Monday, 2 December 2013

DUNDERDALE ADMINISTRATION: UNFIT TO GOVERN

It didn't take long for the Nova Scotia UARB to approve the Energy Access Agreement (EAA) in its Supplemental Decision on the Maritime Link (ML). Its blessing is needed by the Dunderdale Government to trigger the Federal Loan Guarantee (FLG) for Muskrat Falls.

The UARB took just one week to digest the evidence presented at both the Technical Conference and Hearings and write a Report. They ought to feel a little foolish for the rush knowing it was unnecessary to create more CO₂ than a Sydney coal by burning all that mid-night oil; the Dunderdale Government is concerned with saving face. It would have agreed to anything.

The crux of the matter is that UARB declared, in its July Decision, (para 216, page 70) the Maritime Link is $706 million to $1.422 billion more expensive than the alternative lowest cost option.  It stated that its approval depended upon Emera’s success at closing this large financial gap.  It said the gulf could be bridged if Nalcor guaranteed to Nova Scotia sufficient surplus or “Market-priced” energy from Muskrat Falls. 

It had no concern about price as long as the power was valued against the super competitive New England market. A bigger fear was that Labrador mines or domestic growth might absorb the available surplus.
Noteworthy is that the UARB confirmed Nalcor has agreed to provide access not to just to  Muskrat Falls but to all of NL’s power generation facilities, to ensure the power is delivered. 

 Nalcor didn’t just commit most of NL’s surplus power; it guaranteed the supply in a manner that is so legally binding that the word “surplus” is actually now a misnomer. The only wiggle room the deal affords NL is, if we run into problems with supply, Emera has agreed to find 25% of our minimum commitment (subject to other conditions).  Nalcor has to come up with the balance; otherwise, it is hit with financial penalties.

The EAA permits neither domestic power growth (Native Load), Labrador Mines, nor even drought to free Nalcor from the undertaking.  If more power is needed Nalcor has agreed to build more.
In short, we have agreed to sell power cheaply but keep building the expensive kind. Little wonder Richard Cashin would invoke 'Alice in Wonderland' to describe the Dunderdale Government's mentality.
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For more details on what NL committed in the Energy Access Agreement:

WHY DERRICK DALLEY SHOULD HAVE BEEB NAMED

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One fact is clear.
This is not the Muskrat Falls Project that the Government presented to the PUB.  It is certainly not the one the Dunderdale Government told the public it ought to support.

It has often been said that, by sanctioning prematurely, Emera and the UARB had the NL Government by the throat.  The Dunderdale Government, consciously and in full view of the public, exposed itself to that risk. The UARB performed its job and protected the interests of Nova Scotians. Our Government did not protect our interests.

For some reason, the Government of Danny Williams determined three years ago Muskrat Falls would be constructed ‘come hell or high water’.  The Dunderdale Administration put on the same blinkers.  Though it boasted it would go it alone, if the FLG failed to materialize, everyone knew NL could not raise the billions of dollars the Project required. 

As public money flew out the door to SNC Lavalin and others, even as the market price for energy in the northeastern U.S. worsened in the face of the shale gas revolution, it was not within the capability of the Government to change course. 

For some reason, in spite of the huge cost overruns on every other mega project and significant outstanding legal issues, too, the Government steadfastly maintained its obliviousness to the risks of this Project.

A negative outcome on water management, in the Quebec Superior Court, could diminish Muskrat’s power output from 824 MWs to 170 MWs.  But, given the manner which the EAA is drafted, just like cost overruns, the Water Management Agreement is our problem.

The Nova Scotia ratepayer is fully protected.  The NL ratepayer is fully exposed and will have no idea of the cost until the Project is completed. 

Even the eight demands that the new Liberal Government of Nova Scotia crafted, as prerequisite to its support, were added to the EAA by the UARB; Emera and Nalcor were informed these conditions must not place additional costs on Nova Scotia ratepayers. You heard Ed Martin and Premier Dunderdale on Thursday.  It’s all fine with them.

I understand Governments can make mistakes.  I understand that there will always be disagreements over public policy.

What I don’t understand is why the Dunderdale Government would expose this Province to so many risks, ostensibly just to shutter Holyrood. 

If we were at war and our freedom at stake, just as we did in an earlier time, we would break open the bank, punch above our weight and ensure we had performed our duty. But, to undertake so much risk to access only 325 MW capacity, the insanity of it is mind boggling.

