Nalcor CEO Stan
Marshall has finally provided the update on the Muskrat Falls project that Ed
Martin wouldn’t or couldn’t. He reset the schedule, estimated project costs at
$11.4 billion, and advised that we should get ready for electricity rates of
21.4 cents per KWh, roughly double what they are now.
$11.4
billion and 21.4 cents are frightening numbers. They must be laid against a
deficit exceeding $2 billion annually, declining GDP, and the reality that we are
already paying some of the highest taxes in Canada — all of which is made worse
by a shrinking population.
I don’t know
if the public really understands the threat the province faces, or if they
derive any comfort from a weak Premier stating that he won’t let the province
go bankrupt. I hope the public and Premier Ball understand that words, alone,
won’t solve this crisis.
Worrisome, too,
is that we have heard little more from Stan Marshall than his disturbing
arithmetic.
Marshall has
changed the tone around the Muskrat issue. He even concurred with the view that
Muskrat Falls is a “boondoggle”. To some it is just a silly word. But no one
should laugh.
“Boondoggle” implies willful, intentional, deliberate, reckless,
wanton, capricious, malicious misconduct. Pick your choice. Google the word
yourself. You will find no flattering definitions.
The new
CEO’s comment is tantamount to an institutional admission of dishonesty.
In his words,
the project failed “to reflect costs and obligations”; it was “too large” for
the province’s demand requirements; the “capital cost estimates were really
aggressive and optimistic”; “false assumptions” were employed. The project was
held up by “false underpinnings”. The CEO stated “there were clearly more
affordable options”.
Marshall’s words
constitute a damning indictment of successive Tory Governments and of Nalcor’s
senior personnel.
Yet Marshall
has made no changes at Nalcor; not in consequence of this troubling (but not
surprising) conclusion, or due to the massive cost overruns which have occurred.
How are we
to have confidence in him that the incredulous figure of $11.4 billion will not
be exceeded? Why should anyone take the figures seriously when the project is
being run by the same senior management, by the same project management, and by
the same group of contractors, too?
Stan Marshall
has some explaining to do on that account and others.
Marshall omitted reference to several key issues with financial
implications:
-
The financial impact of a loss in the Quebec Superior
Court of Hydro Quebec’s challenge to the Upper Churchill Renewal Agreement. The
Agreement (to which Hydro Quebec refused to sign on) has major implications for
the Water Management Agreement (WMA) which sets up an energy bank to exchange
power with the Upper Churchill to compensate for periods when Muskrat can’t
meet demand. Muskrat has a tiny reservoir and is therefore described as a “run
of river” facility.
-
No reference was made to the integrity or the
stability of the North Spur which constitutes two-thirds of the dam structure. Nor
did Marshall appoint an international panel of experts to review geotechnical
conditions and to assess Nalcor’s remediation plan for the Spur.
-
No reference was made to major Quality Assurance
problems on the project. The recent blow-out of a large concrete form, and
manufacturing of flawed transmission cables, are only the most recent examples.
(See: Design Engineer Baffled By Extent Of Muskrat TL Flaw Reported by CBC)
Each of those issues could be a project killer.
To have concluded that Muskrat must proceed, without exhibiting a
detailed quantitative assessment of the option, suggests that Marshall is not
without his own set of blinkers.
If he wants us to trust him, Marshall will have to provide transparency regarding
his decisions.
Finally, there is little comfort to be found in Stan Marshall’s claim that
he is “trying to minimize the capital costs” of the project and is “attempting
to identify other opportunities to bring down” the anticipated rate of 21.4
cents per KWh for Muskrat power.
On the surface, that seems laudable. But the public would be foolish if
it failed to realize that nothing is for free.
We should be concerned what Stan Marshall has been authorized to trade
in order to reduce the financial burden. We need to know the public policy
implications, short and long term.
One can expect Nalcor not to pay the Government dividends or even the interest
on the debt raised for Muskrat. The
fiction, of course, is that the savings to ratepayers will be suffered by taxpayers
— as if they can be distinguished. For that bit of fiction, you can expect
fewer services and reduced program funding in aid of a “boondoggle”.
If Stan Marshall taps the Federal Government — as he proposes, ostensibly
for additional loan guarantees — then the debt of an already heavily indebted
province will be compounded.
Marshall says he is meeting with Emera of Nova Scotia and Hydro Quebec.
Talk won’t be cheap with either of those entities, as history has shown.
Hence, we need to know what the implications of any proposal are, before
new ink is applied to any agreement. Whether the trade-off is the Upper
Churchill Contract (it had better not be!), the sale of equity in Muskrat, or
any increase in the public debt, the public has a right to know first, not
last!
Stan Marshall undoubtedly has the best of intentions. But don’t assume
that he will give public policy issues the same weight that you will.
And his estimate of $11.4 billion is not a cap. It’s just another
estimate derived by a group of people who consistently underestimate their own
incompetence.
Unless Stan Marshall begins to describe fundamental changes taking place
under his watch, my suggestion is: don’t
throw away those calculators just yet!