Emera CEO didn’t ask for misleading estimates
Chris Huskilson’s says company wanted clear costs before Nova Scotia utilities board
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.