Thursday, 27 September 2018

FORENSIC AUDIT ONLY SCRATCHES SURFACE OF SANCTION COSTING ERRORS

Guest Post by PlanetNL

Planet NL15: Forensic Audit Only Scratches Surface of Sanction Costing Errors

The release of the Grant Thornton report on Friday raised serious doubts about Nalcor’s pre-sanction justification for the Muskrat Falls project.  The report indicated enough areas where weakly constructed assumptions would add up to show that the Muskrat Interconnected option would not be the least cost alternative compared to the remaining Isolated Island option.

Despite these very persuasive snapshots, the Inquiry may only have gotten just what it asked in terms of the forensic audit’s time and budget limitations from a team with little experience in electricity utilities.  The story is not yet complete enough and the Commission should pursue reconstruction of Nalcor’s cost models using an extensive revised set of assumptions developed by an experienced utility consultant.  It’s a significant undertaking but one that appears essential to allow the Commissioner to concisely explain the project’s economic fallacy.
……

The most complete publicly open analysis put forward by Nalcor was their November 2011 submission to the PUB following their so-called Decision Gate 2 stage.  Nalcor’s DG2 estimate used the Cumulative Present Worth technique to roll up the two alternative projects under review and declared the Interconnected option (Muskrat) was better by $2.16 Billion.  While a DG3 revision was issued in 2012, DG2 represents a better baseline for comparison as most of Nalcor’s decision making was already complete at that stage.   

Already, as Uncle Gnarley summarized in the September 21 post, that $2B gap is likely non-existent.  We won’t repeat those findings here but we will raise the concern that if more issues were tackled by the auditors and the Commission, the CPW analysis would likely swing substantially in the other direction in favour of remaining an Isolated Island.

The Grant Thornton auditors have not fully defined all the issues and their impact on the CPW analysis nor do their findings to date seem to add up to the known actual overrun.  Perhaps the remainder of cost overrun they intend to show was a collection of execution errors in post-sanction engineering, construction and project management. 

This post puts forward an alternative framework to find several areas of major concern in the CPW analysis and asserts that the overruns were primarily pre-sanction estimating errors.  This post relies on high level industry benchmarks and analysis to show that not only was Nalcor’s CPW estimate drastically wrong, including benchmarks that align with the project’s updated cost projection. 
Capital Cost Error – Labrador Island Link
A detailed report from the Western Electric Coordinating Council, an alliance of utilities operating throughout 14 US-western states plus Alberta and British Columbia, details the costs of AC and DC transmission lines and DC converter stations.  While dated 2014, it is assumed similar earlier reports were available in the industry that could demonstrate consistency in costs.

The report indicates base unit cost for flat land construction of $1.56M/mi for high voltage DC transmission.  A range of multipliers are provided for different terrain: “forested” is the highest at 2.25 which may be the best factor for the LIL conditions.  DC substations are estimated at $490M each.

For the 1100km (688mi) Labrador Island Link with two DC substations, using the forested factor for transmission line construction, the base budget should be [688 x 2.25 x 1.56] + [2 x 490] = $3.4B.  Perhaps 2010 cost estimates may have been a little less, however, the estimate here excludes adders for the Strait of Belle Isle subsea crossing and the synchronous condensers at Soldier’s Pond and Holyrood, plus cost escalation for multiyear construction.  This is also a $USD estimate, however, in 2010 at DG2 the dollar was at par, therefore some exchange rate risk could be added.

Nalcor presently advises the expected cost to complete the LIL, excluding finance charges, is $3.7B.  The WECC-based estimate turns out to be essentially right on the money.   It is interesting that no Labrador cost increase factoring is required in this instance, perhaps as many key materials could be competitively sourced from outside and also because the methodology of the contractors involved came largely from the WECC region.

What is at issue is that Nalcor budgeted the LIL scope at DG2, as presented before the PUB in late 2011, at just $2.06B (excluding finance charges).  Surely better information was available and the lowball estimate cannot be justified.  The Nalcor DG2 estimate for the LIL should easily have been about $1.5B higher.  

Capital Cost Error – Generating Station plus Labrador Transmission Asset

The WECC has another report featuring the table below summarizing hydro generating station costs at $3200/kW (note the EIA figure is specifically for 500MW+ plants). Although it is a 2014 report, this figure is consistent with additional reports not cited for the period around 2010.

In this instance we cannot ignore that Labrador carries a high premium for on site construction costs.  Knowing the circumstances of the other megaprojects in the province, including the highly relevant IOC expansion started in 2008, large scale in-place construction work – ie. you can’t buy a dam and truck it in – are typically more than double.  The components and modules that could be bought from outside the region don’t need factoring.  A minimum average factoring of 1.5 would be entirely appropriate with 15% contingency besides if only for exchange rate risk and multiyear cost escalation.
Had the generating station been budgeted at [3200 x 1.5 x 1.15] = $5520/kW, multiplied by the 824MW capacity, the anticipated cost would be $4.5B before adding finance charges.  
To this we must add the Labrador Transmission Asset, a 315KV AC transmission line connected to Churchill Falls 250km (156mi) away.  The WECC guide used in the LIL analysis above indicates flat land construction cost of $2.08M/mi.  Using the forested factor again, the LTA could be predicted to cost [156 x 2.25 x 2.08] = $0.73B before financing charges are added.  A massive new transformer substation at Churchill Falls was also part of the LTA scope that is likely costing well in excess of $100M (more precise data could not be found in the time available to prepare this post).
Today we find that Nalcor is budgeting final construction cost for the generating station to be $5.5B and the LTA $0.9B.  The cost estimates above derived from WECC benchmarks is no less than $5.3B.  Again, these quick real-world estimate assumptions would have been very accurate.
At DG2 in November 2011, Nalcor carried $2.87B for the Muskrat generating station including the cost of the LTA. Not only did they not price in local construction premiums but they went considerably under WECC numbers.  Remove the LTA cost, Nalcor may have priced the generating station at under $2500/MW, less than half what they should have carried.  Nalcor’s DG2 estimate for these assets should have easily been $2.5B higher.

Annual Operation and Maintenance Error
In June 2017, Nalcor CEO Stan Marshall updated the project O&M assumption from $34M per year to $109M.  The WECC generating cost table above included a recommended O&M allowance of $30/kW-yr.  This excludes all transmission asset O&M which must be estimated separately.  Given Muskrat’s 824MW rating, the expected cost is $25M/yr.  At DG2, Nalcor presented to the PUB an O&M estimate of $13M for Muskrat generation and $14M for transmission.  

Nalcor likewise should’ve known plenty about its own transmission assets to not expect these expansive assets to cost only $14M/yr.  There was never a basis for setting O&M at $27M/yr at DG2 (or $34M/yr at DG3).   The tripling of O&M costs applied over the 50-year term of the CPW analysis was not calculated by Grant Thornton but likely would have increased the CPW of the Muskrat option by $1B.

Overinflated Load Forecast – Impact on Isolated Option Assumptions
Last year, Stan Marshall also released the second downward revision of the Nalcor load forecast, dramatically pared down from what Nalcor presented at DG2.  This is critical to the Isolated Island CPW calculation as Nalcor used the huge load growth to justify burdening the Isolated Island Scenario with a costly series of new generation plants above and beyond Holyrood refurbishment.  They chose mostly fuel-fired thermal plants which allowed the additional error of excessively high oil price forecasts to be applied.

Unravelling this aspect is not easily done without engaging in a complete re-run of the modelling performed by Nalcor.  It is guesstimated, based on DG2 sensitivity analysis figures, that the latest Nalcor forecast would drastically reduce new plant builds and improve the CPW of the Isolated option by up to $1B. 
In addition, fuel cost was the majority of Nalcor’s CPW estimate for the Isolated scenario at just over $6B, most of which was needed to satisfy the false load forecast increases.  Adjusting for the huge reduction in fuel quantities required and relaxing the inflated pricing even a little might well lower the Isolated CPW by $3B.

There are additional issues that time and space are not available to fully address in this post such as Nalcor’s refusal to include effective Conservation and Demand Management, to allow for higher levels of wind energy penetration, to effectively recognize elasticity behaviour and to foresee additional evolutionary steps in technology that would yield further load reductions, even lower than Nalcor’s latest forecast revision. 

Revising the Cumulative Present Worth Projections
Just the few easy to find items quantified above make a massive change to the DG2 CPW numbers presented by Nalcor.  The summary table below shows that the revised CPW analysis would favour the Isolated Island option by nearly $7B.  Muskrat would not only have failed a more accurate DG2 analysis, but it surely would have been eliminated at the preliminary DG1 screening stage in favour of other less evaluated alternatives.


