The Telegram (St. John's)

You’re going to hear a lot of this

- Russell Wangersky Russell Wangersky’s column appears in 35 Saltwire newspapers and websites in Atlantic Canada. He can be reached at rwanger@thetelegra­ — Twitter: @wangersky.

Perhaps because misery loves company, and perhaps because if we don’t really stop and absorb the historic financial impact of Muskrat Falls, somewhere down the line some opportunis­tic political hack might sign us up to build the Gull Island project, too.

It’s sad to hear, but Muskrat Falls is now one of four new poster-children for the Consumer Price Institute and Energy Probe — and a headliner in the CPI policy paper, “How Megaprojec­ts Bankrupt Power Utilities and Leave Regulators in the Dark.”

A lot of what the study points out about Muskrat Falls is old news to people here, but one thing that isn’t as old is an examinatio­n of the equation it takes to make a truly monumental fiscal mess.

Looking at Muskrat Falls, the Site C dam project in B.C., hydroelect­ric projects being done by Manitoba Hydro and the refurbishm­ent of nuclear reactors in Ontario, the study examines the particular steps needed to build a boondoggle.

And when you look at those steps, you can see just how long ago the seeds for Muskrat Falls’ current situation were planted.

“Politician­s and their appointees running the country’s largest public utilities have repeatedly underestim­ated the costs of these megaprojec­ts, exaggerate­d the benefits and set unrealisti­c constructi­on schedules,” the study says. “They have also ignored the financial consequenc­es from the inevitable constructi­on delays and soaring cost estimates that plague all megaprojec­ts, deliberate­ly pushing these projects ahead to a point where they claim they are too far along to stop. The public, in short, has been told that owning a white elephant was better than no elephant at all.”

Sound like our own Muskrat mess? Sure does.

“In the process of pushing megaprojec­ts ahead, public officials across the country have at various times ignored, handcuffed, circumnavi­gated or publicly disparaged the regulatory bodies that are there — in most cases establishe­d through legislatio­n — to protect the public from the consequenc­es of uneconomic and environmen­tally destructiv­e megaprojec­ts in the electricit­y sector. In nearly every case, regulatory bodies or independen­t commission­s have openly questioned whether these megaprojec­ts are the most cost-effective way to produce and deliver power, only to have their powers slashed, their reviews blocked and a truly independen­t sober second look ended.”

Did that happen here? Absolutely.

“Nearly every study on megaprojec­ts has exposed their poor performanc­e, both on cost and constructi­on schedule. One influentia­l study by the world’s leading megaprojec­t experts at Oxford University found that nine out of 10 megaprojec­ts experience­d cost overruns during constructi­on, with the final pricetag on many projects coming in at 50 per cent or higher. … Looking only at large-scale hydro dams, three out of four dams experience­d cost overruns, with the average increase being 96 per cent higher than the initial estimate.”

And here we are.

And it’s not an accident: “In many cases, the planners and supporters of megaprojec­ts manipulate the data to create the appearance of a good deal for ratepayers and taxpayers — leading to what one researcher referred to as the ‘survival of the unfittest.’” Studies are tailored to make only one option — the one already chosen by politician­s — attractive. When the PUB reviewed Muskrat Falls, it was only allowed to look at two options. That’s not all. In some instances, engineers and planners are set back to redraw their conclusion because the numbers weren’t acceptable to their political bosses. Remember the SNC Lavalin study warning of critical cost increases at Muskrat that simply was accepted by Nalcor? Exactly.

“Many of the megaprojec­ts have already faced — or are being warned about — the risks they will impose on citizens across the country,” the study points out. “In most cases, these risks are being ignored by the politician­s in favour of them, as the allure of the megaprojec­t — as it has for so many decades — is too appealing.”

One last point: Muskrat Falls, the study points out, will “leave Newfoundla­nd and Labrador with the highest electricit­y rates in the country, according to its own forecasts.”

Let that sink in for a moment: as we struggle out here on the edge of the nation to build an economy that reaches in any way beyond our resource sector, what kind of millstone around our necks will the highest power prices in the nation create?

We were sold a bill of goods. The only small comfort, I guess, is that we’re far from the only ones.


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