Monday, 6 August 2018

MUSKRAT: A FAIR RATE IDEA THAT WON'T SHOCK YOU

Guest Post by PlanetNL
PlanetNL11: A Fair Rate Concept for Post-Muskrat

Premier Dwight Ball has been justifying a massive rate increase to 18 c/KWh as fair because he suggests it is comparable to rates paid in our neighbouring Atlantic Canadian provinces.  Such logic might succeed if only it were true: in the last PlanetNL post, it was clearly demonstrated that the expected rate in those provinces would be 12 c/KWh. 

The Premier’s admission of error has not been heard, therefore it appears Ball is sticking to his plan to punish ratepayers despite the widespread harm it will cause.

In this post, a case is developed for a post-Muskrat rate that would be fair to ratepayers. But it’s sure to be a solution the politicians will fear.  The outcome may shock many. The future proposed rate is coincidentally - and surely to Premier Ball’s chagrin - 12 c/KWh.  
…..  
Muskrat Was Not Approved By Ratepayers

NL ratepayers are represented by the provincial Public Utilities Board (PUB).  Utility boards are required to review all the plans of the utility and to demand that the case for investment in new infrastructure is both necessary and the least cost approach.  In the case of Muskrat Falls, the existing legislation that would have had the PUB do an extensive evaluation of Muskrat and all possible alternatives was denied by a political act from Government with the passing of a piece of legislation excluding Muskrat from review. 

If given the opportunity, would the PUB have approved Muskrat?  Not a chance.  There is little reason to doubt that the PUB would have rejected the elaborate and confusing Muskrat economic justification produced by Nalcor and approved by Government.  Their analysis bore no resemblance to conventional utility submissions for capital work.  Had Nalcor been ordered to reformat its calculations using conventional engineering project economic assessment methodology - while using a correct load forecast (not inflated by 50%) - and to give consideration to a broader set of alternatives, Muskrat simply would not have seen the light of day. 

Muskrat was a political project created by overzealous officials elected by an overwhelmingly misled public. Ratepayers did not elect Muskrat on a ballot and the PUB did not approve it in a hearing.  There is no evidence in the least that suggests ratepayers are responsible for project sanction and the massively increased cost of service resulting from Muskrat.  Despite these facts, the current group of politicians in control are eager to pin a large share of the burden on ratepayers. 

True Cost of Service Numbers Emerging

NL Hydro recently submitted a document at the General Rate Application hearings ongoing before the PUB.  The Board demanded a better explanation for Hydro’s strategy to start next year in collecting revenues toward Muskrat costs before they are properly due in late 2020.  Finally, some simple numbers are presented to illustrate the grotesque error of Government’s forced sanction of the project.

Firstly, the cost of running Holyrood was presented as a share of the energy rate when the cost is averaged over the entire annual Island electricity sales.  Holyrood makes up 1.8 c/KWh of the electricity rate.  This is broken down into 1.2 c/KWh for fuel (on the assumption of average $85/barrel heavy oil costs) and 0.6 c/KWh for operations and maintenance.

Now remember - the fundamental reason for Muskrat was to substitute for Holyrood.  It was supposed to be cheaper.  Instead, Hydro is now revealing that before any Government subsidy, Muskrat will become a 12 c/KWh component of the Island electricity rate.

Hydro is now compelled to substitute a 1.8 c/KWh cost with one that is 12 c/KWh, nearly 7 times higher.  It’s insane.

This is the simple bottom line analysis that Nalcor and Government couldn’t ever let the PUB expose. It is why the PUB, representing ratepayers, could not be allowed to decide upon the sanction of Muskrat.  Even had it been half the construction cost, and if oil cost doubled – mistruths the PUB would have likely rejected – Muskrat would still cost at least double that of Holyrood.  It was never close to being the right solution.

Allow the PUB to Assess Eligible Costs

Proper project screening principles suggest that a replacement for Holyrood could have been found at the same cost or preferably less.  It is entirely reasonable to believe that such alternatives were available just as other jurisdictions have done over the past decade.

On the assumption Muskrat will successfully operate, the PUB should be directed to hold a hearing to evaluate the most likely alternatives that were available and identify a specific solution and calculate the cost of service.  The board would then rule that this cost shall be recovered from ratepayers while the remainder of the Muskrat investment and costs would be ruled as imprudent and ineligible for recovery from ratepayers.  The utility and its shareholder, Government, must bear the excess cost.  Former PUB Chair David Vardy agrees this is a legitimate and well understood solution in the practice of utilities governance.