Muskrat Interconnected Option ($B)
Isolated Island Option
($B)
Nalcor DG2 (PUB 2011)
      6.65
   8.81
LIL error
+  1.5

MFGS/LTA error
+  2.5

O&M error
+ 1

Load Forecast error on capital requirements

-  1
Load Forecast error on fuel  requirements

-  3
Potential Revised DG2 CPW estimate
       11.65
        4.81

The items Grant Thornton reported on only amounted to roughly $2B in total adjustment bringing the difference between the two options to roughly zero.   Besides not calculating the value of certain items, it appears their analysis does not sufficiently step outside the box of Nalcor-supplied information.  Relying solely on Nalcor’s pre-sanction documentation and the review opinion of Manitoba Hydro International, an organization afflicted with many of the same flaws as Nalcor, may not be able to sufficiently expose the poor decision making.
It may be necessary for the Commission of Inquiry to hire a professional energy industry specialist firm, like a Liberty Consulting, to take all the steps needed to thoroughly reconstruct pre-sanction cost estimates.  Then, only by fully remodelling the CPW analysis using reasonable and foreseeable costs will the first phase of the Inquiry have an opportunity to find the true magnitude of costing errors.

99 comments:

  1. Clearly, if you can create high level estimates based on well known costs of other projects and they end up being close to what has been actually spent on Muskrat Falls - then something is very wrong with Nalcor. It appears that the estimates were contrived (lies) to generate the pretend cost that would allow project sanction.

    I'd love to see Liberty Consulting review the load forecast and cost estimates. The reporting would be peppered with the word "imprudent".

    ReplyDelete
  2. Just call it what it is; Fraud. Call the RCMP.

    ReplyDelete
  3. Phase one...what will be the outcome??? From my viewpoint, in not having watched all the proceedings, and not much gleamed from the brave fearless media reporting, everything else rest with Mr. Budden and Mr. Fitzgerald. The stage has been set, with all actors being pro muskrat, all lawyers, pro muskrat, with the exception of the PUB and the citizens collation. The assistant commissioner appears netural, in setting the stage and organizing. Mr.'s Vardy and Penny will have their say for a day. PlanetNL will not appear on the stand, maybe he should for a day or a week. The audit was completed by a non utility experts. A couple of others from the PUB will appear, (I assume they will not be pro muskrat). There will be a couple of other lonely voices crying in the wilderness (MR. BRuno etc.) This is how I see it, what do you think?? Are the laws of Justice in balance ask average Joe???

    ReplyDelete
  4. Well we have established that the least cost determination is fraudulent. That was clear to anyone reviewing Nalcor's submission to the JRP in 2011 if they cared to look.

    The question remains who will challenge the ugly politics and hubris of the clan chief? Few had the gonads to follow the evidence in 2011 and we find ourselves in a 12.7 (15 or more billion is more likely)hole now.

    Will the collective will of the abused masses prevail or will fear of lightning bolts from the chieftain win the day???

    ReplyDelete
    Replies
    1. Well, Bruno, VOCM poll shows 71% now saying MFs should not have been sanctioned and 20% says yes, this after the GT audit testimony.
      From GT we see that a partial assessment show both options about equal in cost, but a better analysis as Planet NL shows here, the Isolated Option about 7 billion cheaper. And that is without a CDM factor applied, which will improve the Isolated option further.
      Have we established fraud? Not by a long shot. The opening presentation indicating typical dam construction average of 96 % overruns sets the stage : all this is mere errors of bias. If that is allowed as an explanation, then it is a "Get out of jail free" to the Gatekeeper, St. Martin, and all the bootlickers.
      We all have biases, you Bruno and me too, so the learned judge Leblanc just has to identify and make clear the difference between errors from biases and fraud. Can he, and his assistant commissioners want to do that, and go down that road? That is the question.
      Already they allowed 1 full hour to hold up St Martin's halo, whether GT was unfair to Martin in how they phrased a line or two in their report. So, how often will the Leblanc give free reign in the name of fairness to all the enablers: the chiefian, the gatekeeper and all the scallywags? Time will tell.
      Winston Adams

      Delete
    2. Monday and Tuesday will tell the tale for any who still think that a single political appointee will get to, or even show interest in the manipulation that led to the most expensive hydro project ever conceived. The judge and chieftain are on the same side and you ain't!

      Delete
    3. Hi Bruno, please elaborate what events you are foretelling next Monday and Tuesday.
      Winston, it should not be expected that the GI will show evidence of criminality. That is the job of the crime and fraud section of RCMP. Can you think of who or what is happening behind the scenes, preventing such investigation happening?

      Delete
    4. https://www.muskratfallsinquiry.ca/schedule-witnesses/

      Delete
    5. Robert, GT contract says that, what they might consider evidence of criminal activity, they pass to the Inquiry, but GT must keep this info secret.
      One might think such evidence would go to the police, as to whether charges to be laid. But there may be a rationale that charges would interfere with phase 2 of the audit or the Inquiry itself. So likely Leblanc is the gatekeeper between any such evidence and the police ever seeing this. Maybe Leblanc decides at a later date, or the info kept secret and not released at all.
      Like with the Trump selected judge now before the senate, but 3 incidents of attempted rape, and no one will have the FBI investigate, which is normally done. That judge yesterday,says the senate is investigating(which is a joke) , not the FBI. And the senate refuses to compel a witness to appear and testify. So, as to the Rule of Law, different rules for different folks, is it not?
      Winston

      Delete
    6. Omg Winston, sad that you mentioned the judge that's being interviewed for one of the highest jobs in the US of A. For a few minutes, I observed a snivelling, babbling iodit pleading for a job as a judge. Sure if he were pleading for a janitorial job he would have been rejected on that performance. As being too unstable, and revengeful and unhinged to even be considered for any job. But a job that requires totally honesty and integrity he was found totally wanting. He lowered me respect for judges in general, as being untruthful, self serving and blatenly unfit for the job, as I understand it, not to mention the sexual assault that he has been accused of. Hope we have a better caliber of judges in Canada, and a hell of a lot better means of selecting them. And hope we can treat wemen or any person better than Dr. Ford was treated, says average Joe.

      Delete
    7. Thank you Bruno. My old age not paying attention disorder.

      Why do you think that the man himself is called this early in the GI? Damage control? This does look suspicious. Lawyer gamesmanship? Lacking in objectivity, etc.

      Delete
    8. As Elvis would say; I have a "Suspicious Mind". Love the song and chorus.

      Delete
    9. Joe, high drama right now as whether this Judge in the USA gets confirmed. This a bit more riveting than the Leblanc Inquiry. As least in the USA, there is TV coverage of this, and always the character and record of judges is under the spotlight, and still scratches the surface sometimes.
      This judge a teen age idiot, drunkard and criminal it seems, yet a church goer.
      Breaking News : Senator Flake wants a 1 week delay,for FBI investigation, he was cornered in an elevator earlier and a woman (sexual assault survivor) peppered him for intending to vote approval for that judge. So, Flake says he will ask Trump for the FBI investigation. Now Trump will likey shoot Flake for this,(or have Russians poison him) as he long ago said he could shoot someone and no one would mind.
      Oh, bring back Davey Crocket to the Senate.
      Now Lidsey Graham looks dejected,tries to save face, says this is democracy, but says his job to explain this to Trump. Linsey showed his colors, praising this terrible judge. A victory today for women and assault victims and what one or two brave women could do.
      Winston

      Delete
  5. Just read over on the Telegram how the architect of the load forecast stands by his projection and would do it over again? How can that be said when Nalcor has since dramatically cut the load forecast and evidently he is the guy who prepared that forecast too? We can only hope the Commissioner doesn't miss the contradictions from such individuals who no doubt have been coached to preach the party line.

    ReplyDelete
    Replies
    1. For those who would like to read the article anon@13:03 refers, I believe it is this one:

      http://www.thetelegram.com/news/local/nalcors-predictions-explored-at-muskrat-falls-inquiry-245029/

      Delete
  6. Of course it's necessary for the Commission of Inquiry to hire professional industry advice. How else can the situation be fully and fairly assessed? For our appointed Justices to weigh and measure values and the balance of probabilities on various technical issues, there must be non-biased advice to support their decision making.

    How else can the citizens interests be fairly and objectively served through this public Inquiry?

    This process is currently turning a hugely important page in NL's history and future. To consult with a poker coach before the next hand, when we have 13 billion in the pot already, makes perfect sense.

    Would it make sense also, to hire some expertise with respect to how Inquiries are managed and/or held accountable to the public interest? It may be helpful in securing public funding for whatever expertise we may so badly need. It may also help to support stronger recommendations to come from the Inquiry towards a better future.

