’s a 25 per cent chance of cost overruns and a 75 per cent chance the costs will turn out as estimated or less. As the auditors noted, the higher the P factor used, the greater the contingency amount.
By the end of questioning, it was noted other projects had used the P50 value in considering potential project costs, with reference to Manitoba Hydro.
“I think anyone who has listened to this intently this week will realize that they do need the full breadth of information that’s provided in crossexamination. You cannot make early decisions, you have to get the full facts on the table and I thought that happened this week,” Martin told The Telegram as the inquiry was moving to its next witnesses.
Des Sullivan, a leading member of the Muskrat Falls Concerned Citizens Coalition and author of the blog Uncle Gnarley, said the basics set out by the auditors show key areas for further questions, particularly on the way Nalcor determined the risk of cost overruns.
“It seems clear from the testimony that as much as Nalcor wants to argue that a P50 was appropriate, the fact is that only experienced companies with a portfolio of projects actually get to use a P50 and there are very, very few of those,” Sullivan said in a brief interview following proceedings Tuesday.
Sullivan said the coalition members still feel – as stated since the audit findings were first presented last week – the audit is vindication of their comments to date. He said he expects what he describes as “low-balling” of project risk in cost and schedule to become a major story from the inquiry.
“I think anyone who has listened to this intently this week will realize that they do need the full breadth of information that’s provided in cross-examination. You cannot make early decisions, you have to get the full facts on the table and I thought that happened this week.”
Former Nalcor president and CEO Ed Martin
Consumer Advocate Dennis Browne has long advocated options for the supply of power should have been left to the province’s Public Utilities Board (PUB), as opposed to a decision made by Nalcor Energy and the provincial government on the information available in 2012.
Browne told The Telegram he was pleased overall with the auditors report, and that it provided context for the days to come.
“Their major conclusions have not been disturbed at all. The auditors were subject to fierce cross-examination. I think they withstood the crossexamination,” he said.
Representing the consumer advocate, Chris Peddigrew had started a line of questioning before the auditors were dismissed, related to the PUB’S limited review of the project options. The questions were cut off by the commissioner, following an objection suggesting the auditors were not the appropriate witnesses to speak to the PUB review.
“I understand that the commissioner is trying to make sure that we keep to our timeline and make sure that we’re focused on the evidence that the witnesses who are present can speak to. I think some of the questions may be better left to another day, so we were happy enough to do that,” Peddigrew told The Telegram. “We’ll have our chance.”
The auditors were dismissed in the afternoon, and Bob Moulton and Auburn Warren of Nalcor Energy were called to the stand. A third panel member from the corporation, Paul Stratton, was reported ill and absent, but it was suggested he might be present when the group is called upon to continue their testimony Wednesday.