MUSKRAT TAX IDEA: WHAT WAS JIM FEEHAN THINKING?

I sat in the audience at St. John's Rotary Club, last week, as Memorial Economics Professor, Dr. Jim Feehan, explained how successive years of excessive spending and a precipitous decline in revenues, much of it anticipated, had given rise to the province’s current fiscal mess.  He took time to explain the limited options available to the government, quantified the savings associated with service and program cuts, and suggested possible new revenues, all in pursuit of self-rescue.

Lunch was already over before he launched into the proposal for a new “Muskrat Falls Financing Tax”.  Luckily, the normally thoughtful Professor was empathetic enough not to have subverted decent gastronomy before exposing the audience to the most recent innovation of the ‘dismal science’.

A “Muskrat Falls Financing Tax”, an economic concept? Not really; not in the way of Piketty or the Nobel winning Klugman. It was just an idea; perhaps, like hundreds of others. Except, this one had more implications, an unusual rationale; it was presumptuous, to say the least, even for an economist.

PROBLEM IN THE LONG-TERM DEBT MARKET HAS BALL SCARED

“Paul Davis did not tell the people of this province that we could not borrow long term money. That’s the situation we are currently facing in the province….” - Premier Dwight Ball (VOCM Open Line February 2-, 2016)

I wasn’t sure that I had heard the Premier right; I waited until VOCM had posted Paddy Daly’s Open Line Show on its archive and listened again, and again. Indeed, he did say it: “… we could not borrow long term money…”

Ball seemed apprehensive, even scared. Later, I wondered if he fully understood the implications of what he had said.

This may seem, to some, a very complex issue; but that is true only in its detail. Most people would understand the implications of having their credit card taken away. 

INCOMPETENCE IN REAL TIME (OR WHY THE PUB SHOULD SAY "NO" TO A RATE HIKE)

A convoy of fuel tanker trucks are seen heading out from the Come By Chance Oil Refinery to the Holyrood Generating Station. The cavalcade persists 24 hours per day; day after day. Their mission: to rescue the electrical grid of the Avalon Peninsula from collapse.

Nalcor has already planted its preferred narrative with the media: historically low reservoir levels have imposed a higher demand on Holyrood for power than ever before.

Yet, there is a larger narrative at play, one that depicts the parade of tankers as proof, as much as metaphor, of failed energy policy, incompetent operators of the province’s electricity assets, and a group who play fast and loose with the truth.

Unfortunately, that is not obvious to the Consumer Advocate; but he will be dealt with in a later post.

Nalcor is seeking approval from the PUB to levy $33.3 million on ratepayers for the cost of thermal (diesel) generated “stand-by” power. This is power supplied by thermal plants other than Holyrood, which are called upon when Holyrood can’t meet demand.

STABLE RATES: THE ELEVENTH MYTH OF MUSKRAT (Part II)

Guest Post written by JM

Early in the Muskrat Falls debate, an old friend of mine, who worked at Newfoundland Hydro unequivocally stated: “the upfront costs for Hydro are high, but they will come down over time”. This was a conventional argument for Hydro developments, but one not truly applicable to the back-loaded Muskrat Falls model. 

The prospect of long term stable rates was a key argument used to convince the public of the benefits of the Muskrat Falls project. Its very allure may have been instrumental in maintaining popular support for the initiative. 

Conventional wisdom might well suggest hydro power would make sense long term.  Strangely though, in spite of all Nalcor’s claims, the Crown Agency has never provided a comprehensible, consistent or detailed calculation of future electricity rates.  

TOP TEN MUSKRAT MYTHS: PART I

Guest Post Written by "JM"

The arguments for Muskrat Falls were always more qualitative than quantitative; they appealed to the common sense aspect of peoples' decision-making and thought processes. 

Who has not heard claims of "green energy", "stable rates", "power for industrial expansion in Labrador", "lowest cost option", "export revenues", and "we need the power"? 

