David Vardy and Ron Penney are well-known
names in this Province, both having served in a number of senior public positions. Prior to his retirement David Vardy served as
Chair, Public Utilities Board. Ron Penney most recently served as Chief
Commissioner and City Solicitor, City of St. John’s.
Equally, they will be recognized for
their continuing role as critics of the Muskrat Falls project.
Uncle Gnarley Blog has obtained a copy of a Brief
Vardy and Penney just submitted to the Public Utilities Board. The PUB is about to enter into the
second phase of Hearings which are part of the Supply Issues and Power Outages Review for the Island Interconnected
System called by the Provincial Government last year, following several
days of Island-wide power outages.
Among other
issues, the Brief draws attention to the conclusions of the Liberty Report and,
as Vardy and Penney describe, the “damming criticism” of NL Hydro resulting from the degradation of the Province’s hydro assets.
They state: “There are many fine people
working in Hydro who must be embarrassed by what has been allowed to happen to
the public company they work for”. Vardy and Penney also make
recommendations to the PUB to remedy those problems. Here is their Brief:
March 27, 2015
Ms. Cheryl Blundon
Director of Corporate
Services and Secretary to the Board
Board of Commissioners
of Public Utilities
120 Torbay Road
P.O. Box 21040
St. John’s, NL
A1A 5B2
Supply
Issues and Power Outages Review Island Interconnected System:
Brief
to the Board of Commissioners of Public Utilities
Newfoundland
and Labrador
Dear Ms. Blundon:
Thank you for the opportunity to
provide this written brief to the Board as it conducts its hearing into the
power outages review. We ask that it be included in the public record of the
hearing.
Our main interest in the review
is the reliability of the post-Muskrat Falls system and we look forward to
seeing the report of the Liberty Consulting Group on that issue. We doubt that
they will conclude that Muskrat Falls is the panacea for the reliability issues
we face today and over the next few years and we suspect that Holyrood, or a
replacement for Holyrood, will be necessary to ensure reliable power to the
Avalon Peninsula when Muskrat Falls is completed.
We are disappointed that the
request we made to the Board to have an independent study done of the North
Spur has been rejected, as we feel that the Bernander presentation raises
serious concerns about the stability of the North Spur, which is surely a
reliability issue. However we understand the restrictions the Board is under as
a result of the order in council which exempts the project from a full
regulatory review. While there was a limited reference to the Board on whether
Muskrat Falls was the cheapest alternative it was not a substitute for the kind
of full and unfettered review conducted by the Nova Scotia Board on the
Maritime Link.
However, we would like to comment
on the main findings of the consultants in the context of recent outages and
the continuing failure of Hydro to meet its obligations to ensure a reliable
supply of power. It is clear that no lessons have been learned and that the
warning of Liberty of the possibility of continuing outages has come to
fruition. We urge the Board to engage its consultants to review the recent
outages.
With the recent outages, one of
which caused considerable disruption to the educational system, this will mark
the third year we have experienced outages.
Liberty noted that "Hydro
did not complete recommend maintenance activities on the equipment that failed
and that protective relay design issues and inefficient operator knowledge of
the protective relay design issues and insufficient operator knowledge of the
protective relay schemes existed."
In its interim report Liberty
concluded that "Hydro's shortage of generation capacity was exacerbated by
a failure to complete planned outage work needed to ensure the availability of
its full range of generating facilities as the winter season began."
In addition "Liberty found
that Hydro needs to plan its resources to meet more severe weather than it has
assumed to date."
The comment by Liberty that “the
number and nature of the failures that occurred within this compressed time
frame is very unusual and raises questions about Hydro's operation and
maintenance of equipment" is a damming criticism of Hydro. The two recent
outages are continuing proof that Hydro is still not doing a good job of
operating and maintaining its equipment. Liberty needs to be asked to
investigate those recent outages. Internal investigations by Hydro are not good
enough. The fact that the much delayed turbine generator failed to start when
it was first needed is cause for concern.
The result of three successive years
of outages based on the failure to properly maintain and operate generating
equipment has created a total lack of confidence by the ratepayers in the
ability of Hydro to be a reliable supplier of electricity. We suspect, based on
our own experience, and anecdotal evidence, that the sales of standby
generators have increased dramatically. We wonder how many Hydro employees have
done the same. And we conclude that Newfoundland and Labrador Hydro, long the
crown jewel of our Crown corporations, has been allowed to decline and it's
well deserved former reputation as a reliable and well-run utility is in
tatters.
This leads us to the governance
issues which have been addressed by Liberty.
We are both former public
officials with long and varied experience in running large and complex public
organizations. Newfoundland and Labrador Hydro is a public organization but
perhaps not recognized as such by the current Board and CEO. We have had some
of our finest public administrators run Hydro, people
such as Vic Young, Cyril Abery, Bill Wells and David Mercer, among others.
There were few issues of reliability under their watch.
Problems arise from time to time
in public organizations including the supply of electricity. There have been
losses of power in the past arising mainly from the failure of transmission
because of weather, but we have never experienced the kind of outages which
occurred over the past three years.
When a problem happens once and
is remedied so it doesn't happen again, that is the sign of competent
management. When it happens over and over again the result in any other
organization is change at the top. Why that hasn't happened in the case of
Hydro is difficult to understand.
Liberty makes recommendations
with respect to governance and management.
First of all it recommends that
"the range of skills and experience among the directors on Hydro's
Board" be expanded. Liberty obviously feels that the present Board does
not have those skills and experience. It seems to us that many of the present
appointees owe the appointments to "who" they know rather that
"what" they know. Political affiliation and who you know should not
be the basis for appointments to such an important board.
Secondly, Liberty advises that
"Hydro needs a single executive under which it can consolidate the
principal functions associated with delivering utility service. In the current
structure the Nalcor CEO has a broad range of other duties that limit his
ability to manage Hydro on a day-to-day basis. This new, full-time Hydro
executive needs to be in place soon; a leader with proven, top-level utility
experience would be a first choice."
We understand that the present
CEO allocates around 10% of his time to Hydro.
It is shocking that there has
been no response by Government to those recommendations. And even more shocking
is that the only response has been from the present CEO who has no business
responding to matters which are policy matters for Government to decide.
We believe that the source of the
problems with Hydro is the misguided creation of Nalcor. We should never be in
the oil and gas industry. It is far too risky a proposition for a small
jurisdiction like ours, as we are about to discover. We should not be in the
equally risky business of developing Muskrat Falls, a project which may well
prove our undoing as costs escalate and schedules slip. There is no need to
have Nalcor manage Bull Arm.
We have created a monster with
wildly disparate parts and one of the casualties is the lack of attention to
the most important part of Nalcor, Newfoundland and Labrador Hydro, which has
resulted in the mess we find ourselves today.
There are many fine people
working in Hydro who must be embarrassed by what has been allowed to happen to
the public company they work for. The only way that this can be remedied is to
create a separate board for Hydro and to appoint an experienced full-time
executive to run Hydro and we urge the Board to so order.
Respectfully,
Ronald
Penney
David
Vardy
Ratepayers
Newfoundland
and Labrador