The foreseeable domestic rate in 2021 would likely be about 12 c/KWh.  Avoided would be issues of rate shock and energy sales decline.  Ratepayer revenue would be stable.  Government would also beneficially exit the artificial rate mitigation game and improve its focus where it needs to. 

The downside is the colossal addition to Government’s long term debt and a substantial increase to the annual deficit.  It is vital, however, that the legacy of Muskrat debt should be parked where it originated. The coming fiscal crisis needs to be fully represented on the books of Government and not pawned off on ratepayers.  A responsible Government would know this is crucial to future negotiations.  We could only wish we had one.    
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N.B. David Vardy, a former Chair of the Public Utilities Board, will be posting a related article, building upon the concept raised by PlanetNL. Look for that post on Wednesday.

49 comments:

  1. This is exactly how I feel the costs should be borne. It was a purely political project with very little economical chance of cheaper long term rates and extremely high risk of getting out of control without PUB input. No one can afford 50-100% increase in power rates to pay for a poor government choice and terrible oversight of the project.

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  2. Do we as rate payers have a Take-or-pay contract with government?? Seems PlanetNL is saying we do not, because it was not approved or accepted by the PUB, or by a referendum. Do we have a contract by government legislation, and would a government worth its salt enforce that legislation or change it?? PlanetNL has raised those questions, and said no, there is no take-or-pay contract between the rate payer and government, as I understand his post. So, government is totally responsible for muskrat and not the rate payer. And govt. has to look elsewhere to pay the cost of muskrat. Maybe it will be the taxpayer, maybe directly from oil revenues, or from revenues in general?? It's about time that government responded directly to the questions raised!! Cheers, average Joe.

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    1. Hi AJ,

      As a citizen, you have a Pay-Only contract with the government, just like every one in every province and in the country towards the Feds. As a citizen, you must pay your taxes.

      For the power, the Take-Or-Pay contract was signed by the government. Because it now must pay no matter what, the government needs the money for that. Also, the FLG explicity stated that the government must raise the rate to whatever is high enough to collect enough money to pay back the loans, without a maximum.

      So despite the Take-Or-Pay was signed by government, every Average Joe end up forced to pay for it, either by power rate (Take) or (-Or-) axes (Pay).

      So you can consider that Yes, the same way the government is bound by Take-Or-Pay for that power, you are bound by Take-Or-Pay for the same amount.

      Delete
  3. I may have commented in the past that in a telephone conversation with engineer Lorne Henderson of Nfld Power in 2015, he agreed with my estimate of Holyrood infrastructure and fuel represented about 20 percent of our energy cost ( so without that, when rates were 10 cents they might have been 8 cents without that 2 cent burden). UG puts Holyrood component at 1.8 cents. My point with Henderson being that to incrementally down stage Holyrood with customer conservation via efficient space heating and other measures would be very cost effective, instead of MFs.
    That imprudent spending by the power companies be disallowed was advocated by Liberty, using the IMPRUDENT some 70 times in one of their reports, and some acted on by the PUB.Historically it was little used I suspect.
    Yet my plea to the PUB, in 2015 or 2016, to disallow nearly 1 million on useless studies by Take Charge, offering no meaningful help to consumers, fell on deaf ears, those ears specifically including PUB chair Andy Wells. That the studied were mostly useless can be demonstrated.
    Winston Adams

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  4. One of the basic flaws in the approach most people take to this problem of mitigation is precisely the same one employed by project proponents and others involved as officials in addressing MF.

    This post repeats that false distinction, namely that that there is a discrete group called ratepayers who are completely distinct from another group called taxpayers. The implicit conclusion that one would draw from this post is that the PUB would magically conclude that ratepayers have no responsibility for paying for this folly. This would work if we were talking about a project proposed and implemented by a private sector company. But we are speaking of a project proposed, financed through, and implemented by the provincial government and its Crown corporation called Nalcor.

    The PUB might decide that the cost for the project must be paid by someone other than domestic ratepayers. Wonderful, some might think, since their electricity rates will now not double. Unfortunately, the people who are responsible for cover all the costs are the same people, give or take a few of them, under their other name "taxpayer." The distinction is without a difference and it is merely a matter of what pocket from which we must find initially $800 million the first year and finally $2.2 billion 50 years hence.

    The post ends up with, essentially, an accountant's concern about which set of books reflects the debt. I'd say this is also a distinction without a difference since the debt rests with the government and its Crown corp one way or another.

    What doesn't get answered by this approach is where we find the money to pay back the loans, the interest, the O and M etc without, in the process, demolishing public services or driving the provincial government to insolvency. That is really the problem that mitigation must resolve and I am not surprised that no one has yet come to grips with that issue either inside or outside government.