It is natural for people to embrace assurances that are of the “motherhood” variety especially if they trust the one making the promise; however, ill-advised.  

Indeed, the promise of Muskrat never seemed huge enough. And when it didn't, there was always former Premier Tom Marshall to up the ante with this mother of all promises: "the project won’t contribute to our net debt".   

MEMO TO BOB HALLETT (AND TO THE MAYOR OF ST. JOHN'S)

A letter written to the Editor of the Telegram on January 9^th, by downtown St. John’s business owner, Bob Hallett, was more than a thoughtful message about a group frequently taken for granted.

It was a reminder that commerce, however small, is serious business; that fiscal prudence, in an economy in which government is the largest player, is at great risk especially when there is, according City Councillor, Art Puddester, “a vacuum of leadership”.

At the provincial level this is an all too familiar theme. In recent years, fiscal drunkenness has reduced the travails of entrepreneurship to the mantra: “I believe in Newfoundland and Labrador”. Except, in the real world, this is the empty bravado of ‘cheerleaders’. And it doesn’t pay the bills.

WHY IS NAPE JERRY EARLE WAVING GOOD-BYE?

The public, especially public servants, will pay a big price for the last decade of recklessness.

It is fine for the NAPE Head, Jerry Earle, to have reminded Anthony Germain on the CBC Morning Show recently, "this is a government that said there would be no layoffs". But such lamentations are meaningless when it is clear deficits and the growing public debt are unsustainable. The howling will not have much currency with fired workers, either. 

Jerry Earle has a big problem. And it is not just about a bloated public service. Issues, other than labour costs, also affect labour.

That is what he fails to see.

SIOBHAN COADY: SO FAR, WE ARE NOT IMPRESSED

Natural Resources minister Siobhan Coady said she is very concerned about the continuing problems at the Holyrood generating plant.

The new Minister of Natural Resources is sounding a lot like the former Tory Minister, Derrick Dalley. And that’s not a tag synonymous with political success. 

The Minister told the CBC  that “the Holyrood plant breaks down too often. I'm concerned that we have an aging asset, that we have an old furnace in our house." The CBC reported the Minister stating “the only solution is to find another way to generate electricity.”

The Minister would only be right if you agreed all the facts should be ignored.

HYDRO ENGINEER REFUSES BRIEFING. WANTS NALCOR TO CONDUCT INDEPENDENT REVIEW

Canadian Hydro Engineer, James L. Gordon has refused a one-on-one briefing proposed by Nalcor’s Engineering Manager on the Muskrat Falls project. The invitation to Gordon came from Muskrat Falls Manager of engineering, Greg Snyder.

Nalcor proposed to hold the meeting at SNC Offices in Montreal.

Gordon has been an outspoken critic who insists the remediation plans for the North Spur require assessment by a competent Review Board. 

In turning down his offer, Gordon told Snyder "there are many others that need assurance from an independent Review Board that the North Spur dam design is correct."

Gordon has worked on 113 hydro projects throughout the world and is the recipient of several awards for “excellence in design”. He fears that Nalcor’s remediation plans have not been designed by experts who have extensive experience in marine clays.

THE DITHERERING DARLING OF DEER LAKE

The Government of Dwight Ball risks putting the financial underpinnings of the Province in even greater peril than it is already, having failed to take early action to remedy the fiscal crisis.

With political leadership so obviously missing, there is bemusement that a Premier, one given an overwhelming mandate, wants the public to go first!

He should worry bemusement will become derision, and that laughter will follow.

Liberal partisans excuse Premier Ball’s attraction to the photo-op as he eschews the role of Chairman of the Board. They watch, some without enthusiasm, as Paul Davis saddles him with a problem the Tories created.  

Inexplicably, Ball seems incapable of fighting back. Turning the other cheek may be fine for "church-goers" but, in politics, it means you are either weak or you are taking advice from someone who wants your job.