The Telegram (St. John's)
You’re going to hear a lot of this
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.