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    1. It is true that ratepayers and tax payers are virtually the same except that a tax payer is obligated by law to pay the tax whereas a ratepayer can find means to mitigate the payments. Double the rates and many ratepayers will cut consumption in half so very little extra revenue for Nalcor.

      As a taxpayer at least I get to deduct my extra payments on my income tax assuming it is taxed as income tax.

      Overall, I agree with the blog post that it is not the fault of the average citizen. I would also suggest that the federal government was negligent in granting a loan guarantee without proper due diligence. The project could not have been financed without it. We deserve some relief through being able to write off the costs on our taxes and a better arrangement on equalization. Going bankrupt or leaving the province due to high living costs doesn't make sense while paying into equalization.

      Delete
    2. Paying into equalization is part of Canadian federation membership; if your province takes in more money per capita than a proscribed amount, you pay in for provinces that can't achieve that income. Problem with NL, is that, along with high per capita income, there is also an obscene amount of per capita spending that grossly exceeds the income. Couple that with the huge MF boondoggle, NL has screwed itself into poor house.
      As to average citizen, they are also average voters, and Daniel and his lot won two elections on the MF hype. If you can parse who voted against the PCs in those elections, you might be able to define the lily-white NLer's who have no responsibility for the fiasco, perhaps they can pay the suggested 0.12/KWH. Problem, though, is that the other two parties also supported MF.
      We may need some relief, perhaps from ourselves, but the other 9 partners won't be cutting us any slack for our own incompetence.

      Delete
  5. The past governments that championed and cheerlead this project as well as the present government that continued the project, now near completion they say, have committed the ratepayers and taxpayers of this province to pay and also the people of Canada through the federal loan guarantee. The ratepayer and taxpayer are virtually the same people except that we are all taxpayers but not all are ratepayers. The question that should be asked is, do you want the cost to be paid back through rates alone or a combination of rates and taxes via the new phenomenon called rate mitigation? In answering this question we must maintain the finances of the province in a positive position, after all someone has to continue to pay my provincial pension, right!

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  6. As far as the difference between Holyrood and Muskrat costs.

    As early as May, 2011 I raised that issue in my Telegram letter "Nalcor and numbers" (see www.vision2041.com and scroll down to scanned copies of my letters/articles from 2011-2017).

    I also provided a graphic in 2012 (see http://www.vision2041.com/holyrood.html ) where I explained that Muskrat was 8 times the cost of Holyrood.

    As to the need for a cost-of-service comparison between Muskrat and an isolated island option, I proposed that as Item 2. of my February, 2012 written submission to the PUB least-cost option review ( http://www.pub.nf.ca/applications/muskratfalls2011/files/comments/13-MA-2012-02-28.pdf ).

    Also, it may be even less fair to low-income families if MF costs were shifted to taxpayers (about 30% of household (I would suggest many or most may be low income) do not use electric heat and are therefore not so dramatically impacted by a doubling of rates, but may impacted disproportionately if costs were recovered through taxation -- beer, cigarettes, special levies, vehicle licences, gas/fuel oil taxes, food, etc).

    Those with larger, electrically heated homes, 2 incomes, high paid professionals, etc. may have some share of their costs shifted to lower and middle income homeowners.

    So it is not clear that the costs are the same to each homeowner if the method of cost recovery was through rate increase or increased taxation --- those coughing up the moola are not exactly one and the same.

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  7. The NL Budget of 2020 will make Budget 2016 look like a day in the park. If you work and save money for your future, may i suggest you consider moving NOW!!

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    1. Evidently, the Bond Holders are arranging a back office deal to sell off the assets, some of which are "Stranded". Why is this not the core concern for bloggers?

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    2. 1. What evidence do you have that this is the case?

      2. The lack of evidence might be a reason why people aren;t talking about it seriously.

      3. Selling assets won;t eliminate the debt or the obligation to pay it.

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    3. No evidence at all Ed. However, I believe Bond holders would favour the assets being placed in Stronger hands, don't you think? Political strategists must be working overtime for a deal on the Muskrat, in the lead up to 2019 elections. Things are much too quiet before the storm.

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    4. Bondholders want their money and there's nothing more likely to get them their cash than an entity that cannot go bankrupt. Government might go insolvent but it never goes bankrupt. And in the case of the province, its loans are guaranteed by the federal government on this one.

      There's absolutely no reason to sell off any of the assets to pay off the loans. In fact, a smart purchaser would leave the loans with the government.

