Too lit­tle and too late

The Compass - - Editorial -

Pre­mier Dwight Ball’s an­nounce­ment ear­lier this month on govern­ment’s ref­er­ence of the mat­ter of power rates to the PUB has caught the at­ten­tion of the pub­lic and was well re­ported in Sept. 8’s edi­tion of The Tele­gram.

If this an­nounce­ment had been made two years ago it would have been her­alded as a big step for­ward. Now that the Lib­er­als have been in power for al­most three years it is too lit­tle and too late.

It is a re­ver­sal of the pre­mier’s state­ment of Aug. 22 that ratepay­ers will not be called upon to pay the im­pru­dent costs of Muskrat Falls.

Upon tak­ing of­fice, the Muskrat Falls project should have been sus­pended pend­ing a stop/go anal­y­sis as well as prepa­ra­tion of a plan to re­cover costs. In­stead, upon tak­ing of­fice, govern­ment en­gaged EY with a nar­row man­date to ex­am­ine costs and sched­ules, with­out a full anal­y­sis of the wis­dom of in­vest­ing more money in a flawed project for which there is no busi­ness plan and no way to be­come self-sup­port­ing.

Govern­ment dis­missed the need for a full ben­e­fit cost anal­y­sis of the op­tion of stop­ping the project. Their com­mit­ment was to fin­ish the project with­out first ques­tion­ing how it can be self-sup­port­ing. Govern­ment al­lowed “sunk” costs and con­trac­tual com­mit­ments to drive the project to com­ple­tion, not­with­stand­ing our in­abil­ity to cover es­ca­lat­ing fu­ture costs from rate rev­enues af­ter full power had been achieved.

In the mean­time, our PUB is no longer “in­de­pen­dent,” hav­ing been stripped of its in­de­pen­dence by the 2012 leg­isla­tive amendments. In an in­ter­con­nected world we have to con­sider set­ting rates based on those set in com­pet­i­tive ex­ter­nal mar­kets and not based on the in­flated his­tor­i­cal cost of Muskrat Falls.

The leg­is­la­tion places us in a time warp, trans­ported back to the 19th cen­tury with­out com­pe­ti­tion and with­out ef­fec­tive over­sight. Pub­lic util­ity tri­bunals were in­tended as a sur­ro­gate for com­pe­ti­tion, al­beit im­per­fect.

The 2012 amendments lock us in to a mo­nop­oly world where Nal­cor the mo­nop­oly reigns supreme and con­tin­ues to trump the neutered PUB. The govern­ment needs to re­peal the amendments and re­scind the ex­emp­tions which dis­em­pow­ered the PUB.

Where is the plan for an ap­proach to the fed­eral govern­ment?

As The Tele­gram’s Sept. 8 ed­i­to­rial pointed out, the an­nual cost of elec­tri­cal power is in­creas­ing by an amount sim­i­lar in mag­ni­tude to our oil rev­enues.

The full cost of elec­tric­ity, at $1.5 bil­lion an­nu­ally, will ri­val the cost of ed­u­ca­tion, pri­mary, se­condary and post-se­condary com­bined. It is sim­ply be­yond the ca­pac­ity of this small prov­ince and can­not be fully re­cov­ered ei­ther from ratepay­ers or tax­pay­ers.

Yet we all know that the pain must be­come in­tense be­fore Ot­tawa will come to the res­cue. The fed­eral govern­ment will not come to the res­cue un­less they see that we have cut to the bone.

The pre­mier’s an­nounce­ment of Aug. 22 held out the prospect that govern­ment had con­cluded the take-or-pay power pur­chase agree­ment (PPA) does not make the project self-sup­port­ing.

Sad to say, the ref­er­ence to the PUB demon­strates that the govern­ment is still hang­ing on to the myth that Muskrat Falls can be self-sup­port­ing. Sad to say we are back to where we were three years ago, no fur­ther ahead but deeper in debt and no closer to res­o­lu­tion of the ex­is­ten­tial prob­lems con­fronting this be­lea­guered prov­ince.

David Vardy St. John’s

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