Thursday, 15 November 2012

The Power is in Whose Hands?

By now you have received your Muskrat Falls Brochure.  It was aptly titled “the power is in our hands”.  I have to assume that the “our” referred to, is Nalcor.

The Brochure deals less with the justification for the Muskrat Falls Project than with making sure Nalcor is credited with the Project, that Nalcor has the professionalism, Nalcor has the experience, Nalcor has the strategic vision to carry out a $7.4 billion megaproject. 
The public has been told that the marketing campaign to ‘sell’ the Project, of which the glossy Brochure is but one piece, will provide transparency and factual information to the people of the province.

It does not achieve that purpose.   
The Brochure barely notes the role of the Government. Even Muskrat Falls is secondary here. Nalcor is on display.  The Brochure boasts:  “MHI has found Nalcor’s work to be skilled, well-founded, and in accordance with industry practices…..”.  “MHI supports Nalcor’s finding….”.  “In MHI’s opinion, Nalcor has undertaken a diligent and appropriate approach…”.  Like the child that is the perennial underperformer, whose need for reassurance cannot be sated,  Nalcor needs to be the center of attention. 


That is unfortunate.    
In a democratic society, there is a time when the unelected ones step back and defer to the elected. Either Nalcor does not know its place or certain Ministers do not know theirs.

The Government has received Nalcor’s recommendation.  Now, the Government should report to the people of the province.  
Whether you agree with their conclusion or not, the Government - having balanced all of the options, weighed the risks and the costs and having come to a conclusion – must defend its decision against all comers. 

Muskrat Falls is a project, not a principle; it is an investment, not an ideology.  Its approval, especially given its cost and risk, demands that the process of governance is undertaken transparently, honestly and with a completeness that is unassailable.  That is what comes with the territory of elected government.
There are other problems with the Brochure. For example,  it fails to note that Muskrat Falls did not receive approval from the Federal-Provincial Joint Panel which spent two years studying the socio-economic and environmental impacts of the Project.

It does not state that the Public Utilities Board, the province’s independent review agency  failed to come to a conclusion on the Project because the information, on which it was asked to base a decision, was inadequate (remember, it was given only DG-2 numbers).

The Brochure did not state the true cost of the power from Muskrat Falls.  Nor did it say that Muskrat power will be the most expensive hydro power under development in North America. 
The Brochure failed to inform the public that construction estimates did not include interest costs contrary to basic accounting rules.  It was silent on the risks to the tax payer of cost overruns. 

This was not a Brochure to inform.  It was an advertisement to introduce the folks at Nalcor as professional and experienced.  Cleverly, it avoided the issue of Nalcor’s achievements.  Likely, because, for many years, there have been little to report. Bay D’espoir was constructed 50 years ago, Cat Arm 30 years ago.  The “professionals” engaged in these projects have all retired.

The fact that the senior officers of Nalcor are performing the public relations of politicians, permits only one conclusion.

The Government has been captured by its own utility.  It is not in control.  It is being controlled.   It is acceding to Nalcor’s ambitions. 
The Project, having progressed as far as it has, the Government is now cornered; it feels it cannot turn back no matter what the consequences.

That is the sad reality.
Nalcor's hubris is embedded even in the glossy brochures.  They feel omnipotent, immune to risk and above the electorate.  Certainly, they need not worry about the trivialities of democracy. 

Weak politicians, even if they notice that they have been supplanted, can't acknowledge that due process has less to do now with democratic government than with the need for an affirmation of what the unelected have already decided.

Hark! I hear the mailman coming.  A second Brochure, from Nalcor, lands in my mailbox.  Perhaps, it contains some of the answers the first one ommitted. But, I'm not betting on it.

10 comments:

  1. Other items which have not been included in the information barage:

    1) In the wind analysis they did not consider the interconnected case. The link to either Labrador or Nova Scotia would greatly improve the use of wind. It may be cheaper, especially with the link to labrador it would only be requried for 20 years. The wind options presented were not technically sound, but that does not fairly consider the real wind alternative.

    2) The natural gas options considered island demand only. It never appeared to consider the power exports, or other gas export in the Cost that was presented.

    3) The 2041 paper says that it is not preferred to wait until 2041. But there was no update of the CPW analysis which was presented in the DG2 analysis (which showed it was cheaper than the isolated option at that time). Nor was there any anlysis of building the link now, getting access to RECALL power, then waiting until 2041 for the rest. Let the people of the province see the numbers, so we can make our own decision.

    4) They have not considered other interconnected options such as power purchases from Hydro Quebec (LIL), or through Nova Scotia.

    5) To my knowledge Nalcor have not descibed the tremendous risk to ratepayers if island demand does not grow as predicted by Nalcor. This is real and material.

    6) Nalcor have not discounted the potential for power imports over the Maritime Link or the Labrador Link with open access rights that Emera and Hydro Quebec would have. Is this a risk?

    7) In their interconnected option based on Muskrat, they still depend on power purchases from the Upper Churchill. What price for UC power was used in the analysis? There seems to be a inconsistent message from Nalcor/government on the use of UC power.

    These papers have (as expected) raised alot of questions. Instead of countering the argument for a second PUB review, they in my opinion, reinforce the need for a review. Especially that the majority of the secondary papers have been produced by the Government of Newfoundland as opposed to Nalcor. Who is making the final recommendation here? Nalcor, Governemnt or MHI.

    Historians will not be kind to this lot.