    ReplyDelete
  7. I was surprised to see that Judge Leblanc asked but 1 minor question during the examination of the 3 Nfld Hydro load forecasters and planners. These 3, with false load forecasting and planning, set the stage for moving forward with the now 12.7 billion boondoggle. The MFCCC and CA lawyers did a fine job, but the judge could have, seeking clarification, assisted the public with a better understanding of the complexity of forecasting and planning and how all this went down. Leblanc may be clear in his mind as to the complexity, and satisfied with the explanations, but I doubt if the public is so clear. If I had not worked and had experience with power systems, I may see little wrong with their testimony, how they performed their work,with so little concern or care or professionalism, for the high risk that their actions was leading to a massive blunder.
    What to me seems unbelievable statements as to competence of how they performed their work, and to which Leblanc would be expected to ask for clarification or to reaffirm their statements or opinion, instead Leblanc stayed silent and apparently saw no need.
    Winston Adams

    ReplyDelete
    Replies
    1. Yep...Govt created a monoster, and turned it loose. We know it as nalcor or we could call him Frankenstein. Completely out of control, more powerful that its creator. So with no accountability to anyone, not even itself, it takes no responsibility for the boondoggle, or the 13$ billion. Just lay it at the feet of its creator and the people. We have no responsibility, except keep paying for a project that we did not need, and and was not the least cost option. So we are now in the king justice court, nalcor dominates the stage, challenging all comers to try and slay it. But currently we only have two challengers, the PUB and the citizens coalition. Have we not read or heard this story before. Yes, David and Goliath. Yes, and David not even a worrier, or a lawyer sley him alone with one single stone, and then used his own sword to render him headless. He was the hero. Do we have a David? (Not really referring to Mr. Vardy) He or she can be totally unknown at this time. What is the single stone that can slay the monster. Is it the $7billion bunker C oil that we are not consuming at holyrood and was placed on the side of the isolated island option to inflate that side of the equation ask Joe blow.

      Delete
  8. https://www.cbc.ca/news/canada/newfoundland-labrador/astaldi-lien-muskrat-falls-1.4839678

    It is the direct responsibility of the project certifier, (Stan Marshall), to dispatch all Liens, and ensure fair play ensues. How about it Stan?

    ReplyDelete
    Replies
    1. Seems other private Nfld business now at risk form the boondoggle, the airline to and from labrador owed over 4 million going back to May. Will there be others? How soon will subs to Astaldi get protected?
      And the law in Nfld protect generals more than subs. If a lien not filed in 30 days , no protection given, I think, if others can comment on this? My experience the Feds will hold back payment on generals if subs not paid in time, but provincially not so, and many subs may be at risk due to outdated Mechanics Lien Act
      AG. Generals here often the ones who make donations to political parties, and may explain this.
      AG

      Delete
    2. Government construction contracts hold back 10% from each monthly payment for the mechanics lien fund. When the contract is substantially complete, the general asks for the holdback to be paid out (released). After substantial completion, sub contractors can file a lien for unpaid bills that, if legitimate, will then be paid from the holdback funds or directly by the general. If a sub contractor doesn't take advantage of the procedure, then the only resource is to sue the general in court which is like getting blood from a turnip if the general is insolvent.

      I don't know if the payments to Astaldi follow standard government practice or not. Maybe someone here knows.

      Delete
    3. Standard Construction Documents, if followed, provides for appropriate administration of liens. Grant Thornton, in their purview should establish for the Public, (True Owner), what protocols were followed in pre qualifying Bidders, Bid procedures, Award and administration of contracts. This is the nub of determination whether or not fraud has occurred. If the Inquiry is not delving in this mix, there is sufficient evidence already to warrant RCMP investigation.

      Delete
  9. Was it the lie that gave birth to muskrat??? Yes, the KD election of Octiber 2011 saw the sanction of muskrat in less than a year later. The 6 or 7$ billion lie of what oil would cost us to keep holyrood going was front and center at the campaign doors. The guy that came to my door that was his line, "who would you rather pay your heat money to the big oil companies or your own company - nalcor". I told him oil prices were not going anywhere, and what goes up must come down. I asked him if he every heard of the fracking oil program going on in the US of A, and they were predicting oil self sufficiency in a couple of short years. It came in less than a year after muskrat sanction in 2012. The Americans stopped shipping money by the barrel to the Middle East after they stopped importing their oil, and the bottom went out of the world oil market. Did FERA give them that advice, that they were paying big money for confidence that oil would continue upwards, and the sky was the limit. The'll give you any advice you want, as long as you keep paying them. But the damage had already been done, muskrat had been approved as the least cost option over the isolated island option, that had been inflated by the cost to keep holyrood up and running. KD said a number of times that the election was a referendum on muskrat, before and after the election. So we were off to the races, dollar signs danced in the heads of construction companies big and small of schemes to make a quick buck. The government was good for it, and to boot we had the federal loan guarantee. Nalcor's plan had worked says Joe blow.

    ReplyDelete
  10. A 15 minute back of the envelope analysis for least cost:
    150 MW of additional island hydro @ 750 million (850 MW capacity was identified, plus extra potential for peak capacity at Bay d Espoir and Cat Arm an option for consideration)
    150 Mw of additional wind,54 now operating,so 204 MW total : 400 million
    300 MW gas turbine for emergency or top up occassional use,Holyrood thermal shut down) : 500 Million.
    Total 1.7 billion.
    Incremental CDM to convert to efficient hp and insulation for domestic : reduce electric heat load from 650 MW by 50% , so 350 MW reduction. Present Peak load @ 1650, so new Peak load after several years goes down to 1300 MW. Cost for incentives adds 1 cent to rates.
    New peak demand winter load @ 1300.
    Hydro power now@ 1150MW, jumps to 1300 MW, could be more peak hydro capacity with upgrades at BD and CA
    Wind @ 200 at 43% capacity factor = 86 MW. At 25 % firm factor = 50 MW
    GTs for backup when wind and hydro capacity is reduced,so 23% of peak

    Cost of 1.7 billion capital cost adds about 30% to rates, so from 10 cents to 13 cents. Add 1 cent for CDM gives 14 cent rates.

    Now the good part: CDM and energy efficiency reduces heat energy and typically reduces yearly power bills for a house by 30 %. So while rates go from 10 to 14 cent, a reduction in use by 30% gives a cost the same 10 cent power, so power bills would not increase at all. Off the wall or not?
    What says Joe? And this rough figures which therefore can allow for considerable contingency by the gatekeeper.
    Winston

    ReplyDelete
    Replies
    1. Winston, did you forget to subtract Holyrood fuel savings? What positive effects might that have?

      Delete
    2. Yes, I did forget, and a rough estimate that at present it represnts about 1.5 cents per kwh hr cost, so maybe with that "equivalent" final cost not 10 cents but 8.5 cent, not as good as Quebec, but could have been close. GTs would use a little fuel, but not much.
      WA

      Delete
    3. I think PENG3 will say that 200 MW of wind is too much for stability.
      At 1300 Mw peak, if 200MW of wind operating at say 50 % capacity then this suggests hydro would be 1200. So 200 WInd cap over 1200 suggest about 17 % wind.
      We now have 2 or 3 % wind. MHI said ok for 10 % or, if I recall possible 15%. Some jurisdictions that are isolated may have or aim for 25 %, I seem to recall. So 17 % is aggressive , yes, but would be ramped up for ongoing analysis of performance. Lets call wind the Bruno effect(no pun intended), but Bruno is a big advocate of wind, and may aim for 600 MW of wind, so we have to reign in Bruno on that t see if he settle for 200. He will likely say more wind and add Tesla batteries for storage, but is that cost effective? I think not.
      WA

      Delete
    4. Don't forget also that apart from fuel, required revenue is a fixed cost therefore aggressive CDM that drives down energy sales will force a rate increase. Your original rate target is probably correct then?

      Delete
    5. Agree Winston. But what we need is a good dose of realism. We need a brief report from a electric power company like Liberty. Given the condition of 2012-13, to tell us what the best solution for us was, and yes using both foresight and hindsight. Or in other words forget muskrat, and tell us what the island isolated option would cost. Using their own numbers, and not using Nalcor's numbers, as MHI and GT did. That's the only way we could get the true cost and how we could get the power on this island from mainly wind, rain, and CDM. Once you take muskrat out of the equation, very easy to figure out. We now know in hindsight what muskrat cost. So let's find out what the island isolated option would cost using both foresight and hindsight. And until the inquiry does that, their results will not be worth the paper it is written on, as it will be so concafluted that not even the judge himself will understand completely what he has written , much less the average Jane or Joe. Cheers, Joe blow.