Then there is the secrecy, shutting out the PUB, the double speak and outright dishonesty. 

Why would a Government disallow its own Department of Finance to check Nalcor’s assumptions, modelling and cost estimates denying itself the opportunity for second opinion from the very people on whom they depend year in, year out?

Why would the CEO of Nalcor not want them involved or to share responsibility if there is serious miscalculation?  (Perhaps Jerome Kennedy will tell, all in due course, though his opportunity for absolution in these matters is becoming very limited.)

Why would the Minister of Natural Resources, with the approval of the Premier, stand and inform the House of Assembly that the 'surplus' power, committed to Nova Scotia, could be "recalled at any time", knowing, as he must have, that Nalcor has placed the power beyond our reach?

Indeed, why would Nalcor be permitted to proceed without first resolving the North  Spur stability problem?

In time, a badly informed public will be forced to consider how it was possible, in the midst of wealth, education and good fortune that it installed a government that cared not a whit about the role of our institutions, like the PUB, or for the fundamental requirements of governance.

We will wonder how it was possible so many people were prepared to place their faith in the most incompetent government, since Confederation, to undertake the largest publicly financed project in our history.  

What will the final chapter on Muskrat Falls say about the Dunderdale Administration? I believe it will speak to its lack of integrity.

We have a Government that cannot tell the truth; one that distorts and hides important information.  Whether the issue is Bill 29 restricting information access, Bill 60 and 61, confirming its power monopoly, or Muskrat Falls, it is willing to place our fundamental interests in harm’s way.    

The Government is arrogant, unwise and undeserving of our trust.

An Administration that deceives its citizens should not hold public office. 

It is unfit to govern.

12 comments:

  1. The government of Newfoundland and Labrador or Nalcor have never provided evidence to the public that the Muskrat Falls option, with the Emera deal included, represents the lowest cost option for NL rate payers.

    The PUB exercise, and all the associated volumes of information released to the public, did show that Muskrat Falls was cheaper than continuing to burn oil at Holyrood. However, the analysis did not include the capacity or energy which is being provided to Nova Scotia.

    In fact when presenting to the PUB, Nalcor assumed within their Strategist runs that in the Infeed option there was access to 5943 GWHr of energy available each year. This is the total MF production, with the remaining RECALL. It also modelled the MF plant as a 900 MW thermal unit. In this case there is 900 MW available when we need it. These were the 2 assumptions included in the lowst cost exercise.

    The deal with Nova Scotia changes this. The fact is Nalcor have never established that MF with the Emera deal is the lowest cost option to NL ratepayers. Neither have the government ever committed to using export revenue to keep the NL rate payer whole from what was presented to the PUB.

    Nalcor should be charged with immediately releasing the terms of the PPA between NLH and Nalcor. Is this internal contract consistent with the assumptions of the lowest cost analysis.

    Or is our entire democratic process a sham. Who is protecting the rate payers of this province, from the complete and utter disrespect shown by our government.

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    1. jamesglearning@yahoo.ca2 December 2013 at 22:56

      As we watch all outside experts who have had some or much to do with the internal workings of governance here, we know there is much wrong. They have outlined, pointed out, proven with figures there is much wrong. Yet no one in government is responding. Why? The government is allowing Nalcor to run away with the Budget. Finance finance Minister Kennedy stared at a hopeless situation until he realized his credibility was on the line, and he bailed. Before that Williams bailed, for who knows why. Constituency awareness is in the toilet. The St. John's Board of Trade is backing Nalcor to the hilt. I'm convinced the Premier can do nothing to stop this or anything around or close to it. For those of us who are screaming for justification and reason a day of reckoning will come.

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  2. How can Nalcor commit up to 40% of MF power to NS when it will sell 100% of the power to NL Hydro? How will this deal affect the Loan Guarantee?
    Gerry

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    1. Gerry: The original plan for Muskrat, based upon 4.9 terawatt hours of electricity: 40% to replace Holyrood, Vale, etc., 20% Nova Scotia Block for Maritime Link with the remaining 40% available for export to New England States for sale on the Spot Market. That 40% was supposed to be used to satisfy "forecast" increases in domestic demand. Because of the serious giveaway contained in the Excess Access Agreement (EAA) Nalcor has now committed much of that surplus. What is also different under the EAA is that NS must be offered power from the whole NL grid, not just from the Muskrat facility. Remember, too, from the beginning the Newfoundland ratepayer was required to pay 100% of the cost of Muskrat in return for receiving only 40% of the power. Any revenue associated with the "surplus" power was to be kept by Nalcor not by Newfoundland Hydro to offset the power rate paid by the consumer. I trust this answers your question.
      - Des Sullivan

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  3. Mr. Sullivan, I applaud you for your frank and forthright assessment of this incompetent and underhanded government. It is high time the people of the province woke up and began taking to the streets in protest.

