Too little and too late
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
The full cost of electricity, at $1.5 billion annually, will rival the cost of education, primary, secondary and post-secondary combined.
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.