      Delete
    6. That someone like Liberty should evaluate, as Planet NL says, and do an analysis on what would have been a reasonable least cost is essential to compare the extent of the boondoggle. Part of that would should be to include a cost effective CDM and EE analysis, all of which was excluded, directed I expect by the gatekeeper , St Martin.( but long a government policy to exclude CDM and EE)
      I did not see where Liberty has EE expertise, for input into CDM, but can source this. I was somewhat impressed with a consulting firm for NB, though a modest plan compared to NS, but NB firm also did estimates of the benefit for the economy as to jobs created in EE field in the province, over 700 jobs for a modest program. NS is big into CDM and EE, starting in 2008, so a decade ago. But remember, Nalcor is world class,(actually third world class) so that was dismissed,
      Winston

      Delete
    7. Anon @ 10:25, yes a reduction from CDM reduces energy sales but a higher rate charged of 14 cents increase revenue, so some tradeoff. But also, from efficient heat and lower cost there is some rebound of use , less costly to keep the house a bit warmer,
      So would not want to expect equivalent 8.5 cents , but those other factors helps the case for equivalent 10 cent rates, if near correct, is very good.
      WA

      Delete
    8. That word was meant to be "convoluted", sorry....cheers, average Joe.

      Delete
  11. Looks like world-class Astaldi could be in some financial hot water, I guess the money we borrowed and funneled to them isn't enough to keep their heads above water. Their recent attempts to liquefy some assets isn't going so smoothly. As DW would say - that's just the cost of doing business.

    ReplyDelete
  12. From twitter: David Maher @DavidMaherNL 14h14 hours ago: One of the details is that Ball say government will change government buildings heated by oil and switching them to electricity, increasing electricity demand.

    It isn't that simple. While some buildings have hot water heating and the boilers can be changed to electric, a new electrical service is required and for a small government building (like a small school with 250 children) you are looking at $500,000 in capital costs and a year of construction. Larger multistory buildings will cost about 2 million to upgrade. If the water/steam system is obsolete and you want baseboard and controls in every room, then the entire building is disturbed (walls, ceilings, asbestos abatement, demolition of old equipment like chopping up the old boiler to get it out), reinstatement, repainting etc. It isn't cheap.

    Better option: Add biomass boilers to a few hospital heating plants such that there is enough wood chip and/or pellet mass consumed to start a sustainable biomass fuel industry in the island. Once the industry is stable with many residential consumers, then the hospitals can go back to using whatever fuel is cheapest.

    Winston: About 25 million liters of fuel oil were delivered to government agencies in calendar year 2017 (everything from NL housing to hospitals). Assuming an unlimited budget for retrofits, what is the maximum potential increase in load?

    ReplyDelete
    Replies
    1. At close to 10 kwh heating energy per liter, you have just under 250GWh potential demand. 200 GWh might do it. That's 3% electrical energy increase in the island. Or more accurately 3% less decrease as others flee from electrical consumption. Ball's mountain of new demand is a tiny molehill.

      Delete
    2. Begging the question; Solar Hot water, thermal in ground storage, geothermal, wind, etc. +low carbon reconstruction options, would strongly suggest that hot water distribution should never be replaced with electric, (particular with expected increased hydro rates).

      Delete
    3. If MFs is operating with reliability, and also the transmission system to Soldiers Pond,then more use of that high cost energy might be reasonable in some public buildings, but sufficient costs for conversion as you suggest.
      But what if the Labrador in feed is not reliable? We are fortunate that our peak load has decreased form a forecast of about 1850 MW at this time, down to about 1650 MW. If MFs power is not reliable, as Liberty suggests, and as I and other expect, then any move to increase the grid peak load is imprudent, and risks more serious rotating outages then past one of DarkNL.
      Aggressive CDM and EE is a two edged sword right now: it reduces load and revenue to help pay or MFs, but if MFs is indeed unreliable, then it can be a blessing to have a peak demand that is reduced. I would tend to lead to the latter, of more CDM and EE, believing MFs will be unreliable. In any case more low efficient resistance electric heat (baseboard or furnaces or boilers) is generally backward looking.
      WA

      Delete
    4. should read significant costs, not sufficient costs

      Delete
    5. Get a qualified Energy Audit for each District Energy opportunity; Hospitals, Bldgs over 1,000sm, nursing homes, rental/ retail complexes, etc. Results over 30yr comparative costs studies might surprise, beneficially. Put MUN Cost Engineering to work!

      Delete
    6. Two more concerns with converting those government buildings. As raised above, they cost substantial capital that we will have to borrow so they are a bad use of funds. Second, applications such as schools will only worsen the peak load cycles, raising MW demand levels resulting in added utility stress and costs if government were to actually meet their planned goal. It's bad logic from every angle. Ball is using this silly talk to distract from his real plan: borrowing more money to cover the interest payments. Puerto Rico here we come.

      Delete
    7. The rationale for MFs was to satisfy our high demand for energy and grid peak demand required by highly inefficient baseboard electric heating, for residential and commercial and some institutional. At a forecast winter load of 2018 about 1850 MW, it is about 2.8 times the summer load of about 650 MM. Ideally it is most cost effective and least cost to have summer and winter peak load the same, and next best to reduce the ratio as much as possible.
      To try and satisfy the baseboard load it has cost us 12.7 billion. Now to again to continue on that path, of increasing the peak load via inefficient heat, is very questionable. Better to find better efficient uses for any surplus power that might exist.

      WA

      Delete
    8. As suggested previously the smart move is to prioritize the uses permitted for Electricity, Fossil fuels, Renewables. Get them in order of least cost, least environmental damage, least cost to import, etc. Simply put, where is the rational Energy Strategy for NL. Duh. Have not heard much in this regard from the two party leadership. Hope tonight's MUN seminar enlightens the Public to constructive dialog, which was needed since early 70's, and might have prevented the Holyrood/Muskrat/Avalon debacle.

      Delete
  13. Does that affect their Canadian business?

    "Sept 28 (Reuters) - Italian construction company Astaldi has applied to a court in Rome for protection from its creditors following a delay in the sale of a bridge in Turkey, the company said on Friday, sending its shares plunging to a record low."

    ReplyDelete
    Replies
    1. This may imply that NALCOR/NL/Taxpayers will be required to make good on the bankrupt Astaldi liabilities on the Muskrat contract. What is the bonding and insurance situation? Grant Thornton should be required to report.

      Delete
  14. As to Strtton's power forecast. His testimony;
    Did NH do any elasticity studies? No because it is already embodied in their model. He uses a figure of o.35. Feehan suggests 0.4 to 0.5 which he says is not that different. That all of this is inelastic.
    That Stratton discussed with NL as to power rates when customer would switch. That NP elasticity is consistant with his , NH figures.
    Is that correct ? Is he honest. Has NP since called to inform the Commission of that error or false statement?
    To my knowledge NP uses o.2 and figured it might go to 0.3 if prices go to 15-16 cent.
    Also , most do not know this: NH customers are very few, say 90% or more are NP customers. So if Stratton is using o.35 for his few customers and NP using o.2 for most all Nfld customers, then :Houston, we have a problem there right away with forecasting. So the difference between Feehan and NP is from 0.2 to 0.4 or .5, a very big difference.
    Can anyone shed more light on this?
    Winston

    ReplyDelete
    Replies
    1. should read "discussed with NP, Nfld Power)

      Delete
    2. Are you sure he didn't say 0.035? Is there a way to get this important piece of evidence verified?

      Delete
    3. I assume the transcripts are posted. I marked down what he said, and I don't think I got it wrong. Also:
      .035 is a very low number
      And much of NH load for domestic is isolated diesel communities, which are higher power rates, electric heat is not used much as too expensive, and 0.35 may be a bit reasonable, in being higher than Nfld Power which services most of Nfld.
      Winston

      Delete
  15. STRATON ISSUE #2
    Question: was there any estimate of what customers were prepared to pay (before switching)?
    Answer,That initially for MFs it was estimated rates would need to go to about 15.6 cents, but that with discussion with Wade Locke, Locke said rates would have to go 65-75 % more than that to eliminate growth.
    My interpretation: that if we start at 10 cents and it goes to 15.6 , not a problem at all, but another 70% of 10 cents is another 7 cents. So 15.6 + 7 = 22.6 cents (blended rate) before people start to switch so that there is no growth in electricity sales, but not even a decline at these rates, just no growth. No Feehan warns, correctly, of a big decline even at modest rate increases.
    If this is what Straton is saying, and what Locke told him, how realistic is that? Will the doctor, Wade Locke deny that ?
    Winston

    ReplyDelete
  16. If NLP,NLH,Nalcor, DW, EM, KD, et al are all lawyered up with publicly funded high paid and very competant lawyers who represents the public and competant enough to ask the right questions??? It seems to me that the right people to be asking the tough questions is David Vardy, Ron Penny,Des Sullivan, reps from PlanetNL et al but my understanding is they are the ones to be questioned. Questioned by who??? LeBlanc??--he isn't asking anything except for clarification on a few items.
    This has the making of a whitewash.

    ReplyDelete
  17. My concerns about a whitewash is not getting any less.