    The impending crisis is getting more ominous by the day and they are glibly going along as though the Muskrat Falls project is a winner......it is....... for Nova Scotia.

    How our own people could allow this to happen with no sign of protest is beyond me.

    Jerome Kennedy had the opportunity to redeem himself when he resigned but he chose instead to sell out the establishment running this arrogant, incompetent, and, in my opinion, corrupt administration. Every aspect of this deal has been wrapped in faulty analysis, obfuscation, ignorance, and incompetence........ from the Premier on down.

    Is there anybody in this administration with the intestinal fortitude to step away now and say, "Enough is enough"? All it will take is for one individual to speak out and more will find the courage to follow. Somebody must break away from this bunker mentality and tell them they have sold the people of the province down the river.

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  4. Since when have the people of Nfld ever said no to a make-work project? Because make no mistake: that's what this is. It's a make-work project, especially for the handful of contractors in St. John's who stand to make hundreds of millions off it.
    And that is why Muskrat Falls has gone ahead, hell or high water. No other reason.

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    1. The new Construction association catalogue says there are some 600 members. And that almost 2 billion dollars of MF costs will go to Nfld firms. Suppose 100 of the members get contracts at 20 percent profit, that is 400 million, or on average 4 million profit for each company. And there is the make work jobs. Meanwhile 6 billion will go outside Nfld. And 100,000 households will incur 50 percent higher power bills for the next 50 years .The golden days indeed , for some. Any wonder 600 paid 500 dollars a plate for lunch with Kathy? The poor, poor ignorant people! How easily deceived.

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  5. I have tried to make sense of this MF scheme. It was Danny's project. Danny boasted that he made a killing on the sale of his Cable business because it was "a perfect storm." By this he meant that he had 3 different companies in competition wanting to buy his business. This information is in the pubic domain, from court proceedings. I would say his good fortune was part skill and part luck.
    As premier, and knowing the problems with Quebec on the Upper Churchill, and the problem to get a satisfactory deal on the Lower Churchill, I suspect Williams assessed the situation similar to his cable business. If one can get a situation where you have 3 bidders, that is very good business. To get that he needed the Maritime Link, opening an opportunity for sales into Nova Scotia, as well as the Eastern Seaboard of the USA ( who until recently were paying extremely high power costs for summer time electricity for air conditioning.) And Nova Scotia was tied to dirty coal, and needed cleaner power. With this alternate export opportunity in place, it would be a "perfect storm" situation by 2041, when a lot of Upper Churchill power became available to us, and otherwise with Hydro Quebec as the primary buyer. Additional lines to Nova Scotia was a second route, and there would be three customers bidding for power: Quebec Hydro, Nova Scotia, and the USA.
    This was a long term plan, that made some sense , as long as oil costs for power generation kept going up as they expected, and without the shale oil and gas boom.
    But oil for Holyrood has not increased in cost as planned. Holdrood production has gone down.
    But more so, the shale boom has killed the opportunity for exports to the USA. And the worse that could happen has happened. Nova Scotia has now got opportunities for alternate low cost power from either Quebec, or could import low cost gas generation from the Canada/USA grid. It has became a Perfect storm for Nova Scotia: three sources of new supply: Muskrat Falls, Quebec Hydro , and cheap shale gas generation. We are now stuck with a storm , of sorts, but rather imperfect. Nova Scotia has made the best of it, taking every advantage, their PUB permitted to squeeze every megawatt possible, at such low cost to make us a laughing stock, so it seems, paid on the backs of the common worker and pensioner here in Nfld. MF never made sense to satisfy the small load of 12 percent oil fired generation we had here. This could have been met with 1 billion , not 10 billion costs. MF was conceived as a perfect storm, but at the risk of the Nfld ratepayers and taxpayers. And the scheme started to fall apart 2 years ago, and should have been aborted, not sanctioned. I had once worked with Nfld Hydro as an engineer, and those in charge that I knew would never have gambled like this, in my opinion. And if anyone can explain the rationale for MF any better, I would like to hear it, leaving out the mumbo jumbo, about the "gravy" we would get from the USA spot markets and all the other nonsense used to sell this project to an uninformed public. On a larger ,regional scale, it will add green energy. But this is a regional, and world benefit, but all at our expense in Nfld. Nova Scotia and the USA are not prepared to pay anywhere near their share. It's on our dime, in the billions. I doubt if we can afford it. Winston Adams