      Since there's no real advantage to selling off the assets in this scenario, there's no reason to do it.

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    5. I accept your argument that the Gov'mt never goes bankrupt, just as Gov'mt are usually poor managers of the public assets. Who would Bondholders prefer as the asset managers? In the day we are told that Morgan Stanley welcomed Levesque/Keirans to the table because they knew HQ was a prudent manager. It certainly helped that they had solid Engineering and Construction, provided by the private sector. NALCOR, another story. I think that transfer of assets is in the works.

      You do great public service work Ed. Your Blog is good stuff. Long may your jib draw

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  8. Indeed Robert.

    Actually our core concern should be that NL obtains a => fair market value <= for those assets.

    I sure hope those "back office" negotiations are somewhat supervised/enabled by the Feds, as we (Feds & every Canadians) have a vested interest into NL thriving as a prosperous province.

    I personally see great potential for win - win solutions.
    However, NLers suspicions/dislike of a particular province/utility might make even a fantastic win - win solution politically impossible to achieve(Example of a fantastic deal basically rejected due to voters suspicions/dislike: HQ proposal to acquire NB Power)

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    1. I should have used the word "facilitated" instead of "somewhat supervised/enabled"

      Delete
    2. Ex-Mil @ 12:38.
      I agree there is a possibility of a win-win situation between NL and QC But you're implying that if there isn't a deal struck then it is Nls fault because of "its dislike and suspicions of QC". The UC asset we will (or are supposed to) inherit in 2041 is the one and only asset we have to negotiate and we are definitely "over a barrel" BUT PLEASE get off the "Nlers hate QC" mentality if there isn't a deal struck making it NL's fault. You're implying QC is our guardian angel and we must accept whatever offered (with cap in hand). I think we'll forfeit our 2041 control of the UC to QC in exchange for MF relief but please don't portray all NLer as sore losers to a better managed province and better managed utility (which is painfully true)

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    3. Heracles/Etienne/Bruno; What news and "grape vine" talk of the quiet deal, Supreme Court Decision, HQ/QC/FED Gov. negotiations with NL is happening on this subject? Surely the Elections Blackout Strategy is wearing thin. Is Trudeau visiting NL, as he gets around the Country, (BC this week), prior to the Fall sessions? Oh yes the Lieut. Gov. Garden Party will spread news from Gov. House I suppose.

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    4. Wayne, I fully understand your frustration here. You and most commentators here are definitely past that "NLers hate QC" rhetoric, and my "thus failure would always be NL's fault".

      But I'm not so sure if that's the case for other NF voters.

      ==> Wayne, do you sincerely believe NL's politicians will have an easy time explaining any assets sale involving HQ??? <==

      If history is of any indications, I'm not very optimistic...

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    5. Also, it's possible the Feds (or Emera) are the one that offers the most for Nalcor's 66% stake in CFLCo. Combine that with HQ providing wholesale power to both NL & NS and we now have a win - win solution that's "politically" easy to sell.

      So no, QC is definitely not a "guardian angel" in any ways. Everyone (including HQ & Emera) will drive hard for their own interests.

      FWIW, I somehow believe a Fed "facilitation" should keep everyone honest...

      Delete
    6. Ex-Mil, are you suggesting a possible buy in by the Feds of a segment of the Eastern Canada grid, sort of a Trans Mountain kind of deal? Whatever is Morneau and company up to these days with Tax revenue futures? Do you not agree that the whole HQ/Atlantic Grid needs to be rationalized in the "National Interest"? Vote splitting and such as what is happening in the West?

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    7. I believe the Feds will be more interested in ensuring that assets fetch the most value.

      If they expect HQ buying that 66% stake would just not fly politically, then the Feds might consider taking over.

      In order to fetch more money for that 66% stake (from whoever acquires it), the post 2041 has to be settled.

      For HQ to commit purchasing power (at market prices) past 2041, it must find new customers - like NL, NS and possibly NB and PEI.

      I don't see the Feds interrested in buying anyone's grid. They would just acquire lots of trouble&repair $ with little political gains. (And it requires considerably more expertise than the above 66% of CFLCO).

      I see however the Feds interested in "facilitating" new/increased interprovincial power connections.