    At the end of the hearing on Wednesday Nalcor's lawyer (Simmons) suggested (and Straton agreed) that because the CPW cost calculations get brought back to the present, that such CPW 'discounting' means that any apparent increased risk due to the long 50+ year time period, that the long forecast period is really a "low risk" because the CPW process brings it back (discounts it) to the present time.

    The load forecaster (Straton) agreed and there was no query from Leblanc and no objection from any lawyer).

    But would Straton have the CPW knowledge/economic credentials to answer that question?

    It seems to me that Simmmons' suggestion was not correct (in part because load forecasts at such long 50+ year time periods are prone to what MHI described as 'risk magnification', and load has been identified as having a major/magnified impact on the CPW results (especially due to fuel usage) and the forecast load itself would not be discounted. Would it?

    Am I correct or incorrect on that?

    Any economists/CPW experts here?

    If I am correct ---- neither Leblanc nor any lawyer objected to Simmons' statement and Stratton's agreement.

    Why not? And what are they being paid for?

    ReplyDelete
    Replies
    1. When questioned about the impact price elasticity might have on load forecasts, Stratton stated that he didn't incorporate that into his calculations because the historical indications were that, under shall we say "normal" circumstances, it had little to nil impact on load forecasts.

      However, ratepayers will soon have to grapple with a doubling of electricity costs over a very short time period

      These are far from "normal" circumstances.

      Delete
    2. It was well known that MF would at least raise rates by 50% or more. More than 10% in a year is considered SHOCK rates. So how could he not have foresight of abnormal circumstances. According to ,Ball rates rose 1 cent over 10 years, so about 1 % a year average, and a 50 % rise did not bring concern to him?
      WA

      Delete
    3. Then why didn't the Concerned Citizens council raise that issue with this Nalcor Stratton individual when he was on the stand?

      Delete
    4. They had limited time, and did ok considering that, but also why did Kate of Leblanc not ask questions. These guys need to be recalled and be grilled, yet I sort of feel sorry for them. They were treated with kid gloves, and maybe partly effective to get the answers they gave, which is revealing when analysed. I though if HQ engneers were watching this, they must be really laughing. Maybe that is why Heracles and Ex Military are silent? No need for them to rub it in. If we don't expose this, with the aid of Liberty and CDM experts, questioned by our lawyers (as only experts get consideration by Leblanc), then they get a pass. Our lawyers are getting up to speed on this, but need another go at them later.
      Winston

      Delete
    5. Maurice Adams also jumped on this turn of events as well...

      http://www.thetelegram.com/opinion/letter-to-the-editor/letter-nalcor-excluded-electricity-price-elasticity-why-245710/

      Delete
  18. Stratton Issue #3
    I find this one laughable: Stratton used electricity used for residential in Quebec as his model for how things should work here, as to uptake for electric baseboard heat. Now Quebec has rates about 7 cents say and MFs was to require a blended rate of 15.6 he said,(up from about 10 cents).
    Quebec has very low cost hydro power. CFs power is sold to them at 0.2 cents per kwh. If transmission is say 0.5 cents , this is less than 1 cent cost. If sold for residential heating at 7 cents , this is a 700 % markup.
    Nfld island power, if the cost for production and transmission on the grid plus NP distribution say is 7 cents total , and sold for 10 retail, this is 30% markup. Now with MFs power (to initially cost say 30 cents, but now over 60 cents), the blended rate to the electric heat customer when added to the island power would be 15.6 cents retail here(now about 23 cents)
    In Quebec they have very profitable hydro power for electric heat, and generally undercut the price of oil or gas, so customers tend not to switch as long as the electricity rates are lower.
    In Nfld we do not have low cost gas, so oil and wood is the competition. At 10 cent power rates here, a high percentage, say 80 % were opting for electric baseboard heat at those prices. But what would happen with rates at 15.6 , 18, or 23 cents? Even at the projected 15.6 cents, Stratton expected customers to continue installing baseboard heaters, and aiming for full conversion of existing oil heat to electricity! Does this make sense at all? Would not customers switch before the 15.6 rte? And what is the profit margin for Nalcor, a possible 8 % return, compared to HQ 700 %? And if rates go to 23 cents, what is Nalcos profit? Big time negative, a shortfall of hundreds of million of dollars from low volume of energy sales to the residential market.
    Stratton saw no connection between price of power for electric heat vs the cost of alternatives, and assumed no one would switch, but stated he expected continued growth in sales up to 22 cent rates ( backed by advise from Wade Locke he says)
    Now why not compare to NS also or instead of Quebec? NS with rates higher than here, used very little electric baseboard heat, but other alternatives, other than natural gas. There the cost of power is a deterent for baseboard electric heat. But with efficient (300 % efficient HPs) electric heat, if rates are 15 cents, it is almost like 5 cent rates for just operating cost), so over 100,000 of these installed since 2008. If not for that, electric heat would not be competitive at all. Again Stratton did not evaluate and compare what was happening there. Using Quebec rates and the uptake of baseboard heat there was not comparing apples with apples as for forecasting for here. Seems laughable, is it not?
    Winston Adams

    ReplyDelete
    Replies
    1. What about Stratton assessing more carefully what was happening for electric heat uptake with Nfld Power, who handles most all of the island customers here?
      True, that most new house were installing baseboard heaters with rates 10 cents of lower, but this was on the Avalon. I have read Nfld power's own surveys that showed, as best I recall:
      Off the Avalon, there was in increase of people switching form baseboard heat to wood. This change was I think about 2010, 2 years before MF sanction. Did Stratton read NP surveys, when planning and forecasting for a multibillion dollar project of adding new generation supply, to see these trends already happening?
      WA
      There was uptake of ducted heatpumps with electric heat back up, so this was using less electricity
      There was uptake starting here of minisplit HPs, that were highly efficient, reducing electricity need by over 50 %, and needing no baseboard backup.

      Delete
    2. Least there be any doubt that Stratton was confident of his comparison with Quebec, at the end, Nalcor's lawyer Dan Simmons rose and pressed home the point. " What matters is not how much cheaper, but just being cheaper is the factor that people switches, correct|"? asked Simmons. Yes, replied Stratton.
      So we, the public, and Leblanc too, are to believe that the relative cost of one heat source to another is not important. That if a alternate source is 25% or 50 % less costly in the short , medium or long run makes no difference, than if it just 1 % cheaper! Is this a stategy by Simmons and Nalcor to discredit the importance of elasticity (volume of use vs cost) for forecasting? This to suggest that Vardy and Feehan are out to lunch on this basic economic principle, because it was not important to Wade Locke, Stratton, Nfld Hydro and Nalcor in their forecasting and economic analysis?
      Winston Adams

      Delete
    3. Hi Winston,

      Just a small precision for your numbers: from CFLCo's numbers, they say their own sale over HQ network is done including a transport cost of about 1 cent for power from UC. As such, this 1 cent is more accurate for the transport cost for UC power.

      In general, the production cost of HQ's entire fleet, including UC, is said between 2 or 3 cents (I saw both value in recent articles). But the latest and from HQ being 2 cents, lets use that one.

      Not a significant difference and it does not change the idea of what you expressed, but as I understand that you like numbers, details and accuracy, I thought that you may appreciate these more precise numbers.

      Delete
  19. Please people, stop using wood as an alternative heat source. Yes, it is wonderful, but hard to get (if you buy it, you're at the mercy of the seller), has to store/ dry for several years before it can be used, dirty, and anyone getting up in years will find it hard in the woods (it will tear you up). Also, it's hard to control the heat (I've been in peoples houses with a wood stove as their main source of heat and they have the windows open in January to cool the place down. Wood, great for heat in a shed or cabin..For your house? Not so great.

    ReplyDelete
    Replies
    1. David Goodyear of Flatrock uses a wood furnace for his new Passive Design house, and expects to use just 0.75 cord per year for heat and hot water from the wood. See his website, google Flatrock Passive
      And in rural areas with lots of wood, and many with the Quad toys, and pickups, wood cutting is easy. My brother in Riverhead Hr Grace, age 76 cuts his own firewood, his main heat source for 30 years. For me, still use baseboard heat for the main residence, and a minisplit for the cottage. I have minisplits now for the main residence for 2 year and not got around to installing them, and at 11 cent power, not a rush, but should have done it.
      WA

      Delete
    2. A wooodstove that is EPA approved controls the heat and will not over heat you in January. They are clean and efficient. They will not burn green wood.

      If you gather your own it will need to season. Buy seasoned hardwood. At the 140-150 dollar a cord price (cut, split and delivered) it comes to a quarter the cost of oil or electric heat.

      Delete
    3. WA, yes absolutely wood IS an option for some with lots of time on their hands and no health issues- but who knows what tomorrow brings? (i work 48 weeks/year so no way im going in the woods on weekends and my little bit of vac.). I would have to buy it and then like i said, im at the mercy of the seller. If everybody goes wood, the price will go up and up.

