You’re go­ing to hear a lot of this

The Telegram (St. John’s) - - EDITORIAL - Rus­sell Wanger­sky Rus­sell Wanger­sky’s col­umn ap­pears in 35 Saltwire news­pa­pers and web­sites in At­lantic Canada. He can be reached at rwanger@thetele­ — 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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