Site C Hydro Project, B.C. |
Each has origins
inextricably tied to gung-ho engineers, compliant bureaucrats, and politicians unwilling
to subject self-serving assumptions and overbearing risk to professional and
objective review. This is bad enough, except Muskrat will be forever dogged by
the deceit that underscored project sanction.
A relatively
populous (4.6 million), economically diversified, and wealthy province like
BC is capable of absorbing the waste of a few billion dollars — even if the very
notion is offensive. British Columbians are no less insulated from excesses of
populism, dogma, and unfettered hyperbole than any other place.
More financially-stretched Manitoba, with a population of just under 1.3 million, is waking up
to the limitations of political rhetoric and a fast-changing American
electricity market, too.
The Site C
Dam, situated on BC’s Peace River is a 1,100 MW facility, forecast to cost
$8.5 billion. Manitoba’s Keeyask
Dam/Bipole III TL is a $5.5 billion/695 MW project. In contrast, the $11.7
billion/824 MW Muskrat Falls project dwarfs the other two — just on the cost
per MW. Even the arithmetic comparison is premature because the Muskrat powerhouse
is only one-half complete and its efficiency remains under a cloud, Nalcor
having lost the legal right to enforce a Water Management Agreement.
That all
three projects are in trouble is indisputable. Researchers at the University of
British Columbia (UBC) recently issued a report calling for the suspension of
Site C, arguing that current export prices would see the project report
cumulative losses of $2.7 billion by 2036.
UBC researchers state that Site C “isn’t the most cost-efficient option for producing power anymore”. BC’s predicted demand for electricity, they say, has "dropped significantly".
UBC researchers state that Site C “isn’t the most cost-efficient option for producing power anymore”. BC’s predicted demand for electricity, they say, has "dropped significantly".
The parallel
with Muskrat is that electricity demand in this province will not reach MF
sanction level estimates until 2036.
At the
center of Manitoba’s and BC’s problem is also the collapse of electricity
prices in the United States. The UBC authors state that the energy will be “exported
at prices currently far below cost".
“We got the
use if you got the juice” is a phrase that still resounds; Premier Dunderdale unmindful
that she had approved the giveaway to Nova Scotia while ignoring the low
returns forecast from a fiercely competitive New England electricity market.
Keeyask Hydro Project, Manitoba |
But far more
than those arrangements (Nalcor has its own Innu deal which has feathered the
nest of just a few Natives) Manitoba Hydro’s failure to examine the business
case for their project has led to the conclusion that even changing the transmission line - Bipole
III’s “circuitous, lengthy and enormously costly route” - will give the province
little respite from fierce competition in all directions.
Lane notes:
“American utilities expect more below-cost power.” He adds: “Hydro now takes
$500 million a year more out of ratepayers' pockets than before the expansion
began [and] if not courageously halted by the… government, ratepayers could end
up paying a further $1.5 billion annually to keep [Manitoba] Hydro solvent.”
Are you
getting the picture?
Underscoring
NL’s Muskrat Falls, BC’s Site C and Manitoba’s Keeyask Dam/Bipole III TL, is
the absence of a full regulatory review.
The NL government dismissed the thumbs down given by the Lower Churchill Project Joint Panel, and permitted Nalcor to ignore the PUB’s implicit warning in favour of approval from its own selection of paid consultants.
The NL government dismissed the thumbs down given by the Lower Churchill Project Joint Panel, and permitted Nalcor to ignore the PUB’s implicit warning in favour of approval from its own selection of paid consultants.
In Manitoba,
a panel — not the PUB — was given the job of reviewing various hydro projects.
It was required to treat prebuild expenses on Keeyask and a second project, Conawapa, as sunk costs.
In BC, while Site C was given an environmental assessment, the PUB was not allowed to review
the business case.
It is clear
that a government that wants support and approval for even risky, and foolhardy,
public works projects will find a way.
In time,
overtaxed consumers will tire of slogging their guts out for a short-term
political purpose. Eventually they might see the value of oversight
institutions, like public utilities boards. But they will learn that lesson the
hard way.
Of course, Muskrat
has been grossly mismanaged from day one, too.
Other than this
massive problem — which Stan Marshall has failed to remedy — the similarities
between the Muskrat Falls project, Site C and Keeyask/Bipole III end. That is,
of course, with one other major exception.
While the
BC and Manitoba projects were ill-advised, it is noteworthy that, unlike in the
case of Muskrat, no one has offered evidence that their sanction was a
consequence of the falsification of project estimates.
Muskrat
Falls, alone, carries that stain.
Remember
those words from Nalcor’s engineer who disclosed, in quite comprehensible and descriptive terms, the virus that had infected Muskrat. In a Piece entitled MUSKRAT: ALLEGATIONS OF PHONY COST ESTIMATES the engineer declared:
“I could not put up with falsifying
information anymore. To begin with, the original cost of
$6.2 billion on which the project was approved was a complete falsification.
The estimate was deliberately kept low — below $7 billion, so as to appear
favourable relative to the cost of thermal power generation.
"The likely costs were known about
three years ago, but Nalcor Management kept it a secret, steadfastly denying
that there were major schedule delays and cost overruns, until it was no longer
possible to hide the true status with the election of a new Provincial
Government.”
Now NL
finds itself in a position where the project has already exceeded the “fake”
estimate by $4.3 billion, including interest costs.
Why the
public is not in a state of rebellion is perplexing. It is a matter that will
be debated in the province for the next one hundred years.
Whatever the
reason for such deep-seated public passivity, the Muskrat Falls project will
forever stand as a beacon testifying to the wilful complicity of bureaucrats
and politicians, to secure the sanction that might otherwise be denied.
When you
hear comparisons to Site C or Keeyask, I suggest that you not be too quick assess them
as merely having “Muskrat proportions”.