      Delete
  9. Whether ratepayer and taxpayer is a distinction without a difference? Some difference but not much maybe.
    Boston , NY with rates of about 23 cents, parts of California about 30 cents, average North America about 10 cents. Some suggest Nfld will be like Detroit, abandoned, if rates go high. Rates of 23 cents may be the fairest and hit the well off more so than higher taxes, which the wealthy has loopholes to avoid both personal and business. With 23 cent rates there will be reduction in power sales, gradually, but a decade or more to go efficient. But the 2 and 3 car garage owners who have more heat to comfort their cars, will be hit on power bills not easy and quick to avoid. And add a demand charge for residential, again to catch the rich, and MF enablers. And we go Greener over the next decade. If people are not abandoning Boston and NY due to 23 cent rates, not that many will abandon Nfld. Indeed, that we can afford much higher rates is why hardly any has protested.Bite the bullet.
    Have I flipped? Maybe. But has mitigation so far offered any solution?
    Winston

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    1. People in the USA can generally use natural gas for heating, and in many areas, need far less heat. Therefore high power rates translate to using ceiling fans to fight the summer heat. We on the other hand require heat, don't have cheap natural gas and will therefore 1) move away for jobs and better services 2) stay but switch to non-electric heating like oil or wood.

      The debt cannot be repaid from the pockets of those living here in NL. Those on pensions, welfare or the unemployed have nothing to spare. These with jobs are mostly barely getting by. The MF loans will either end in default, or asset strip or both. I could see Fortis owning Bay d'Espoir, Quebec getting the Upper Churchill and the Federal Government getting our oil revenues. You could cut funding to the city and it could sell the sewer and water works as well as the land fill. The possibilities are endless and bleak. How about having the Feds relocate us all to Toronto? We have 265,739 dwellings and have previously paid $270,000 for relocation. That would $71 billion and get rid of the problem once and for all.

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    2. Anon, NL's gas alternative for domestic heating was thought to be wind/solar/thermal, but the Hydro Engineers hijacked the power agenda, supported by the "cable guys". Bad outcome!

      Is there an update on feasibility of running a gas line to the Avalon from offshore?

      Delete
    3. Not that bleak: many USA areas with cold climates find efficient HP heating competitive with natural gas, and sometimes cheaper for power line extension than running gas piping.
      Many in the USA using electric AC for summer heat
      Here efficient electric heat used 60 percent less electicity (see Feehan Report), other have wood option and is cheap heat
      Most people have cable , internet, car insurance etc, many not essential like heat yet considerable cost. Electricity is a very valuable asset, and much, almost half is wasted. And no one protested high costs coming, so let it come, and as you move away from Nfld , as why you did not protest the waste on MFs until too late. Put that in you pipe and smoke it. I`m staying electric, on the grid. One more benefit: electric HP hear gives electric AC for summer cooling and dehumidification, and increase summer power sales, a boost to power company revenue. Once you have house AC you won`t go back, just like AC in cars.....how many now buy cars without AC!
      Winston

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    4. I don't think there has been any subsequent analysis on getting natural gas from offshore since Steve Bruneau gave his presentation. I believe the St John's board of trade uninvited him from presenting and MUN's administration exhibited great hostility and threatened his tenure track.

      His work is worth reading. He is an excellent professor and I'd trust his judgement. Bio here: https://www.mun.ca/research/explore/publications/2006report/people/newfaculty/profiles/bruneau.php


      https://www.mun.ca/harriscentre/reports/nlquarterly/MEM-PreNQ-105-2.pdf

      The Rationale for A Natural Gas Pipeline to the Island of Newfoundland

      https://www.engr.mun.ca/~sbruneau/research/energy/noia.pdf

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    5. 23 cent rates and going Green over a decade does not guarantee that power sales revenue might slide further. Solution: incentives for electric cars, so green our transportation. 6-8 thousand dollar incentive as in Quebec or Ont, or via tax credit or funded by carbon tax back to residents, instead of going to industry. ANd going green is a job creator in Nfld , including rural.
      WA

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    6. WA:
      Car companies need to develop a hybrid that utilizes a Free Piston Linear Generator as a go between instead of going from full Internal Combustion to fully electric. This will eliminate range fears and enable the charging infrastructure to be developed more slowly and with less costs as compared to the situation now where in order to go fully electric governments would have to be involved from the get go.

      It is my opinion that the car companies do not want a Hybrid with Free Piston Linear generator developed because they are making to much money from replacement parts and mechanical maintenance on conventional Internal Combustion type cars. An IC vehicle now has around 20, 000 moving parts as compared to about 20 for an EV and about 30 for a Free Piston Linear generator Hybrid. It is not hard to see where car companies are making money.