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  2. The points you raise are excellent; they rightfully complete an otherwise incomplete view of what full transparency means and what the Provincial Government ought to have tried to achieve in its costly advertising campaign to the people of the Province. Moreover, I don't as much want to 'feel good' about an investment as much as I want it proven that the investment meets established criteria as a wise, prudent and potentially profitable one. intellectually

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  3. the single most worrisome threat in all of this, is the very real prospect that the demand growth is completely overstated. As I understand things, on Island demand decreased from roughly 1990 until at least 2006. From then on the actual demand gets murky, but as I look out over the province, i see no population growth, and a series of moves, now largely completed, to urban areas and more efficient housing. Where, where precisely and how, will further demand growth come from? Without such growth, this entire enterprise is simply crazy. CEAA and the PUB both reviewed Nalcor's forecast and said that they had not demonstrated a "need" for the power.

    This is not putting words into anyone's mouth. Here is what the CEAA panel said, in the final report:

    "The Panel concludes that, in light of the uncertainties associated with transmission export markets from Gull Island, Nalcor has not demonstrated the justification of the
    Project as a whole in energy and economic terms.
    The Panel further concludes that there are outstanding questions for each of Muskrat Falls and Gull Island regarding their ability to deliver the projected long-term financial benefits to the Province, even if other sanctioning requirements were met."

    This project will use all the accumulated oil revenues so that instead of debt being paid off, we will end up with the same financial situation as before oil peaked and Hibernia hit pay out.

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    Replies
    1. Nalcor have based their demand projections using their regular methods for 20 years of the 50 year repayment period. This may be reasonable.

      But from year 21 to year 50 they have extrapolated. Guessed the numbers. For a project of this size, it is not reasonable. The provinces population is not expected to grow, but our energy consumption is expected to grow more than 50%!!

      The consequence of this guess being wrong is massive. Lower than expected demand growth, and higher than expected project costs is a perfect storm for a multi-billion dollar boondogle.

      Nalcor should tell us what the power cost will be if growth is half what they expect it to be, and the project cost is 20% more than the DG3 estimate.

      Ask this question, and review the answer before you support the project.

      Ed Martin should explain this demand risk to the MHA's and the people of the province. It is a clear ommission from any of the glossy brochures.

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    2. In these all these remarks, you have succinctly stated the major risks associated with the Muskrat Falls Project. I hope that the NL public is reading the serious issues which you raise and see them as legitimate and necessary.

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  4. If the Power is in Our Hands, then let the people decide.

    Before we decide, then lets ensure that all the facts are on the table.

    The Ziff study did not explore generating hydro from natural gas on the west coast. Why?

    The reason is that Hydro does not have the line capacity to get NG generate power to the North East Avalon. The NE Avalon is where the growth and hydor demand is.

    Hydro does not even have the capacity to get the water generated hydro from the west coast to the east coast. Sources have indicated that Hinds Lake and Cat Arm have sat ideal while Holyrood was on line satisfying the NE Avalon demand.

    It would appear that neither NALCOR and the government have not been upfront with the ratepayer.

    In the end, it is the taxpayer who will be left stuck with the bill for a big white elephant.

    Wayne R Bennett
    Howley NL

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    1. Wayne: It will require much informed debate to derail this unwise Project. Informed comment, like yours, add to this very difficult process.

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  5. As an engineer( who has worked in the field of power generation and distribution and heating systems)I reviewed MHI's report to the PUB wiht a critical eye on the demand forecast. Without a reasonable demand growth the whole stack of cards that is Muskrat Falls would not stand. Without the demand, the whole expense of many studies of various sources of power is a complete waste of time and resources. At that stage , without a technical background one could easily get caught up in the discussion of gas, wind, solar and other expensive solutions. The issue of demand was anchored by the argument for more electric heat for our houses. What was almost entirely overlooked was the idea of efficiency for heating. This was covered by the assertion of Nalcor and MHI that the we had essentially reached saturation in this endeaver. Anyone without experience in modern heating systems would accept this as true. With this proposition being accepted, the whole project can be assumed to be rational one. But the idea of saturation is a false one. Efficient heating reduces electricity demand by two thirds. A serious move to efficient systems destroys the demand forecast. MHI covered their ass by pointing out that Nalcor failed to use best practises for forecasting as to end-use analysis ( and in this our Premier is dishonest is saying MHI affirms Nalcor uses best practises--Did she read this part of the MHI report? End use analysis is technical mumbo jumbo to say - our power companies may know, or can know about these efficient heaters for residential use, but has chosen to ignore it. If this knowledge (and fact) is not a part of the consideration, then the false conclusion of the demand forecast can be supported by MHI. And so it was. And if the efficiency saving can be thus ignored , so can the fact that efficient heating is less than one quarted the cost of MF. Was this an engineering oversight or one directed for political purposes? The failure of our Premier and Minister Kennedy to attend the Governor's conference this summer (where efficiency was a topic) suggested it was political. And Nalcor continues to ignore all my requests to assess the efficiency issue. Winston Adams , Logy Bay

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  6. Winston: You have correctly made these arguments on a number of occasions; the notion that we are into a multi billion dollar Project because new residential development is reliant on electric baseboard heating continues to amaze. With proper incentives new home owners could be encouraged to opt for other forms including heat pumps which are very efficient. We could afford a lot of encouragement before we should consider committing ourselves to an $8 billion plus Project in Muskrat Falls.

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    1. My part 3 of the cost and benefits province wide is completed and sent to the Telegram for publication, and may appear this weekend. It appears an attractive alternative, and I hope it gets a response from Nalcor or the government. Winston Adams

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