Written by "JM"
Edited by Des Sullivan
The
DARK-NL investigation being undertaken by the Public Utilities Board is playing an important
role and not just by getting to the root cause of the Province-wide power
outages last January.
Robbed of the protection
a narrow reference afforded Nalcor, during the 2011 PUB review of Muskrat Falls,
the Crown owned corporation must now answer new questions posed both by the PUB,
interveners, and others relating to security of supply after Muskrat is commissioned.
The
new information illuminates the deficiencies in Nalcor’s filings with the PUB,
in 2011, and exposes key aspects of a plan which ought to have been released at
that time.
The
Public may now finally understand Nalcor’s true intent for the Province’s
electrical system when the interconnections with both Labrador and Nova Scotia
are completed.
Let’s begin by asking: what has been identified as substantially different from the plan first proposed by Nalcor, in 2010, and what are the implications?
One
of the major issues with the original Muskrat Falls PUB review was that it was intentionally
restricted, by the Government, to the island supply case only. It did not consider the Maritime Link
interconnection and delivery of 167 MW to Nova Scotia including during “peak”
periods. Nor did it acknowledge the potential additional revenue from the
export of surplus energy.
The
original PUB Inquiry was useful for its analysis of the project as well as for
the transparency it provided. But the process, without inclusion of the
Maritime Link, was seriously undermined because the plan the PUB was asked to evaluate
was not the one Nalcor had in mind.
Questions
addressed to Nalcor, in relation to the Maritime Link, were not answered; they
were deemed by that Corporation outside the scope of the reference
question. As a result, concerns
regarding the ability of Muskrat Falls to meet peak winter demand on the Island,
and supply 167 MW of power to Nova Scotia, failed to get the notice such a
fundamental issue warranted.
The
implications of this issue for higher costs to consumers and unplanned thermal
(oil) generation, in order to meet our “peak” power requirements, are
significant. As a priority, Nalcor should answer immediately the impact this
commitment to Nova Scotia will have on Island electricity rates.
The
Exhibit, below, is proof that Nalcor did not want to expose a major weakness in
its case when it argued Muskrat was the best alternative. The revelation would
have skewered the project as the lowest cost option.
Consider this question posed to Nalcor and its
response:
Though
Nalcor refused to acknowledge then that the Nova Scotia Block was a key issue
to in the Island’s winter demand forecast, one also central to the issue of the
project’s viability, it was assumed by the Author that Nalcor had, at
least, included the commitment in its analysis of the project.
The
assumption, taken to its logical conclusion, suggests the LOLH reliability calculations (a resource planning model used by Nalcor) presented to Manitoba Hydro International (MHI) and the PUB included delivery
of the 167 MWs to Nova Scotia; it was also assumed that the timing of those obligations were
accounted for.
The
issues are critical because, if Nalcor is forced to burn additional oil in
order to meet ‘peak’ demand in winter, the earlier requirement for new generation could materially add great cost to the equation
used by Nalcor’s accountants (Cumulative Present Worth Analysis (CPW)) in order to conclude Muskrat Falls is the lowest cost option.
Described
another way, although the Maritime Link was excluded from the PUB review, the
Author assumed that the Nova Scotia Block was accounted for by Nalcor, Manitoba
Hydro, Navigant and the PUB to determine that Muskrat Falls was the lowest cost
option.
The assumption was wrong.
Nalcor
recently posted on its web site answers to questions raised by Mr. David Vardy¹ and others,
including this one, which bears on the subject under discussion:
The
months January-May represent the period of ‘peak’ demand. The acknowledgement, by Nalcor, that only
673MW, not the 830 MW capacity will be available, confirms a serious
omission in its representations not just to the PUB, but to its own
Consultants.
The
reply to Vardy’s question verifies that the work completed by Nalcor and
validated by MHI and Navigant, as third party expert verification of Nalcor’s
analysis, was not reflective of the true plan the Agency had in mind. The revelation undermines three years of
public debate, in which the arguments presented for the project were grounded
in analysis based upon the wrong information.
Little
wonder that the PUB stated in its Report To Government that “(t)he information provided by Nalcor in
the review is not detailed, complete or current enough to allow the Board to
determine whether the Interconnected Option represents the least-cost option….”
!
No
longer protected by a limited reference question of its own design, Nalcor must
now answer the PUB’s concerns regarding the adequacy of power to meet the
Province’s needs after the commissioning of Muskrat Falls. Nalcor cannot answer questions selectively
this time; its information must be based upon the entire project, including
those commitments made to Emera of Nova Scotia, which have been confirmed by
the UARB in that Province.
The
Exhibit below was issued by Nalcor in response to a question from the Consumer
Advocate. It provides a glimpse of the post-Muskrat
plan.
The
Table demonstrates that we will be dependent upon Nova Scotia to provide up to
300 MW of capacity to meet the required contingency levels at "peak" demand. While the Table contains a lot of data, I
would refer you specifically to the column titled “Maritime Link” in which a 300 MW capacity
from the Link is indicated commencing 2021-22.
Nalcor
has not verified if firm contracts have been executed which permit this supply;
nor has it confirmed if any additional costs for this power will have to be
borne by the NL rate payer. If
additional costs apply to its procurement, we need to know if they are already
included in Nalcor’s rate projections.
Note 4 of the Exhibit, attributed to this power allocation, is hardly
definitive.
Within the original Muskrat Falls Review, the amount of oil consumed for thermal generation post-Muskrat
was limited. Nalcor must now also disclose how much oil
will be burnt each year in order to meet our demand requirements.
In summary, Nalcor must clarify:
1) If, post-Muskrat, we
will be burning oil, in Holyrood, to meet our obligations to Nova Scotia.
2) If the Island
ratepayer is responsible for the additional oil generation.
3) When the additional
fuel is added, is Muskrat Falls still the lowest option…was it ever?
4) If 675 MW is still coming
from the LIL. The number seems to
neglect any allocation of Muskrat Falls’ capacity to Labrador Mining. The 75 MW allocation to Alderon will exacerbate
the power shortfall on the island.
Finally, we must challenge the Government and Nalcor for spending resources
on MHI, Navigant and the PUB to review a scenario that was meaningless for any
purpose, except possibly to permit them to ‘sell’ the project to the
public.
The people of Newfoundland and Labrador have been exposed, perhaps, to the
greatest ‘Snow Job’ in our history. If
the consumers of the province are expected to pay additional rates to meet the delivery
of 167 MW to Nova Scotia, the proposition is worse than a deception; it is a
corruption of governance.
The PUB should be mandated to investigate the matter.
The full truth needs to come out.
[1] Dave Vardy should be commended for his personal effort in raising
questions to Nalcor regarding the Muskrat Falls. He has done a
yoeman service to the Province in raising awareness of issues such as
the one discussed in this piece.
Editors Note:
"JM" is the
anonymous researcher and writer who presented a major Paper to the PUB Review during
the Muskrat Falls Review. He has since written a series of twelve Papers on various aspects of the project, links to which are found on The Sir Robert Bond Papers Blog.
JM has also posted on Uncle Gnarley Blog, including, most recently, Gnarley's Theory of Political Devolution, The Great Revolutionary From The Shore and The Right Side of History.
Editors Note:
JM has also posted on Uncle Gnarley Blog, including, most recently, Gnarley's Theory of Political Devolution, The Great Revolutionary From The Shore and The Right Side of History.
To recent readers unfamiliar with "JM", I would say that, while circumstances require
his anonymity, his credentials are his professional expertise, his technical knowledge of the Muskrat Falls project and the high level of analysis he brings to the subject.
- Des Sullivan
