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The public should worry when weak governments run the
province. For a decade, successive administrations have given little focus to
tough public policy issues, worsening an already difficult fiscal situation. They don't see that successful societies harm themselves looking inward when predators come calling.
We forget that, while political parties, labour and business
conduct their affairs with a vision narrow enough to be thought ‘in the moment,’
the real business of politics — our business — is being managed in places where
strategic self-interest has long been defined.
A few weeks ago, a story by La Presse in Montreal contained some
rather interesting messaging.
The story quoted federal Natural Resources Minister Jim Carr to the
effect that Ottawa is eager to pursue a “regional transmission line connecting
Quebec and the Atlantic provinces”. There was even the offer to “kick in some
cash” to make it happen.
Jim Carr went so far as to welcome “the recent thaw in
relations” between Quebec and NL. “I am encouraged by what I have heard from
elected officials from both provinces,” Carr was quoted. Strangely, no one in
this province was ever alerted to a chinook having passed through.
Carr added that the corridor “could also open the door to
exports, with such a regional network, to the northeastern United States.”
Carr either knows little about the paradigm shift in electricity
supply and demand in many regions of the world — including the northeastern
U.S. — or he is playing the “dumb” game, the same one Williams, Dunderdale and
Nalcor used on the NL public to get Muskrat sanction.
The price of electricity in the New England area, especially
energy sold on the “spot” market, has fallen into the basement in line with the
commodity price of natural gas. In addition, emerging and anticipated cost declines
in wind, solar and energy storage pose significant threats to Hydro Quebec (HQ) — which is
dependent on high-cost, large-scale transmission infrastructure. This is a huge
new risk and it is occurring in markets that have served as HQ’s traditional
playground and on which their newest megaprojects depend.
The fact that the Feds, in 2017, are still willing to fund
such a transmission corridor — even after Muskrat — knowing as they must that
it will add to Canada’s lack of competitiveness, is indicative of the size of
HQ’s problem and its influence on national politics. Exhibiting the empire
building character of bureaucrats, HQ also failed to recognize market changes before
it damned the Romaine River.
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| Federal Natural Resources Minister James Carr |
Carr’s mission is to find “new lands”; to “boldly go”, on HQ’s
behalf, where previously it was uneconomic for them or where they were
rejected.
The scuttling of the NB Power/HQ deal in 2010 is
still fresh. HQ sought changes to the deal to purchase NB Power assets, leaving
then Premier Graham to conclude that it “no longer” made the $3.2 billion deal
“worthwhile”. Vigorous protests from New Brunswickers also found their mark.
Readers might recall an attempt by HQ, Ontario Hydro and SNC
Lavalin to do a deal in 2005 to develop the Lower Churchill — which foundered.
Out of the effort, SNC could still be seen grasping the friendly hand of Danny
Williams, leading to the birth of the Muskrat Falls project.
Earlier this year, HQ again attempted to entice Ontario to
take more power but ended up with a quite tepid agreement to trade surplus
power back and forth, in the end giving HQ none of the export gains it had
sought.
Against this background, readers will understand the absurdity
of La Presse having invoked the Churchill River’s third hydro prospect — Gull
Island — for potential development.
The assertion works perfectly on the gullible and
short-sighted, but the changing electricity market — one enjoying the fruits of
new technologies and increased competition — has reduced a large megaproject,
like Gull Island, to the status of “bait” for the exuberant and the uninformed.
The provincial Energy Minister, Siobhan Coady, acknowledged
that she is too busy talking to Quebec about mining to “have that conversation”
on the electricity corridor. Had she said, ‘what’s such a corridor got to do
with NL?’ we might have acknowledged that — for once — the Minister is on her
toes. “Too busy” only confirms that she lacks a capacity to walk and chew gum
at the same time.
Of course federal Minister Jim Carr was being coy. He had essentially
confirmed what has long been suspected: the talks allowing the Feds and NL to ‘settle
up’ with Quebec were under way.