      Delete
    4. Suit yourself. You can buy seasoned hardwood at 1/4 the price or you can continue to be be a Levy Payer!

      Delete
  20. the position of some provinces is quite startling: New Brunswick’s debt, now at 34 per cent of GDP, leaps to 115 per cent; Manitoba’s, from 37 per cent to 105 per cent; Newfoundland’s, from 32 per cent to 76 per cent.

    From the National Post online today

    ReplyDelete
  21. BEOTHIC
    A plea to Judge Leblanc:
    Mr Leblanc, you surely recall my comments back months ago as to the Nfld Coat of Arms that you displayed above your head at this Muskrat fall Inquiry. I stated that it should have no relevance in this 21 century in Canada or Nfld, and clearly stated why it was an insult of First Nation people, and factually misrepresents the Beothic as warriors and as if enslaved to the British Crown. Further it misrepresents the majestic caribou with an elk, that is not native to either Nfld or Labrador.
    Soon after , the Labrador Inuit, and Liberal MHA made it an issue before the Liberal Party, though it was not welcomed. Premier Ball later supported the idea that this Coat of Arms needs changing.
    Then the media commented, and at first only 11 % supported a change, because few understood why it was so insulting. Soon, within days, the 11% rose to 25 %, but then the matter died.
    But your Honour took notice, before going to Labrador for the Inquiry. I saw that now the large image of the Beothic is no longer displaced above your head by the TV cameras on close up shots. Now, it can be seen only on a far away shot of the proceedings, and too small then to see.
    But on the website, most of of your information links shows it on the left side of the screen display. And constantly , about 10 minute intervals during the testimony, up pops this crude image, an insult to our province and people, and showing no respect for the First Nations.
    This week you have an Innu leader as a witness on Oct 3. He will be exposed to this disrespect at your Inquiry, this symbol of colonial times that should be long gone.
    And further, he is to come and appear before you, where? To the Beothic Building, Sir!
    We have a French commentator on this site , Etienne, who has pointed out our extermination of the Beothic. These hearing is on the Internet, viewed around the world. You did much to make the offending symbol reduced in size, but it is still there and still offensive.
    To show respect for the First Nations and the Innu leader, I implore, beg, pray, and and say to you sir: Before Oct 3 REMOVE THAT COAT OF ARMS, FROM THE PREMISES AND FROM THE WEBSITE.
    PF

    ReplyDelete
  22. FYI http://www.thetelegram.com/opinion/letter-to-the-editor/letter-nalcor-excluded-electricity-price-elasticity-why-245710/

    ReplyDelete
  23. THE TELEGRAMS VIEW ON THE INQUIRY
    1. Russell writes that the inquiry is producing "acres of boring questions and metric tons of exhibits as it tries to reach a cohesive conclusion about what went wrong" . He recommends going to the pre sanction report instead and of the 50 pages just read the paragraph he says. Heck, don't read it all says Russell. It says there were few qualified contractors interested, so they had to convince them to bid, so this would lead to cost growth and slippage. This a recipe for exactly where we are right now says Russell.
    So nothing to see in false forecasting, to then lead to false planning for how to meet the false loads.
    Russell has stated in the past that he does not like numbers, and forecasting, and costing of generation assets is all about numbers. But ignore that, it is BORING say Russell. Guess that is why all that false stuff slipped right by Russell in 2012, hey b'ys. So much for investigative journalism.

    Pam writes that she is impressed with the Oxford university prof, and states that "contractors and promoters who stand to gain from the mere construction of projects , and who are often powerful movers in the early stage of project development, may have a self-serving interest in underestimating costs and overestimating demand, and underestimating environmental impacts and overestimating developmental effects. .... they get high paying jobs and the project can bring about financial ruin for the citizens left to foot the bill.
    Also the government can cherry pick experts and consultants to back up its argument, and critics were no match for the Nalcor -steered machine. She suggests Leblanc should be handing out copies of that consultant's report.
    (Now that report says just biases, seldom crimes are found)

    Ashley reports on the trio of : Paull Sratton, Bob Moulton, and Auburn Warren, (all MUN graduates) who did the forecasting of power demand and planning and risk assessments. She cites the 50 year forecast, that he included a "technological factor" saying it accounted for sudden disruption for new energy efficient appliances, but that they did not consider aggressive management of demand via incentives for energy efficiency. , as that "could not be relied on" over the long term. I would note that Ashley , nor the counsel nor co counsel nor Leblanc asked what factor they used for this "technology factor" (so that remains secret)
    She also says ELASTICITY was not included in the forecast models. because "the system does not respond to that" , and so it would be a 'shot in the dark".

    She says Nalcor estimated rates of 15-16 cents , but now Feehan says people may abandon electricity to use for heat.
    She says Stratton would not do anything different and would do the same all over again. "I stand by my forecast " he said.
    So, I suggest ONCE WORLD CLASS , ALWAYS WORLD CLASS. Lets do Gull island now, using the same people and methods.
    Winston Adams

    ReplyDelete
  24. STRATTON Issue # 5
    Stratton says he used a "technology factor" that allowed for "disruptive" changes due to energy efficiency improvements. What was his technology factor , and was it reasonable?
    In testimony we heard David of GT reference smart thermostats. Straton referenced efficient light. Are either of these disruptive to significant decrease Nfld loads? Not at all. Others that are disruptive seems totally ignored.
    Here this week as the Inquiry is center stage. Take Charge is blasting us in the media with Sept 24-30 as Energy Efficiency Week. It cites its 10 year achievement of over 10,000 attics and basements insulated, so about 1000 per year. With nearly 200,000 residential units , is that a proud achievement?
    They cite 100,000 energy efficient thernostats. So if about 10 per house, this means 10,000 houses of nearly 200,000. And these save very little energy, and actually increase morning grid peak loads!
    And they cite 2,000,000 LED lights. They say 25 per house is typical, so nearly half our house have these, but to what effect?
    LEDs use 75 5 less energy thab th eold Edison type light. If in Florida, on your energy bill , you save actually more than what you expect.
    If in Nfld , you save almost nothing. The light energy saves as the heat energy increase. This is the INTERACTIVE EFFECT. Tat Leblanc need to understand and be explained, how the public is being conned here by the power companies as to energy efficiency savings.
    And technologies that are disruptive , that reduce heating with efficiency of 300% instead of 100%, is ignored by Stratton it seems, and largely ignored by Take Charge. I think a class action law suit should be brought against the power companies for their misleading promotions and statements. Our province is 2nd wore in the country. The past Consumer Advocate concluded and stated to the PUB that our power companies had failed in their Conservation and EE plan.
    Winston Adams

    ReplyDelete
    Replies
    1. should read: LEDs use 75% less energy than the old Edison type

      Delete
    2. MHI Consultants confirmed Nalcors opinion that efficiency improvements for housing here was approaching "saturation levels", so nothing to see there folks. That was a crock. That permitted low CDM and EE savings potential in their forecasting. Efficient heating alone gives 60 % reduction on heating energy, and large grid peak reductions. For new houses , the updated R2000 national standards then kicked in. These do not mandate efficient heating but when combned with efficent heating, this is disruptive going forward as to heating loads. All this ignored by Stratton it seems.
      WA

      Delete
    3. Is the Technology factor a key issue as to Conservation and elasticity, as to forecasting and a FATAL FLAW?
      Consider the questioning of Nalcor's lawyer Dan Simmons to David of GT:
      1. Did GT make observations on conservation and elasticity, and what expertise did you use for that?
      Answer: as to experts, no deep dive into that. We made no observations of whether Naclor's decisions on that were good, bad or not.
      2. Was the regressive equation of the econometric model used for forecasting good.
      Answer : It is a good way to forecast.
      3. Is the Strategist software a common method ?
      Answer: nothing said by David on that.
      4 As to accuracy of forecasting, Dan says overall a 1 % error historical, so is this volatility for forecasting?
      Answer : David says that 1 % can be signifcant. (UG readers should keep in mind that Stratton's forecast for 50 year load growth of 0.8 % . So such an error of even 1% could mean a negative 0.2 % growth, so no load growth at all is possible with just 1 % error. This the devil especially in 50 year forecasting.)

      4. Dan says the Stragetist software model is good, and a common method used, but does not put it as a question
      Answer: nothing said
      5. Dan stated that CDM(Conservation Denmand Management was not used by nalcor. What is your, GT's understanding of CDM
      Answer : like a programmable thermostat. We have no idea if CDM was used up to the year 2012.
      5. What basis does GT have for saying CDM was not used?
      Answer: An interview with Nalcor.
      6. MHI did assess Nalcor's decision as to CDM?
      Answer: MHI said CDM "should be used".
      7. Nfld Hydro used a technology change variable instead?
      Answer: That is beyond my own understanding.
      8. A technology change factor is the method actually used. Does GT understand that?
      Answer : It may be a factor, but we never investigated that.
      9 . Did you find that a technology change factor was reasonable?
      Answer : No, we never assessed that.

