Guest Post Written by David Vardy
PUBLIC
INQUIRY NEEDED URGENTLY
The evidence
is mounting that the Muskrat Falls project was ill-conceived and badly
executed. Sadly there is also a growing body of evidence that the mismanagement
of the project has been compounded by practices that are ethically
questionable. They cry out for nothing less than a judicial inquiry into these
practices and into the myths that were proclaimed as facts.
The Case for
Muskrat Falls
The Muskrat
Falls project lies at the heart of the financial dilemma facing the province.
What was proclaimed as a “strategic investment” has become a financial and
environmental disaster as well as an existential threat to our sovereignty. Why
have we allowed this to happen, plunging the province into an abyss of debt,
and into spiraling population decline?
Rising
Demand for Electricity: The First Myth
The first
myth was the rising demand for electricity.
Minister Jerome Kennedy said we needed the power, and Muskrat Falls was
the least cost option – based on a forecast of $150 oil. The June 24, 2016
project update by CEO Stan Marshall presented a revised load forecast
dramatically lower than the one on which sanction was based in December 2012.
The load that was forecast for 2020 will not now be reached until 2036. The new
Nalcor forecast recognizes for the first time the effect of consumer behaviour
in substituting other energy sources when electricity prices rise significantly
as a result of this project. Apart from the demand from the Vale smelter, loads
have been virtually level over the past 15 years, and the declining population
projected by the Department of Finance provides no basis to expect any
increase.
Replacement
of Holyrood thermal plant: The Second Myth
The second
myth was the replacement of the Holyrood thermal plant. The PUB investigation
into supply issues and power outages confirms the necessity for a large block
of emergency power to be located on the Avalon Peninsula after interconnection.
The Avalon is where most of the load is concentrated, and it can be easily
isolated by extreme weather conditions from the lines from Muskrat Falls and
from Bay D’Espoir, as well as from any emergency power from Nova Scotia. Even
after interconnection there will still be a need to upgrade or replace the
Holyrood plant. Muskrat Falls was never an alternative to Holyrood, which will
continue to be needed.
By-passing
Hydro-Quebec: The Third Myth
The third
myth is that Muskrat Falls gives us an alternative path for power from Gull
Island or Churchill Falls, thereby strengthening our position with Quebec. This
myth has been propagated by political luminaries but has no foundation in fact.
The reality is that the transmission lines are sized to carry only Muskrat
Falls power, with a capacity of just 900 MW. The Maritime Link has a capacity
of 500 MW. If we are to gain access to the full capacity of the Upper Churchill
(5,428 MW) we will need new transmission lines and new submarine cables across
both Straits in order to bypass Quebec. There will be no savings! Furthermore,
by building Muskrat Falls we will have satisfied future demand for power on the
Island, making it impossible for consumers to benefit from low cost Churchill
Falls power when it is available.
Warning from
the Joint Federal Provincial Environmental Panel
Both the
federal and provincial governments ignored the warning from the joint
environmental panel who told us in August of 2011 that “The Panel concludes
that Nalcor’s analysis that showed Muskrat Falls to be the best and least cost
way to meet domestic demand requirements is inadequate and an independent
analysis of economic, energy and broad-based environmental considerations of alternatives
is required.” (Joint Panel report page 34).
Warning from
the Public Utilities Board
Instead of a
robust inquiry by the PUB, in pursuit of its statutory mandate to ensure that
new supplies are “lowest possible cost consistent with reliable service”, the
Board was presented with an impossibly short timeframe and could not review a
full range of alternative sources of power. Instead it was told to pick between
two options only.
The
provincial government ignored the advice from the PUB which concluded that “The
Board concludes that the information provided by Nalcor in the review is not
detailed, complete or current enough to determine whether the Interconnected
Option represents the least-cost option for the supply of power to Island
Interconnected customers over the period of 2011-67, as compared to the
Isolated Island Option.”
By exempting
the project from the Board’s jurisdiction the PUB was prevented from
discharging its statutory duty.
No Business
Case for Project
Having
failed to “capture” the joint panel and the PUB the proponents contrived a
business case by bold-faced manipulation. Government commissioned a number of
consulting studies to buttress their business case but none of these were
tested by cross-examination by experts in a public hearing. Instead these
studies were a desperate flurry of activity to validate the project, which was
built on a foundation of sand, with questionable assumptions including future
escalation of oil prices beyond US $150 a barrel. At the time there were many
warnings of the impact of the “shale gas revolution” but these were ignored by
our “world class experts” in the euphoria of building our “Energy Warehouse.”
Royal
Commission Needed
The Muskrat
Falls project has escalated from $6.2 billion in 2010 to $11.7 billion today,
based on Nalcor estimates. The project will double the public debt, and place a
burden of $22,000 on each man, woman and child. My expectation is that it will
escalate to $15 billion; the cost per person will then be $28,000 and in excess
of $100,000 for a family of four.
We must have
a Royal Commission of Inquiry into why this project was sanctioned and why
Nalcor was given extraordinary powers, to circumvent the Public Tendering Act,
to restrict access by the Auditor General and to limit public access to
information. Deliberate policy decisions were taken to shield the project from
proper oversight.
A great
American jurist, Justice Louis Brandeis, once said that Sunlight is said to be
the best of disinfectants; electric light the most efficient policeman. As has
been documented by the undersigned previously on this blog, there has been
little sunlight or oversight to instill confidence in the management of this
megaproject. Without oversight the darkness has deepened.
The Royal
Commission must have full powers to subpoena witnesses and evidence. The
inquiry must explain why the Astaldi contract rose from $1.1 billion to $1.83
billion and who is bearing the cost of the aborted canopy over the project,
reported to cost $120 million. It must determine who is bearing the cost of the
transmission lines which had to be taken down and replaced because of a
defective strand. And it must determine the truth concerning the allegations
that the initial cosr estimates were falsified.
Conclusion
Such an
inquiry will be commissioned only if the people of the province speak out and
demand it. Citizens will make such a demand when they learn that the case for
building Muskrat Falls was a fabrication from the beginning and that the cost
estimates were manipulated to ensure an early decision to sanction.
The question
the Royal Commission must answer is: Why did Nalcor and the government deceive
us at the time of sanction and then mislead us for the following four years?
This question must be answered before ratepayers receive their first bill for
Muskrat Falls power. The government is playing with fire if they think people
will endure power rates exceeding 21.4 cents without vehement public
protest.
David Vardy
