Monday, 25 November 2013

WHY DERRICK DALLEY SHOULD HAVE BEEN NAMED

The Government should always be alert in the House of Assembly.  They ought to be careful not to ‘mislead’ for fear one of their number will endure the penalty arrant misbehaviour exacts in the tradition of British parliaments.

Then too, Opposition Members must be vigilant, ready to ‘spot’ an errant Minister or Premier engaging in an economy of the truth. 

Getting caught uttering a falsehood can lead a Member to be ‘named’.  Naming is a procedure whereby the Speaker proposes a vote on the suspension of a Member if he believes that person has broken the rules of conduct of the House.

Embarrassing the Government is one of the jobs of Opposition Parties. In so doing, they simultaneously magnify the Government’s incompetence and the Opposition’s attentiveness and skill.      
For this very reason, Dwight Ball ought to have had the new Minister of Natural Resources endure the wrath of the Legislature (not that the Tory Caucus would have permitted the vote). But, it would have caused an important debate on Nalcor’s new deal with Emera on virtually all our so-called surplus or Market-Priced Energy. (Maritime Link Compliance Filing with attached Energy Access Agreement (EAA)).  

Anyway, let me explain the Opposition Leader’s missed opportunity.

Dwight Ball asked the Minister if he planned to “build more wind power and more hydro plants to meet the condition(s)” of the UARB, the Province having legally committed virtually all its surplus power to Nova Scotia.

Ball was on to something but, for some reason, he chose to let the Minister off the hook. 

The Opposition Leader likely knew, as most people in this Province have yet to learn, if domestic demand grows additional expensive capacity must be constructed (in addition to Muskrat Falls) in order to meet the legal obligations Nalcor has made to Nova Scotia. 

These are quotes from Hansard (the record of the House of Assembly) of the Minister’s partial reply to Mr. Ball’s question:

“We know we have excess power that we can recall at any time but we are going to sell and make money for the Province.”

Dalley added: “The only way we are not going to have it is if it does not rain or snow for twenty-four years.”

MPA Morrison Park Advisors Inc. Consultants to the UARB in its Review describes the  obligations of Nalcor under the “Energy Access Agreement” (EAA).  Likely, Morrison Park would agree that Minister Dalley’s suggestion that the power committed to Nova Scotia can be “recalled anytime” is nonsense in the absence of an important caveat: ‘when we build more capacity’. 

The media have not reported on the details of the EAA likely because some aspects of it are unclear.  One Intervener at the UARB likened it to a “term sheet” or an “agreement to agree”.  Even Nalcor and Emera have given themselves until October 1, 2014 to provide the deal additional clarity (which is, in part, why the UARB is expected to demand that the confusion be cleared up before giving final sign- off).

What follows is a Reader’s Digest version of the “Critical Features” of the EAA as outlined by Morrison Park.  Nalcor’s commitments are etched in stone. You would never know that if you listened to Mr. Dalley.  As Minister, he is supposed to be aware of the commitments to which Nalcor is binding the Province. (1 terawatt hour (TWh) equals 1 billion kilowatt hours (Kwh).) DON’T STOP READING UNTIL YOU FIND THE WORD “VARIANCE”. This is where NL really gets hooked.

1.      Nalcor commits to make available to Nova Scotia, annually, up to 1.8 Terawatt hours (TWh) of power and achieve a minimum average of 1.2 TWh annually over 24 years (to 2041) to reach a total of 28.8 TWh.

2.      Nalcor’s offer to “Bid” power to Nova Scotia is based upon forecast annual availability which may reach as high as 1.8 TWh or as low as zero in any one “Contract Year” except that the EAA covers off this possibility. (Go to #3).

3.      If there is an extended dry period or system difficulty and Nalcor is unable to supply sufficient energy to meet its commitment Nalcor will declare a “Variance” (ss. 7(a) and 7(b) EAA).  In such a circumstance, Emera is required to come up with the first 300 GWh (which equals 25% of the 1.2 TWh) BUT Nalcor is still responsible for the remaining 75%.

4.      If Emera chooses to satisfy its obligation of the 300 GWh by building wind, tidal or solar Nalcor will support that intermittent source with 100 megawatts of balancing services at a fixed price as it continues to fulfil its own obligations.

5.      Nalcor cannot commitment 1.8 TWh of power to a third party for longer than a 12 month period.  Even if Nalcor fulfils the 28.8 TWh commitment before 2041, Emera retains a “right of first refusal” on 1.8 TWh every year until 2041.

6.      Morrison Park notes, of concern to the UARB, that domestic load growth in NL “could reduce the available supply of energy for export” but states that because of the Variance Clause in the Agreement “Nalcor and Emera have jointly assumed final responsibility for the supply of Market Priced (surplus) energy to Nova Scotia...” (emphasis added). Nalcor’s Variance obligations are limited only by “force majeure” events which have not been defined.

7.      Nalcor has committed to Emera that if NL’s firm demand increases resulting in insufficient surplus power available to meet its obligation to Nova Scotia including Supplemental Energy, it will “build additional...facilities to increase…production”. (For this conclusion Morrison Park cites pp. 14-15 of the Compliance Filing and slides 3-6 of the Nalcor's Presentation to UARB Technical Conference, Oct. 28, 2013.)

8.      If Nalcor fails to meet its Variance requirements to NSPI subsidiary of Emera it must “compensate NSPI accordingly”. (s.7e (viii) of Energy Access Agreement).

There is more in the EAA but these are the most salient issues.