      So obviously behind the scenes Nalcor engineers presently are coaching their lawyer that their method was good, when actually it is NOT good. And they try to get GT to admit it was good, even before the Nalcor trio takes the stand to explain the complex issues. Now Leblanc says all this was explained good by the trio.
      We do not know the value of the factor they used ,and do not know if it a reasonable and good way to assess the impact for CDM, Both Dan and and GT are ignorant of this being a reasonable way of doing it. Nalcor knows they are wrong on this being a reasonable approach to forecasting, and wants to make a silk purse of a sow's ear, So they mislead the Inquiry and the public on this, 100 % sure.
      Perhaps PENG2, engineers, or others can comment.
      Winston Adams

      Delete
    4. To put this in context: they forecast growth at 0.8 % for 50 years. By an error of 1 % there may be negative load growth.
      Now, CDM in other jurisductions typically achieve 1 % negative load growth. , and some jurisdictions, 2 % .
      If Nalcor's forecast was right and a positive load growth of 0.8% , but also using CDM , it results in a negative -0.2 growth.
      If there forecast is wrong and excessive by 1 %, it mean s a negative load growth of -0.2 %, (without CDM) , and if CDM is used and achieves 1% negative growth , then overall it is a negative -1.2 load growth, and if CDM was -2% , then a possible -2.2 % negative growth.
      So CDM is a critical factor and to what extend it is used and the measures uses ( whether a piece of plastic being put over the window, as Take Charge web site actually promote, or good effective measures that are verified as to the savings. But these details are critical, and which Russell at the Telegram finds boring and says look elsewhere.
      We can expect biases for MFs,to be shown by Danny Williams, but it is the TRIO on the stand last week that enable the false forecast for Danny and Ed Martin. It needs to be exposed by our legal beagles and our good economists (Vardy and Feehan) and Liberty type and EE consultants how this manipulation was done. What is important was the cost of effective CDM for the island, as PART of the isolated option, whether comparing against the 6 Billion or 12.7 billion boondoggle.
      WA

      Delete
  25. I find it very annoying that I have to watch the inquiry videos rather than read a transcript. Takes so much longer, I'll never be able to watch very many.

    There is a page for transcripts on the inquiry website but none of the hearings have yet to be posted:

    https://www.muskratfallsinquiry.ca/transcripts-and-exhibits/

    Anyone know when we will get transcripts if ever?

    ReplyDelete
    Replies
    1. Agree with your observation. I am experiencing the same thing; much like a don’t bother to follow us feeling. It feels like a ruse.

      Delete
  26. Way to go Winston, you are getting at the netty gritty, that they do not want to hear. Thanks for joining the two legal begals that have a up hill battle to even make a dent in the reinforced armour of the boondoggle crowd. Addition weight will be added tomorrow at the enquiry to crush what little resistance there is and to give the big picture, and how great thou art, without even mentioning the boondoggle and the 13$ billion. I suspect it will be reduced to about half that in one fell swoop. We will be told how great the enterprise has been, and will be even greater for us in the long term, like long after we are dead and gone, muskrat will bear fruit, and palm trees will grow along the banks of muskrat, and the island will become the garden of Eaden, the land, the place of milk and honey. We will become the energy warehouse of the world. So rejoice now, that we were saved from death and destruction a decade ago. And tell me, over and over again, that we are on the eve of RE-CONSTRUCTION. Just my thoughts for today says Joe blow.

    ReplyDelete
  27. Clearly, to date, legal representatives for consumers/citizens/taxpayers either are unaware of the flaws, omissions/weaknesses in the inquiry TOR/process/testimony (Leblanc's application of his TOR interpretation/GT, Nalcor reps evidence, etc.) and the narrowness of an inquiry that Leblanc supposedly interpreted in a way that he was supposedly going to oversee in a "broad" manner, or these reps have allowed themselves to just 'play the game', show up, put in their time, etc. so that the Phase I inquiry segment will come out the other end touching only tangentially on the key, important, deeply flawed issues --- in short --- a superficial Phase I inquiry.

    That is where we are.

    That is where so far that the evidence points (and I see no evidence that Phase I will bear the kind fruit that this fiasco deserves).

    It is not a good day for justice.

    ReplyDelete
    Replies
    1. A commentator on the UG blog said a while back that this "inquiry" was going to be nothing more than a white-washed farce carefully contrived to protect the Nalcor monstrosity and injudiciously hubristic Frankensteins who created it... how prescient.

      Delete
    2. This inquiry is not a good day for justice or democracy.

      It is sad that so many naysayers have accepted the massive flaws in the process. It amounts to the "Stockholm Syndrome". The prisoners are identifying with the captors.

      No justice for rate/taxpayers will result.

      Delete
    3. Not only that, but to have these individuals seated together in a buttressed threesome rather than facing their inquisitors individually speaks volumes as to how this farce of an inquiry is tailored to give these Nalcor fuckers a free ride.

      https://www.cbc.ca/news/canada/newfoundland-labrador/inquiry-labrador-muskrat-1.4842263

      Delete
  28. Example of TOR "not" being broadly interpreted/applied"--

    Excerpt from http://indiafreelegaladvice.blogspot.com/2015/01/inclusive-but-not-exhaustive-meaning.html

    "...when the word “includes” is used in the definition, the legislature does not intend to restrict the definition: it makes the definition enumerative but not exhaustive. That is to say, the term defined will retain its ordinary meaning but its scope would be extended to bring within it matters, which in its ordinary meaning may or may not comprise............It is no doubt true that generally when the word “include” is used in a definition clause, it is used as a word of enlargement, that is to make the definition extensive and not restrictive. ................“When an interpretation clause uses the word “includes”, it is prima facie extensive. When it uses the word “means and includes”, it will afford an exhaustive explanation to the meaning which for the purposes of the Act must invariably be attached to the word or expression.”

    Note that the MF inquiry TOR, section 4 (a) includes in part the phrase "including whether", and goes on to say [in section 4. (a),(ii)] that

    "Nalcor considered and reasonably dismissed options other than the Muskrat Falls Project and the Isolated Island Option".

    Then when you go to the GT Agreement, it states (paraphrased) that the auditor (GT) is to review and report on only those options considered by Nalcor.

    There could have, and should have been several variations of Nalcor's so-called 'isolated island' option (as well as other options addressed in the forensic audit).

    But Lablanc seems to have narrowly (and I would suggest perhaps) improperly interpreted and applied the "including whether" phrase to then direct GT to only consider the "options" identified as only those "considered" by Nalcor.

    Doing so, eliminated the requirement for GT to review and report on options OTHER THAN those 'crafted by' Nalcor.

    And the carefully crafted Nalcor playbook continues.

    ReplyDelete
    Replies
    1. And Leblanc had to have interpreted and applied his interpretation of the TOR in the manner that restricted the forensic audit, and he had to have done so BEFORE the deadline had passed for the receipt of written submissions from the NL public as to their interpretation of the TOR (and the request for public input and the deadline for public submissions came from the commission itself).

      Delete
  29. One learns in ECON 101 that higher prices lead to lower demand. Yet Nalcor did not allow for this in its general service and industrial demand forecast on the basis that Stratton could not estimate any statistical relationship between price and demand in these sectors. This is a matter of allowing statistical analysis of historic Newfoundland data to override both theory and common sense. In a case like this where a large increase in price is being contemplated, even a small elasticity effect would have a major impact on demand.

    When local statistical analysis fails to find an effect it is not unusual for economists to adopt estimates from studies of other jurisdictions. It is better to use an estimate from someplace else than to assume no effect. This economy cannot be that much different from other places and to assume no effect, as Nalcor did, is implausible.

    A first hit from a simple google search lead me to Akihiro Otsuka, Journal of Economic Structures (2015) "Demand for industrial and commercial electricity: evidence from Japan". Here is what the author stated in his literature review: "For instance, Pindyck (1979) examined industrial and commercial electricity demand using 1959–1973 data from 10 developed countries to estimate price elasticity in each country and found that the price elasticity of the demand was significantly low (from −0.07 to −0.16). Similarly, Bohi and Zimmerman (1984) reviewed several previous studies conducted in the USA and found low price elasticity for industrial electricity demand in the short run (between −0.10 and −0.27) as well as in the long run (between −0.61 and −3.55). However, for commercial electricity demand, they found low price elasticity in the short run (−0.27) but high elasticity in the long run (between −1.05 and −4.56). Hisnanick and Kyer (1995) and Kamershen and Porter(2004) adopted time-series data from the USA. Hisnanick and Kyer (1995) used manufacturing industry data for 1958–1985 and found a low price elasticity value of −0.19. Using industrial and commercial sector data for 1973–1998, Kamershen and Porter (2004) derived price elasticity values ranging between −0.34 and −0.55 for industrial and commercial electricity demand."

