Thursday, 13 December 2018

ED MARTIN’S OVERDUE COMEUPPANCE

A comeuppance for Ed Martin was as predictable as the certainty that Muskrat Falls would become a $12-15 billion project. But it took nearly three full days of evasion, obstruction and “attitude” from Martin for the Commissioner, Richard LeBlanc, to run out of patience. Less tolerant Judges might have reined in the former Nalcor CEO during the first hour of his examination by Commission Counsel, Kate O’Brien.  

Like a spoiled child beyond even coddling, this grown-up couldn’t discern that his behaviour, every bit as much as his decisions, were under a judicial microscope. Contrition was never an expectation.

Triggering the Judge to intervene late Wednesday afternoon was the cross-examination by Geoff Budden, lawyer for the Muskrat Falls Concerned Citizens Coalition (this scribe is one of the Coalition’s three interveners along with David Vardy and Ron Penney). But the moment was not his as much as it was Kate O’Brien’s. Budden had merely continued a line of questioning which Martin interpreted as a licence to obstruct and to void the Inquiry of the requirement of basic civility.

Monday, 10 December 2018

ED MARTIN'S HYDRO PURGE OF 2005

Guest Post by Ron Penney

In my guest post of October 4th I explained how the 2002 Gull Island deal was scuttled by then Leader of the Opposition, Danny Williams, aided and abetted by the then Chair of the Board of  Newfoundland Hydro, Dean MacDonald, and board member Mark Dobbin.

When Mr. Williams became Premier in 2003 he proceeded to commence a series of personnel changes at Newfoundland Hydro which has led directly to the Muskrat Falls boondoggle.

The first was the appointment of Gilbert Bennett in 2003 to oversee the Lower Churchill project. Mr. Bennett formerly worked with Rogers Cable, whose work experience is in telecommunications. He is no doubt a bright and competent telecommunications engineer but it is hard to see how that experience readied him for his current role.

Monday, 3 December 2018

WHAT COULD HAVE BEEN: LOWER RATES NOT HIGHER


PlanetNL21: What the Isolated Island Option Could Have Been

In deciding to proceed with Muskrat Falls, Nalcor and Government could not see the low-cost alternative staring them in the face that was available to eliminate Holyrood and keep electricity rates stable and low.  
First, they could not identify that the Isolated Island System had no load-growth potential.  
Second, they would not recognize that there was great inefficiency in allowing high seasonal electric heating requirements to persist.  
Third, they resisted changing consumer rates to include marginal pricing that would sell Holyrood energy for what it cost to produce.  

Thursday, 29 November 2018

NALCOR'S LOAD FORECAST STILL WRONG

Guest Post by PlanetNL

PlanetNL20: Island Load Forecast Still Wrong
To sanction the Muskrat Falls project, Nalcor relied on their development of a steadily growing electricity load forecast on the Island.  The assumptions used have proven so weak that in 2016 Nalcor decreased the total Island energy load forecast out to 2040 by 25%.  That’s a major error for any self-respecting utility to make.  By putting forward the 2016 revision, Nalcor has quietly admitted their prime reason for Muskrat sanction, needing a lot of power soon, was untrue.

This posting will challenge why the latest Nalcor load forecast still includes 10% net load growth leading up to 2040 instead of declining.  Does Nalcor believe this province has insatiable electricity demand at any price?  Do they remain shockingly ignorant of global trends and energy alternatives?   It appears their revised forecast was a significant step toward reality but not all the way there.  The analysis also begs the question, shouldn’t a proper pre-sanction load forecast have also pointed to declining power needs instead of increasing?

Monday, 26 November 2018

THE ROLE OF BIAS IN NALCOR’S DOWNFALL

Mr. Paul Humphries, the VP of System Operations and Planning at Newfoundland Hydro until his retirement two years ago, recently appeared as a Witness at the Muskrat Falls Inquiry. Humphries was one of the primary architects of the project, as he stated during the 2012 PUB hearings with this declaration: 

“… I'm Paul Humphries, manager of system planning and ultimately the decision on the requirement to move forward and the alternative for the best alternative, and the determination of the cumulative present worth of those alternatives is the responsibility of my department.”

The Cumulative Present Worth (CPW), to which Mr. Humphries refers, is a methodology used to discount to present value, for comparison purposes, the Isolated Island and the Muskrat Falls options. Of course, the calculation is meaningless if the inputs used aren’t prepared rigorously. In such a case, the boosters of the preferred option always win. 

Monday, 19 November 2018

NEGATIVE DIVIDENDS ONE OF THE REALITIES OF MUSKRAT

Guest Post by PlanetNL
PlanetNL19: Muskrat Dividends Will be Negative
While megaprojects have huge costs, their promoters love to talk about the benefits.  At the Decision Gate 3 (DG3) final sanction stage in 2012, Nalcor developed cost and benefit models that predicted not only that Muskrat was going to be billions cheaper for ratepayers than the Isolated alternative but that the Province would reap many billions in dividends.  Key Muskrat promoters heard from at the Inquiry so far still seem to cling to expectations of positive dividends from the project. 

This post lays out how Nalcor and Government failed to assess rate affordability and revenue risk before sanction.  As a result of one of the key risks becoming realized, Government’s anticipated dividends will be greatly exceeded by subsidies and mounting debt servicing costs.  These two-way cash flows must only be considered together in finding the true dividend or net loss on the project.  Government and taxpayers will struggle to subsidize high Muskrat costs in every year of the 50-year project payback term leading to massive new debt growth far larger than the original capital cost of the project.

Thursday, 15 November 2018

TOM OSBORNE NEEDS A FISCAL AXE AND THE COURAGE TO USE IT

In March of this year the Finance Minister, Tom Osborne, delivered the seventh in a successive string of deficit budgets, their genesis originating in both Tory and Liberal Administrations. And like his Liberal predecessor, Osborne still offered the  assurance that fiscal balance will be achieved by 2022-23.

On what basis should we believe him any more than we did Tory Finance Minister Ross Wiseman or Liberal Cathy Bennett? Isn't the process of digging the province out of the current debt spiral less a matter of prediction than of serious intent, discipline and leadership provided through diligent oversight? 

Last year's Budget outcome offers a perfect example of why the promise of achieving a balance of revenue and expenditures in our fiscal affairs is just that - a promise. Nothing more.