      Delete
    7. WA:
      Actually the concept of a Free Piston Linear Generator may have merits in rural NL electricity generation. There is a company in Colorado that makes a wood pellet system which can supply heat (much like an oil furnace), domestic hot water and a range of generating capacity for up to 7000 watts. This would eliminate the need for an expensive grid to isolated communities ( this is a very expensive part of Hydro's operation BTW) by enabling each homeowner to generate their own electricity from wood sources. The technology exists but not the will of neither our leaders nore our people to make the changes required. there is another company in Europe which also makes these units.

      https://www.qnergy.com/

      http://www.microgen-engine.com/technology/how-does-it-work/

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    8. Was not aware of FPLG, but from what you say has merit for remote communities. Pity that people with ideas that may and could have merit continue to be anonymous, as it leaves a void in sorting out the merits.
      Winston

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    9. Is this the system, Gander hospital works on or use to work on. Not really in the know...but I seam to recall the hospital was generating heating on wood chips or something similar, a few years ago. Just asking... Says average Joe..

      Delete
    10. The engine concept around since the early 1940s. Not aware of any units that work well in production. Very simple and could extend the range of electric vehicles byh almost 400 miles, using fuel to make electricity to power the electric vehicle.
      A work in progress. Some question the wisdom of fuel use vs all electric, that could be charged by all renewable power: hydro, wind , solar. Fossil Fuel adds to GHS emissions, have not seen where wood could fuel this?
      For Nfld , all electric cars now have range for up to several hundred miles, and would add to power sales here. I cancelled my Tesla order due to no service locally, and some other makes lack local service.

      Winston

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    11. NLers are saddled with $13 billion in debt from the MRF fiasco and the discussion on this forum degrades into inane natter about weird and wonderful contraptions that are little more than electrical versions of fringe-element perpetual motion machines.

      Talk about Nero fiddling while Rome burns...

      Delete
    12. The Free Piston Linear Generator is being used in Britain by the oil companies on offshore oil platforms because of its small size and less weight. If is essentially about 40% efficient compared to a conventional crankcase type rotary generator. The compact size in relationship to its generating capacity makes it ideal for generating electricity onboard automobiles but there isn't a direct drive to the axials.

      Delete
  10. My brother in Ontario can heat and cool his house for about $300 monthly with natural gas and electricity. Its over 4000 sq feet. His income taxes are lower, food costs such as milk are lower, travel costs, just about everything. I've been fortunate and have a good job in our province. But I will not continue to live here if I cannot afford to heat my home. Unless there is a meaningful contribution from our friends in Ottawa towards the mitigation of these costs our province is effectively insolvent. I suspect some people are already leaving, while they can still derive some value from their homes. If power rates double many younger people will be unable to afford mortgages for homes that have dropped in value (significantly) and pay their new hydro bills. It will be a vicious cycle. People will walk away from there homes and leave the province further straining provincial finances. Other people mostly older will seek assistance from the province to try and heat there homes. THis will place even more pressure on anyone left who is working. A vicious cycle!

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    1. You are a deciple of Heracles, maybe, so leave and loose your asset value and help the spiral down, all because of heating costs?
      Ok 300.oo a month = 3600 a year for I assume is total bill including fridges etc.
      I heat and cool 1000 sq ft for 313.00 a year, so if 4000 sq ft, likely about 1000.oo per year, 2000.00 a year if power is 23 cents.
      That leaves 1600 for other electrical use.......so not so bad. WOuld not cut and run in fear. And if existing homes drop in value, good, they are overvalued, and younger people can get a mortgage easier. Meanwhile , did you ever protest MFs?
      WA

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    2. I'm not all that familiar with Greek mythology, so I can't comment on your assertion that I'm a disciple of Heracles. But I will add that a few additional thoughts on the implications of higher electrical rates. Higher rates will impact all areas of our society from individuals to industry. Our city for example is already forecasting a 60% increase in expenditures. This is significant. In this case we are not dealing with a "tax" to re-distribute wealth within the province, which might not be a bad thing. This could be argued either way. Rather, we are dealing with a withdrawal of capital from the province. The money will not be recirculated or redistributed. It will effectively be removed from our economy to pay off bond holders around the world. Unlike hte United States or to a lesser extent Canada, we can't print money to mitigate the impact.
      In our province, currently, there are many, many individuals who rely on social assistance or other government subsidies such as old age benefits to survive. None of these people can afford to pay the higher rates and will have little or no alternative other than to seek relief from Government. Where will government get the funds. Some perhaps can be borrowed but I suspect we are rapidly reaching our capacity in this area. Perhaps some belt tightening can take place but I doubt we have much capacity, other than too layoff a few more managers appointed during the Williams regime. I would also strongly question the probability of any major additional offshore projects coming on stream in the next decade. The recent announcement of a Statoil project by Nalcor is little more than that. We are competing with the US Eastern seaboard, which has been opened up for drilling by the Trump administration. In this environment it is unlikely we or Statoil with undertake investments in our offshore when they can earn higher returns in a less hostile environment. I hope I'm wrong on this but the announcement, seemed to me at least, to be more politically motivated than based on economic reality.
      This project was in my view ill conceived, and untaken with no consideration to the economic risk for a small province and population. For a host of reasons it has gone off any conceivable track for success and remains in my view a great risk not only economically but also technically if the surrounding area, composed of fine sediments fails and leaves a concrete island behind. Life is short and I want to enjoy it. If I can't afford to heat my home or have to spend an inordinate amount of my income just to live in my home and potentially support many others I will likely move west and I would venture to guess that many, many others will follow suit.
      And yes I did protect MFs I was never in favour of it. Once a link was made to Labrador we should have stopped and purchased power from Quebec. This would have made more economic sense! Not that, that matters.