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  6. Des the 330MW Avalon block includes Long Harbor - and this is the only new industry in the foreseeable future? 7400 GWh current Island demand up to 8400 GWh with long harbor - 10500 GWh 2041 - 12000 GWH 2067.

    2100 GWh of additional demand post Long Harbor by 2041? Has this forecast ever included the possibility of 2 major industrial power users (CBPP CbC Refinery) closing down?

    Post 41' demand forecasts being used as justification for MF, when 23000 GWh UC power becomes available to NL is a straw man argument.

    I remember when Wade Locke misinterpreted a fellow MUN economist pricing electricity to reduce demand - saying we COULD lower demand if we raised prices 80%.

    Raising industrial power rates (ind rate set to double to 8 cents kWh in 2015 from current 4 cents kWh) to curb excessive power use due to cheep power - gives incentives for industries to become more energy efficient thereby lowering demand. This was the main point Locke failed to consider or make an academic counter point to.

    HAHA 80% energy increases: it's not like MF DG2 #s had a 50% bill increase for residential ratepayers - O wait it DID with a 2% annual price increase for 50 years.

    80MW of firm wind power (320MW rated) can generate 700 GWh of electricity annually at the cost of $1.3 billion (installed) for 160 2MW turbines. 700 GWh of renewable energy while lowering fuel costs and allowing existing hydro to store greater amounts of water in their reservoirs - sounds fairly straight forward.

    176MW or 1541 GWh of existing Island hydro electricity is being wasted or spilled due to inadequate power line infrastructure. Cost of upgrading power infrastructure to accommodate current generation faculties estimated at $500 million.

    1541+700 = 2241 GWh and to put that figure in perspective the above 2 ISLAND projects when integrated is enough new generation to bridge the demand gap* until 2041.

    *This demand gap is using incredibly rosy forecasts provided by MF proponent Nalcor - take with a tonne of salt*

    $1.8 billion for the 2 island power projects (let's say $2.4 billion if gov is involved with procurement and installation) to meet the Island portion's current and future demand V X billion for MF power.

    16.4 cents kWh starting MF rate is over 2X the cost of new natural gas $MWh generation being completed in 2018 in the States.

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  7. Your argument ignore the spinoff benefits from have construction and engineering companies operating for four years while MF is being built. nfld learned long ago that real prosperity comes from short term thinking and the application of third world politics. I am, of course, being sarcastic but to any outsider the pattern of development in this province since confederation more closely resembles post colonial Africa than it does North America and Western Europe. Maybe that's all we are capable of: graft, corruption, nepotism, and the continual enrichment of the few at the expense of the many. I guess at least we will have our energy warehouse when the oil runs out.

    John D Pippy

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  8. I am presently reading Joe-Clark's new book on the future of Canada's role int the world. It is exceeding my expectations so far. But there is one line in the book which really stands out. When refering to openess of governments he makes a statement that due to media, internet and better communications that

    "We live in an age that the public can not be kept out of public decisions".

    This was a very profound statement, because in Newfoundland and Labrador we have seen the opposite happen over the past 10 - 12 years. The public are being removed from policy and decision making. Muskrat Falls is an excellent example of this.

    People talk about the Premier's communication issues... I think they have been very successful on filtering the message such that only half the truth is out in the open. But this half truth allows the myth of full transparancy to grow unchecked. It allows sound bights such as "No other project has been so open", "The PUB did not make a decision" etc.

    The reality is that in NL our democracy has failed with the Muskrat issue. Whether it is a good project, or a bad one is irrelvant. Our weak political system has failed.

    Joe Clark is wrong. We live in a age when cityzens do not demand details, but are pacified by soundbights. It is this fact which guides government communication policies.

    Our society is worse off for it.

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    1. What is it about the media is the message. Half truths and sound bites is what is given and most accept it.

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