A December 2012 story from the CBC quoted Alexandre Cloutier,
Quebec's intergovernmental affairs minister saying that “his province never
received similar help from Ottawa for its hydroelectric development.” He added
that “Quebec is looking at its legal options to fight the deal.” As quickly as
Cloutier began his pout, someone told him to shut up.
If the Feds and NL had forgotten that Quebec believes it
deserves a veto over matters that even peripherally touch La Belle Province,
including the Federal Loan Guarantee for Muskrat Falls, Quebec MPs had passed a
reminder on to PM Harper and later PM Trudeau.
Smart federal Ministers/MPs apply skills befitting their
powerful positions. It has been a long time since a Minister from this province
weighed in on “big picture” issues. Admittedly, though, they are very good at ‘photo-ops’.
In contrast, Nova Scotian Peter McKay, as PM Harper’s Minister
of Justice and Attorney General, Minister of National Defence and Minister of
Foreign Affairs, understood power — the political kind. He is the (real) unsung
architect of the FLG — having designed the Guarantee in a way that enabled a
veto over the project by Nova Scotia.
Of course, Minister Carr is aware of several issues whose
status is more than just tangential to that of an electricity corridor.
The Water Management Agreement on the Churchill River is one —
essential if Muskrat ever works — though Nalcor is still in denial that it was
orphaned by the Quebec Superior Court.
Then there is the Muskrat debt problem. We can properly forget the phrase ‘too big to
fail’. The sums piled up are simply ‘too big to be paid back’. It constitutes a
worrisome footnote to the Federal Loan Guarantee, raising the question: does NL
have some assets that an entity like Hydro Quebec might need to help reduce the
debt burden?
Naturally, such a question can’t be nearly as important as the
ass-covering required for both levels of government, the bureaucrats and the politicians,
too; all having played a role in effectively bankrupting a Canadian province
for the first time since Confederation.
Who has more interest than the Feds and Nalcor to back-channel
such issues, affording our elected suitable political cover?
People may be inclined to think an “Atlantic electricity
corridor’ a one-dimensional interest of HQ. They would be foolish. Even Emera
had better not get too big for its britches.
It is worth reminding readers that, except for HQ’s interest
in purchasing the assets of NB Power, it had no interest in Atlantic Canada —
until now.
This excerpt from the UARB Hearings to approve the Maritime
Link is instructive. Questioned is Rick Janega, President of Emera Newfoundland
and Labrador, who is speaking about a meeting held with Hydro Quebec in 2009 to
determine if HQ would sell them a quantity of firm power. ("Firm"
energy is a source that is always available.) Stated Janega:
That was one reason Emera turned to what — for them — was Nalcor’s
far more attractive Muskrat idea.
Another was that that the Maritimes' electricity
infrastructure was sub-standard.
The next excerpt from the Maritime Link Hearings is
categorical on the point. The UARB
comments are based upon analysis conducted by Morrison Park, its consultants for
the ML Application:
Nova Scotia has hopes to replace over 4000 GWh of thermal
generation, some of that via MF.
Understandably, Emera could not have imagined their good fortune
when electricity neophyte Ed Martin came calling. Not just Nova Scotia’s point
man, Peter McKay, could see a sucker all the way from Ottawa, Emera CEO Chris
Huskilson wasn’t exactly blind.
Under the Emera/Nalcor deal, the “Nova Scotia block” of 1.2
TWh is expected to lower that province’s thermal footprint, as will power
committed under the “Energy Access Agreement” and the “Supplemental Agreement”
— which together, at least for the first five years after first power, represents 50% of MF generation (and 12% of MF
costs, according to David Vardy).
Financially embarrassing for NL is that, beneath each of those
agreements, there is little price difference between the “sold” power and the
“free” stuff, Nalcor having netted just 1 cent per kWh from Upper Churchill
"recall" power last year. (HQ profited more than did Nalcor just from
the “wheeling” fees to transport the energy.)
But even worse — a political embarrassment for the Government
of Canada — is that it backed Muskrat, having given the project scant analysis.