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    3. Heracles too, if you follow here regular, a Quebec IT engineer spelling doom and gloom and many or most of us leaving the ROCK due to the boondoggle, needing to sell our share of CF etc.
      Yes high power rates impacts everything, but so to Bostona and NY, who at times have colder temperatures, and many moving to efficient electric heat, an alternate to gas.
      True the low income group will need assistance, but recent numbers posted in the Telegram show those at 22,000 or lower income is relatively small, so other can afford high rates without heat poverty. What proportion of your income now goes to heat?
      All have the freedom to move west, or other direction. Nflders are very very reluctant to leave, so better to have a Plan to deal with the shit given us with this boondoggle.
      As Ches Crosbie said this morning(and so far not a fan of Ches), if you fail to plan, you plan to fail.
      UG called for a panel of experts to get a Plan.
      I suggest 23 cent rates may have value, and I am open to counter arguments, but not whining. I had a plan in 2012 to keep rates at about 10 cent. That plan is out of date. And we need to deal with the mess. Perhaps the best thing now; address waste of power, past due for this. Feehan suggested in 2012 modest increase in rates would have avoided MF. I showed one way to mitigate rates then. Where is Ball's mitigation?

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    4. Hello Winston,

      I tend to believe that excessive rates (23 cents?) would cause even greater damage to the NL's economy & business competitiveness than a lower rate coupled with more taxations.

      (Any impacts on the low-income/poor can be offset via modifying tax brackets/tax credits, so it's not relevant for this reflexion).

      What do you think?

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    5. Excessive rates would be even more damaging if Nalcor ends up with unsold surplus hydro (that has currently little value on the export market).

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    6. Chess is using the right word, "plan". Yes we want a plan from all politicians before we elect them, and not after. Chess says, "if I fail to plan, then I plan to fail" so let's see you "plan" Chess before w elect you. And not only you but all politicians. But since you announced today you want to be elected, then we want to see your plan. As " buddy wasie name said", "you will get no dam good out of a moose". True. And equally true is you will get "no dam good out of a politician after he is elected". They will hide behind the party policy, and the leader. But Chess you are the leader, so let's see you plan; will you run or mothball muskrat, you have had lots of time to figure that out. Will you shut down holyrood? What will be the hydro rate to consumers. Will you fight to have the Feds take their 6, 000,000,000 that the signed for as the enablers. How will you deal with the deficit and the debt? Assemble your panel of experts now chess by, and not after you get elected, if that is your plan. Some plan says average Joe. A couple of panel of experts were suggested on UG a few weeks ago. So your panel of experts has already been selected. So what are you waiting for??? And don't worry about ball et al...we will get around to their plan before the election. But you get 2 chances, now, and before the general election.

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    7. On VOCM Ches called for protesters to show up Friday at the PUB to protest, seeking mitigation plans. Ches has been mum on MF for years. John Crosbie was pro Muskrat. Ches now wants to ride a wave of protest that might grow going forward. He will condemn Ball for no mitigation plan, but himself have no plan. A year ago he stated he has good advisers, but nobody knows who they are, so how does one judge the quality of unknown advisers? And the Tories, DW etc created this mess, but does not condemn the enablers. As Average Joe says, show your plan Ches.