    It seems to me that even employing price elasticities on the low end would have made quite a difference to the load forecast.

    ReplyDelete
  30. Thank you Economist, very much.

    Stratton's view did not ring true to me.

    I appreciate very much your thoughtful and expert (?) reply (and can't help but wonder why the commission's co-counsel and/or other parties with standing did not question Stratton further on this matter).

    Are you able to comment on my concerns about Stratton agreeing that the risk associated with the long 56-year CPW period is lessened, is less than one would think, because that risk is discounted when it is brought back to the present time?

    My thought is that the risk associated with CPW factors such load forecast, of itself, is not diminished (discounting does not strictly apply to, for example, load forecasts and other similar input factors, but does apply to cost estimates)?

    ReplyDelete
    Replies
    1. Hi Maurice:
      Not sure if this exactly addresses your issue but all I can think of for now...

      What they are doing with CPW is discounting the dollar costs. So I think they are just saying that a dollar of error 20+ years from now is not nearly as important a a dollar of error in the earlier years.

      At an 8% discount rate for example, a dollar in ten years has a present value of $0.46 but a dollar in thirty years has a present value is only $0.10.

      If one took the view (and I'm not taking it) that a lower discount rate (or even zero) is appropriate to weigh the out years more heavily, then that would make the difference in CPWs between the two cases larger which would favour the Muskrat Falls option over isolated island.

      Delete
    2. Economist...I guess being an economist, it is quite simple what you are saying, but to the average Joe like me, it is not always apparent. But think I understand what you are saying, that a dollar today is worth a dollar, but today's dollar, way down the road, like 56 years, will be worth less than a couple of pennies. So we will be paying back mere pennies in 50 or so years, plus interest, but not entirely sure how much that will be. So, as you say muskrat way down the road, is least cost than the island option in our immediate or near future, when we would be building and paying for it. But not sure how the money markets and bankers, can make any real money that way. But well remember in my childhood growing up, that a dollar was half a fortune, and now not even a chocolate bar. But the dollar was well earned, with no interest to be paid on it. So, if you could further elighten the average joes, especially how the interest is accumulated or paid off and in what dollars. Guess in the dollars of the day. Guess the same could be said of the UC at less than a billion to build if we could raise the finances, through a loan guarantee. But I am a mere baby in the arms of fincincial wizards says Joe blow.

      Delete
    3. Joe, if you take 1.00 and say it loses value of 8 % in 1 year (not sure if that is what they mean by discount rate?) , so multiply by 0.92 and do that 9 times it equals 47 cents , and 43 cents after 10 times , or 10 years. Now if inflation is 2 %, then multiply by 0.98 ten times and it equals 83 cents , which is about what you see with normal inflation say. I am no economist so not much into that ,, but understand the value of compound interest which is rather remarkable what happens there.
      Now Feehan says MFs analysis would fail evaluation by a 3rd year economics student. Heck (to Use Russell Wangansky 's term), I did only one course on economics , and it would not pass by me, so it would fail a first year I assume. So where does that leave Wade Locke, who heads up the economics dept at MUN. Where does it leave MUN?
      At the Inquiry we have coming up soon Wade Locke, then Feehan , then Vardy, so the titans, and all should be as clear as mud as to CPWs etc.
      First we have to get our has around elasticity, elastic or not? I believe the value of 1 is the cross over line?
      Winston

      Delete
    4. should read our head, not our has

      Delete
  31. Stratton Issue # 5 Continued
    Is our Take Charge program our CDM program for reducing demand via customer energy efficiency? It probably depends on what the meaning of the word IS is!
    GT says Nalcor never used CDM as a consideration as one of the options for the isolated or Lab infeed , told so by an interview with Nalcor. Yet we have a CDM program since 2008 , (largely secret to the public knowledge)that is funded and reevaluated every 4 years, so updated in 2012, and again in 2016-2020 period. The cost for a consultant update is about 300,000 dollars, all paid by ratepayers revenue.
    So why is no CDM considered as an option? Because it is a mostly meaningless program, designed to be meaningless, to protect Fortis shareholders (least Nfld Power revenue falls) , and also to ignore it as one of the important inputs for least cost for the isolated option. So Take Charge is indeed the CDM and why is no value put on it by Stratton? Because it has no meaningful value. And they can hide this fact by the mysterious TECHNOLOGY FACTOR that is also meant to give essentially no benefit for technology improvements.
    Winston Adams

    ReplyDelete
  32. Yes. Thank you.

    I understand and agree, IF that is what they were attempting to convey.

    I may have misinterpreted what was being said, or was intended to mean, as I am not always able to hear clearly through the internet and am sometimes distracted.

    I certainly took the exchange as an attempt to suggest that the 56-year load forecast was discounted and therefore the 'risk magnification' that MHI referred to was therefore not so much affected by the length of the forecast period as one might think (because of discounting)--- and the witness (as I understood it) Nalcor's 'load/capacity forecast' specialist, not their CPW expert.

    But I will wait for the transcript.

    Thanks again. Much appreciated.

    ReplyDelete
  33. Time for a pause for a history lesson:
    WWI (today's CBC): a century ago the Spanish flu hit. 1600 got sick in Nfld and 200 died. In Labadror, of a population of about 1500 Inuit, one third died . The apocalyptic event is described: Sled dogs that were used to hunt and travel were abandoned as their owners died. They became feral and dangerous. It was like a horror movie. Wild dogs-starving husky dogs- actually breaking in and jumping through windows of houses to eat the dead bodies. Survivors had to hunt them down and kill them. They killed hundreds and hundred of starving dogs In Okak , where 263 people lived , fewer than 60 were left. They collected all the human bodies and dug a giant hole and to do that they had to light a big fire to thaw the permafrost . They put them in there and covered them up.

    ReplyDelete
    Replies
    1. In 1916 there was about a 90% casualty rate at Beaumont Hamel, almost 300 died. MUN is a memorial to their memory. The money borrowed to finance the regiment was about half our national debt that led to our loss of democracy in 1934.
      Today's Telegram ( on the eve of DW's testimony about MFs, tells of another memorial : that paid for by Danny Williams, at Galway. Six silhouettes of soldiers. "I thought that was very symbolic . It shows we care- it shows we don't forget". said Danny Williams. He expects thousands of people will drive by on a daily basis once Costco and other shops open in Galway.
      Personally I think it is cheap commercialism to use the sacrifice at Beaumont Hamel in this way.
      Compare the cost and benefit of Bowring Park, which also has the ionic caribou.
      PF

      Delete
  34. As to M Adams comment @13;20
    I too was aware that Leblanc, both for this Inquiry and for GT, wants to not allow in depth review of an option of small hydro, and upgraded island hydro, plus wind plus CDM as a least cost option. CDM can be mentioned around the edges, but no expert analysis of that combination and costing of that for the isolated options for the Inqiry and Leblanc to hear. As it was not considered by Nalsor, do not now consider it. With no exper evidence to be given, it can not be considered. That's the way it works , even a the PUB.
    If that is the stand , then our CA and MFCCC and others should walk away from this Inquiry , as it is truly a farce.
    Winston Adams

    ReplyDelete
    Replies
    1. Back to the Inquiry TOR. It will not deliver justice. It will serve to get NL political influences through another election. It will place no personal blame. It will not make NL look like a good place to do business as to political stability, corruption and financial stability. It will not address the Canadian federation to respect to NL and the resources that it brought in 1949 to Canada. As for Quebec, let’s face it: it is still playing the “Je me souvenir” game.

      Delete
    2. Meant “Je me souvien”.

      Delete
  35. Inflated load forecast. Inflated egos as to energy warehouse. 2nd smallest public utility in Canada next to pronounced 4th largest. Buoyed by the “we got it” 2005 dizzy days of Atlantic Accord”. Nearly 90 years of frustration by Quebec “neighbors”, as to our (NL) place in Confederation, as to Labrador electrical power devlelopment to a fair market. A north spur, touted as part of a natural dam, vis-a-vis MF development; yet unconventional and unable to fit within CD safety association guides. A poor labor and bid market and questionable contract packages for goods and services. Weather risks variables not evident in contingency allocations. Questionable quality assurance and control in contracts. Questionable project management and “EPCM” capabilities and modus operandi. Questionable reliability capability of MF. No water management plan. Fragile financing model as attested to by Emera (NS) stakeholder vis-a-vis federal loan guarantee. Alternative future power options not fully tested. Can the Inquiry fully digest all this within its TOR or is it a ruse? God guard thee Newfoundland.

    ReplyDelete
  36. I am waiting to see DW throw EM and KD under the BUS.
    I didn’t do it.

    ReplyDelete