N.L., Ottawa to protect against Muskrat Falls cost overruns

Ottawa and Newfoundland and Labrador say they will rewrite the financial structure of the Muskrat Falls hydro project to shield ratepayers from paying for the megadam’s cost overruns.

Federal Natural Resources Minister Seamus O’Regan and Premier Dwight Ball announced Monday that their two governments would scrap the financial structure agreed upon in past federal-provincial loan agreements, moving to a model that redirects benefits to ratepayers.

Both politicians called the announcement, which was light on dollar figures, a major milestone in easing residents’ fears that electricity rates will spike sharply when the overbudget dam comes fully online next year.

“We are in a far better place today thanks to this comprehensive plan,” Ball said.

Ball has said the issue of electricity rates is a top priority for his government, and he has pledged to keep rates near existing levels, but talks with Ottawa have dragged on since April.

A report by the province’s Public Utilities Board released Friday forecast an “unprecedented” 75 per cent increase in average domestic rates for island residents in 2021 and reported concerns from industrial customers about their ability to remain competitive.

Costs of the Muskrat Falls megadam on Labrador’s Lower Churchill River have ballooned to more than $12.7 billion since the project was approved in 2012, according to the latest estimate of Crown corporation Nalcor Energy.

The dam is set to produce more power than the province can sell. Its existing financial structure would have left electricity ratepayers on the hook to make up the difference starting in 2021, an issue both governments said Monday has been resolved with the relaunch of financing talks.