Emera CEO didn’t ask for mis­lead­ing es­ti­mates

Chris Huskil­son’s says com­pany wanted clear costs be­fore Nova Sco­tia util­i­ties board

The Aurora (Labrador City) - - Saltwire Homes - BY ASH­LEY FITZ­PATRICK

The for­mer chief ex­ec­u­tive of­fi­cer of Emera has told the on­go­ing Muskrat Falls In­quiry he never asked New­found­land and Labrador Crown cor­po­ra­tion Nal­cor En­ergy to pro­vide an in­ac­cu­rate es­ti­mate on the cost of power from the hy­dro megapro­ject.

Ac­cord­ing to a state­ment now in ev­i­dence, Chris Huskil­son says he wanted clear es­ti­mates on Muskrat Falls power costs, for use dur­ing the re­lated re­view of the pro­posed Mar­itime Link trans­mis­sion project by the Nova Sco­tia Util­i­ties and Re­view Board (UARB). The Mar­itime Link would bring Muskrat Falls power from New­found­land and Labrador to Nova Sco­tia.

Huskil­son says he asked for ev­ery­one in­volved in the UARB ap­pli­ca­tion — Nal­cor and Emera — to use the same ter­mi­nol­ogy in pre­sent­ing costs as­so­ci­ated with risks. Emera did not use the term “strate­gic risk” in its bud­get­ing. He asked Nal­cor En­ergy to present a bud­get that did not re­fer to “strate­gic risk.”

“That is not to say that I ex­pected re­moval of any costs Nal­cor felt were ap­pro­pri­ate to in­clude in its over­all cost es­ti­mate,” he stated in com­ments dated Nov. 25, 2018, and en­tered into ev­i­dence on Mon­day, Nov. 26.

“Emera was not in­volved in how Nal­cor sub­se­quently chose to deal with costs as­so­ci­ated with project risk in its over­all project cost es­ti­mate, but Emera did sub­se­quently re­ceive cost es­ti­mates in a for­mat that was con­sis­tent with Emera’s stan­dard for­mat, which, in turn, al­lowed for the de­sired ‘ap­ples to ap­ples’ com­par­a­tive anal­y­sis and pre­sen­ta­tion,” the state­ment reads.

The man lead­ing the Muskrat Falls project for Nal­cor En­ergy, Gil­bert Ben­nett, is on the stand at the Muskrat Falls In­quiry in St. John’s this week. He was asked Mon­day about two doc­u­ments from 2011 show­ing in­for­ma­tion from Nal­cor En­ergy, one in­clud­ing ref­er­ence to a re­serve amount to be bud­geted for “strate­gic risk,” and a later ver­sion stat­ing that risk as sim­ply, “nil.”

“There’s noth­ing in the re­ports in­di­vid­u­ally. I can’t — I don’t have an ex­pla­na­tion for the dif­fer­ence in the word­ing and how it arose,” Ben­nett said at the start of a re­veal­ing ex­change with in­quiry co-coun­sel Kate O’Brien.

Ben­nett was asked about notes in ev­i­dence from Nal­cor En­ergy chief fi­nan­cial of­fi­cer Der­rick Sturge, sug­gest­ing the cor­po­ra­tion needed to find ways to lower the price on Muskrat Falls to get through the re­lated UARB re­view for the Mar­itime Link.

Apart from re­mov­ing risk re­serves, that could be done by low­er­ing the con­fi­dence level in the es­ti­mates (chang­ing prob­a­bil­ity fac­tors, es­sen­tially bud­get­ing in a way that re­duces the like­li­hood var­i­ous as­pects or the project as a whole will come in with­out over­runs).

“I know that there was a ceil­ing price be­yond – if you went be­yond that in com­par­ing to their other al­ter­na­tives that the Mar­itime Link and the over­all con­struct wasn’t go­ing to be suc­cess­ful,” Ben­nett said dur­ing ques­tion­ing.

Ben­nett was asked di­rectly if the re­serve was dropped or bud­get oth­er­wise al­tered to get the project through the UARB.

“I’m ac­knowl­edg­ing that’s what was done,” he said.

Ben­nett said then-Nal­cor En­ergy pres­i­dent and CEO Ed Martin, who will tes­tify in De­cem­ber, made the choice.

“I was aware of this. I un­der­stood what the ben­e­fits were. I un­der­stand those con­sid­er­a­tions. I have to say I was con­sulted, yes. I was fully aware of it,” Ben­nett said.

He could not say if the re­duced es­ti­mate was com­mu­ni­cated to the pro­vin­cial gov­ern­ment or its rep­re­sen­ta­tives.

Ben­nett said he saw merit given ben­e­fits of get­ting the Mar­itime Link agree­ment. He tes­ti­fied with­out the Mar­itime Link there would be no fed­eral loan guar­an­tee for fi­nanc­ing the Muskrat Falls project and that would be a “sig­nif­i­cant is­sue.”

Nal­cor En­ergy and Emera signed non-bind­ing term sheets to pur­sue their re­gional en­ergy project, in­clud­ing the Mar­itime Link, in Novem­ber 2010. Fi­nal agree­ments were signed in July 2012.

The 500-MW Mar­itime Link was cleared by the Nova Sco­tia UARB in Novem­ber 2013 as the low­est long-term cost op­tion for ac­cess­ing power.

Ben­nett is not yet through di­rect ex­am­i­na­tion by in­quiry lawyers. He will be sub­ject to cross-ex­am­i­na­tion, in­clud­ing ques­tions – if de­sired – from lawyers for for­mer New­found­land and Labrador gov­ern­ment bu­reau­crats, Emera and Nal­cor En­ergy, as well as re­di­rect. His tes­ti­mony is sched­uled to con­tinue through Thurs­day.


Chris Huskil­son

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