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    8. EX- Military, we agreed that the idea rate would be the one where diminishing returns of revenue commence. But where is that rate?
      WHen I installed a minisplit, about 2010, rates were less than 10 cents. Only about 50 units installed in all of Nfld then.By 2014 about 5000 units. Installations were and are growing exponentially, with rate about 10 cents. So maybe 10 cents is the rate for diminishing returns.Now at 11.3 cents revenue and peak demand is declining. In 2011, prior to MF sanction, new houses off the Avalon were seeing a reduction for using baseboard heat as the main source of space heat. So that for rural Nfld and wood ore available. That trend was ignored, and ploughed ahead with MFs. So to think that say 14 or 17 cents would be a magic rate of diminishing returns? We may have passed it already at 11.3 cents now.
      SO yes 23 cents will initially see good revenue, but see a ramp up of decline, mainly for space heating. But mass conversions to efficient minisplits can take a decade.
      As to effect of 23 cents on manufacturing, we have almost no manufacturing. To compete, as to frozen fish at plants, they use power and can get a break as a class. But even with fish, we allow Europe to catch our fish for processing elsewhere.
      To have moderate rates and more taxation? I think the richer class will find loophole from taxes easier than avoid 23 cent space heat rates, plus a demand charge.
      Also consider jobs. Efficiency, a result of 23 cent rates creates considerable jobs, studies show elsewhere.
      What of surplus power unsold? As mentioned, grow the electric car transportation sector. What we reduce from space heat we use with cars. But it needs a Plan, such changes can take a decade or more but needed anyway.
      Electricity for essentials, fridges, lights etc will see little reduction.
      Given the choice of a fire sale for CFs asset, better to suck up the boondoggle and, if possible, keep CFs, for generations coming behind. As Heracles says, we need t learn a lesson. 23 cent rates may do it, and not be that bad, and Nfld turn Green like Ireland.
      Just my view point, and maybe better than false mitigation.
      Can 23 cents rates be accepted by the public? It will drive consumption down for space heating, so not double the yearly cost. Let the panel of experts assess it, vs the alternatives.
      Winston

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    9. Hi Winston,

      No matter In which pocket the government will take the money to pay back MF, Newfoundlanders' pockets are not deep enough to :
      1-Pay back the previous debt
      2-Pay back the additional debt from MF
      3-Balance the budget and get rid of the structural deficit

      When one's debt is 3 or 4 times his yearly income, he is down to bankruptcy. Newfoundland's previous debt + MF debt + structural deficit this year is about 28 billions and yearly income for government is about 7 billions. The maths and numbers are there..

      There must be a bailout, a bankruptcy, the sale of major assets or somthing like that to get out of such a mess..

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    10. Heracles31 @ 01:30: You are correct and it's high time this Government came to grips with it. There is a saying "you can't get blood from a turnip" which is exactly what the MF deception was conceived, sanctioned and built on. The Feds must have incompetant people as NL had/has to base payback on the backs of a populace who simply don not have the fiscal capacity to do so. What has happened here was WRONG (if not criminal) right from the start.

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    11. Isn't this a great country where wealthy provinces share with poorer provinces through equalization payments to help them balance budgets and no province goes bankrupt. Also, the federal government steps in to solve interprovincial problems by purchasing pipelines and facilitating projects through loan guarantees.

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  11. It isn't the power rate and/or MF induced budget reductions that will destroy the place -- its the combination of everything, of which MF might be the final straw. You can study a trade, but to get an apprenticeship, you will likely have to leave the province. MUN graduates hundreds of engineers - work terms are scarce and revelant employment afterwards is impossible for the majority without leaving the province. I met someone with a M.Eng. working the electronics counter at Walmart and a B.Eng. working at Costco. With food and gas prices higher than Hawaii, 15% sales tax, virtually no manufacturing and 20% !! of our population over 65 years old, we have a problem.

    There are only 22,365 children ages 0-4. Both ages 5-9 and 10-14 are 26,000 so it looks like families started delaying pregnancy around 2012. (2016 census data).

    In absolutely every age group (five year buckets) up to 59, there are more people in each older group, peaking at 43,080. It appears that we have a very unstable population that is continuously moving away or dying. After the baby boomers die off, if we were to stabilize at 22,000 per 5 year bucket (0-59), our population would be about 300,000 people, down from the current 520,000. If we ever cut back on the civil service by say 10%, which is 94 people per thousand or 47,000 people, then another 5000 people and their families will likely reolcate.

    If people can't find a way to make ends meet and raise families, then the province will depopulate.

    http://www12.statcan.gc.ca/census-recensement/2016/dp-pd/prof/details/Page.cfm?Lang=E&Geo1=PR&Code1=10&Geo2=&Code2=&Data=Count&SearchText=Newfoundland%20and%20Labrador&SearchType=Begins&SearchPR=01&B1=All&GeoLevel=PR&GeoCode=10

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