While the language of the “deal” is technically a hard slog no should misunderstand the effects of Item #8 regarding compensation for non-performance.  When any agreement contains penalties it demands a clarity no lawyer can obscure.

It is the last point #8 that Dwight Ball should have flown at Derrick Dalley.

The Government seems to be relying upon the complexities of the Energy Access Agreement to keep people in the dark.  Little wonder we are forced to go to Nova Scotia’s UARB to find details of Nalcor’s commitments. Little wonder the media, in this Province, would rather puke than report details of an Agreement like the EAA.  But, I digress.  

Mr. Dalley told the House “it is going to be a great day in this Province if we get to the point where we have to use all of our power and have to create more”.  Like Ms. Dunderdale, Mr. Dalley would have us build 30 cent per KWh power (or higher) so that Nalcor can sell it to Nova Scotia for 4-5 cents per KWh! Anyway, when the power is committed, how can it be called ‘surplus’?

Lest, dear reader, you think I am in error and that Nalcor has no such legal obligation to supply our ‘surplus’ power, consistent with the EAA with Emera, and  consistently over the 24 year period until 2041, let me entertain you with quotes.

The first is from the Nova Scotia Minister of Energy, Mr. Younger. Referring to the Energy Access Agreement as he headed to intervene at the UARB Hearings, Younger stated:

“A significant amount of energy is now guaranteed…and Nalcor is prevented from selling energy on long term contract to anyone but Nova Scotia. As well, Emera and Nalcor would now be financially and legally responsible for ensuring energy commitments are met. These were limitations in the previous deal, and are certainly improvements.”

The second quote is straight out of the UARB Hearings, in Nova Scotia, on the Energy Access Agreement.  John Merrick is Nova Scotia’s Consumer Advocate. Rick Janega is President of Emera Newfoundland and Labrador. (Page 2670/2671 NSUARB-ML-2013-01/M05419)

Let’s listen in:

Mr. Merrick:  But let me continue with my questions.
MR. JANEGA: Mr. Merrick, though,
before you do, if we could, your questions are perfectly
reasonable relative to understanding and providing clarity
over the obligations that Nalcor has; nothing unreasonable
about them.   

The energy will be delivered
by Nalcor and the minimum of 1.2 will be achieved with an
upper limit of 1.8 terawatt hours per year.

Your questions over the last few
minutes have essentially supported what we've been
presenting….those clauses are intended to ensure that
Nalcor can't just, at the end of the year, roll over and
say, "Well, we can't get the energy to you."
It continues to keep them committed,
and they agreed to these terms. They agree with the
principles and the representations….

They have the same interpretation of it.
This is not an agreement that leaves Nova Scotia
Power customers with risks. It's an agreement that
actually satisfies the conditions and provides the
assurances that they have to be delivered.

 
In the immortal words of John Crosbie (paraphrased): ‘I didn’t make this goddam stuff up’.  

In time, Dwight Ball will learn that he must have no mercy on a Minister like Derrick Dalley.  Perhaps, he needs reminding what happens to nice guys.

He must commit to never again let this Government play fast and loose with the truth, at least not without consequences.

Mr. Dalley should have been named. 

3 comments:

  1. By committing this non firm power to Nova Scotia the government has shackled the province with paying for the project, where Nova Scotia reeps the benefit of the gravy. There is a committment to provide the balance of FIRM and AVERAGE energy from not just Muskrat Falls but also the existing assets in Newfoundland. The province has about 1200 GWhr of energy remaining for industrial development, but this subsides very quickly in the absence of additional energy coming onstream.

    But what is more concerning is the availability of Capacity on those cold winter days when we need the power. Nalcor have already sold the remaining 80 MW of winter capacity from RECALL power to Alderon. That leaves about 760 MW of capacity from Muskrat Falls, when it is delivered to Soldiers Pond. Of that there is ~150 MW dedicated to Nova Scotia. This leaves about 600 MW for Newfoundland.

    The province is unable to commit any firm capacity to almost anyone else, without impacting the NL ratepayer. That is because even with Muskrat there is little capacity in the winter. If any additional firm capacity is sold in winter then Nalcor will rely on thermal generation, and burn more oil. Which is not consistent with the model presented to our PUB, and to the HOA, where the economics was based on having access to the full MF at ANY time.

    What was presented to the PUB and what is reality are 2 very different things.

    All eyes should be on the PPA between Nalcor and NLH, and how the energy will be delivered in the winter months. Will we have access to the full output of MF when we need it? What will it say about Capacity in Jan, Feb, and March.

    This is Nalcor's greatest test. Will what was promised to the NL ratepayer, be consistent with what was promised.

    Unfortunately the PPA looks like it will not be released until after the fall sitting. Or maybe Nalcor are delaying its release until after the Quebec trial.

    In any respect the leader of the opposition will not be able to challenge it, in the peoples house until next year!. You can not make this god dam stuff up...

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    Replies
    1. According to the PUB report, Page 59 states that the PPA will not be signed between Nalcor and NL Hydro until the project is complete and all the bills are in in 2017.
      Gerry Goodman

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  2. Great work, Mr. Sullivan. I hope Mr. Ball is reading this, or, better, yet, hires you on as an energy consultant.

    On the one hand, the scenario you describe is absolutely scary for the province of Newfoundland and Labrador. On the other hand. there may yet be a faint hope that the project can be derailed and that we would only suffer the loss of capital expended thus far. That is not a pleasant thought but the alternative is too catastrophic to contemplate.

    ReplyDelete