Re-en­gag­ing PUB is a good first step

The Labradorian - - Editorial -

Govern­ment’s Muskrat Falls ref­er­ence to the Pub­lic Util­i­ties Board is a de facto ac­knowl­edge­ment that the prov­ince’s ratepay­ers can­not bear all the costs as­so­ci­ated with the Muskrat Falls pro­ject.

In 2012, the pro­vin­cial govern­ment de­cided that New­found­land ratepay­ers would pay the en­tire cost of the pro­ject no mat­ter what the cost ended up be­ing.

To fa­cil­i­tate the fi­nanc­ing of the pro­ject, the govern­ment in 2013 is­sued Or­ders-in-coun­cil fa­cil­i­tat­ing fi­nanc­ing of the pro­ject and im­ple­ment­ing its 2012 de­ci­sion to have rate pay­ers pay the en­tire cost. Ab­sent changes in cur­rent le­gal and con­trac­tual ar­range­ments, com­pli­ance with the 2013 Order­sin-coun­cil will re­quire New­found­land ratepay­ers to pay more than 23 cents per kilo­watthour (plus HST) be­gin­ning in 2021.

Muskrat Falls’ pro­po­nents con­ducted no elas­tic­ity stud­ies to de­ter­mine what price the lo­cal elec­tric­ity mar­ket could bear. How­ever, on July 30, 2018 econ­o­mist Dr. Jim Fee­han filed an elas­tic­ity re­port with the Pub­lic Util­i­ties Board.

Fee­han’s re­port demon­strates that as elec­tric­ity rates rise to even 17 cents per kilo­watt-hour, up to 50 per cent of elec­tric space and wa­ter-heat­ing cus­tomers may leave the sys­tem and adopt other forms of heat-gen­er­at­ing en­ergy. His re­port shows it would be more eco­nom­i­cal for con­sumers to move to an ef­fi­cient oil furnace, propane sys­tem, mini-split heat pump, or other op­tions, all of which would be less ex­pen­sive.

In ef­fect, the 2013 Or­ders-in­coun­cil, which were en­acted to fa­cil­i­tate fi­nanc­ing of the Muskrat Falls pro­ject based on the as­sump­tion lo­cal ratepay­ers would pay for it, will be frus­trated.

Elec­tric heat­ing cus­tomers leav­ing the sys­tem in droves would be cat­a­strophic be­cause a sig­nif­i­cant loss of this cus­tomer base would fi­nan­cially crip­ple pub­lic util­i­ties and ul­ti­mately the prov­ince. Some­thing has to be done.

The Pub­lic Util­i­ties Board ref­er­ence is timely. It of­fers stake­hold­ers, con­sumers and in­ter­ested par­ties an op­por­tu­nity to con­trib­ute to find­ing ways of re­tain­ing af­ford­able elec­tric­ity, thereby dis­suad­ing elec­tric­ity users from leav­ing the sys­tem. Rate de­sign ex­perts and economists will be asked to in­ves­ti­gate ways of rem­e­dy­ing our cur­rent sit­u­a­tion. So­lu­tions re­quire re­search and in­no­va­tion.

There are po­ten­tial start­ing points within the cur­rent sys­tem based on du­pli­ca­tion.

One ex­am­ple, in 2017, New­found­land and Labrador Hy­dro and New­found­land Power be­tween them spent $167,000,000 in op­er­at­ing costs.

These and other sys­temic ex­penses need to be ex­am­ined to curb un­nec­es­sary over­lap.

Fur­ther­more, the 8.5 per cent rates of re­turn cur­rently en­joyed by the util­i­ties are no longer pos­si­ble. Mov­ing to in­cen­tive- or per­for­mance-based reg­u­la­tory mech­a­nisms for the trans­mis­sion and dis­tri­bu­tion of elec­tric­ity should be less costly, en­sur­ing ser­vices at the low­est pos­si­ble cost while main­tain­ing ac­cept­able lev­els of cus­tomer ser­vice.

While busi­ness and in­dus­try ex­pan­sion may be the best use for the ad­di­tional en­ergy which will be com­ing onto the is­land, ratepay­ers also need mar­ket priced power for sta­ble rates. This will en­cour­age users of other forms of heat en­ergy to con­vert to elec­tric­ity.

Ev­ery­one rec­og­nizes that the cost of Muskrat Falls will ul­ti­mately have to be paid. How­ever, we now know hav­ing ratepay­ers bear the en­tire cost of Muskrat Falls will not work. Re-en­gag­ing the Pub­lic Util­i­ties Board is a pos­i­tive first step to help to de­ter­mine what will work.

After that, we will know what changes will be re­quired to the cur­rent le­gal and con­trac­tual ar­range­ments.

Den­nis Browne Con­sumer Ad­vo­cate

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