Now, delays and concerns for reliability are causing Nova
Scotia to wonder if they have bargained for a ‘pig in a poke’. (Though Emera's
recent application to run an undersea cable to the Eastern Seaboard assumes that
the cheap energy it negotiated will be available — presumably to be mixed with
wind/solar from other sources.)
Still, the uncertainty is a big problem for a province with 11
federal seats — all of them Liberal. You can well imagine that this issue plays
into Jim Carr’s mission, too.
But that is Jim Carr’s problem — not Hydro Quebec’s.
The latter needs new markets, the “spot” market in the
northeastern U.S. having become so oversupplied that prices are at historic lows.
To make matters worse, local State politicians want at least some of the
sought-after “green” power produced locally.
A federal subsidy for a “corridor” might assuage the bad taste
left by the rejected 2010 New Brunswick deal and permit HQ to return to that
province the “value… unacceptably taken away”, as NB’s Premier discreetly described
the failed negotiation over the purchase of NB Power.
The Point Lepreau nuclear plant represents 35% of NB’s demand
and is getting short on its useful life. But of more immediate interest is that
25% of NB’s power needs are generated with fossil fuels, and it therefore remains
a juicy market for HQ.
In short, Hydro Quebec seeks an Atlantic Canada market because
it offers them a new value proposition. There is less competition and wholesale
electricity prices are higher than in the New England states. If the Feds “kick
in” a subsidy for transmission line construction and upgrades, all the better. Besides,
it will square Quebec's demand for commercial parity with the value given
Muskrat via the Federal Loan Guarantee.
There are other irksome sidebars to this story.
With NL not needing any power from outside the province, and neither
NS nor NB having extended the welcome mat to HQ, one could assume that the idea
of an “Atlantic corridor” has been skilfully misnamed. Is it not a “Quebec
corridor” that the Feds actually seek?
I suppose it could have been called a “pipeline” but hadn’t the
Montreal area mayors, including Denis Coderre, put political pressure on the
Quebec Government to oppose the “Energy East” proposal? Did the Quebec
government tell them to be quiet? I don’t think so.
When NL sought “wheeling rights” to transmit power through
Quebec, the province was denied by that province, then derided by Ottawa because,
ostensibly, we were putting at risk the fabric of the nation — interfering with
Quebec nationalist sensibilities — by merely raising the subject. But a
corridor for Quebec? The ‘fabric’ is not nearly as brittle when it is someone
else’s.
Yes, in proceeding with Muskrat, Newfoundland screwed itself
in order to screw Quebec — even if that wasn’t Williams’ sole motivation for
the project. But the suggestion of an electricity corridor — with federal
backing — is justifiably a sore point.
An electricity corridor — not even for all, but for just one
part of the smallest economic region of the country — can get national
attention when Quebec demands it!
Let’s be clear. Quebec is not our friend.
Quebec is a capable, disciplined and shrewd player, both in
national politics and in the business of influencing its own economic
interests. Newfoundland and Labrador is not.
Negotiations with Quebec — or allowing the Feds and Nalcor to
back-channel those negotiations — should not proceed when the province is on
its economic knees. And they should never be undertaken by two of the parties who
were complicit in the Muskrat Falls debacle: the Feds and Nalcor.
Quebec will have the last laugh over Muskrat; that is an
incontrovertible fact.
But what is clear is that a new game is afoot. And we are not
even at the table, as Minister Coady has confirmed.
Yes, the game is about preserving and growing Hydro Quebec's
power monopoly in Eastern Canada, and about the Feds insulating themselves from
the uncertainties of a big mess in the context of Muskrat.
But only the terribly naive would think that is all that the
“Atlantic Energy Corridor” is about.
Underneath it all is about how to best pick over the dead
carcass that is a bankrupt Newfoundland and Labrador.
The disposal of NL Hydro, and of the nearly 67% of the shares
in CFLco that Hydro Quebec does not own, will be eyed greedily by them.
That assets, alone, won't raise enough to resolve the whole
financial problem. Other assets will have to be stripped from the province too.
Meanwhile, as Quebec and the Feds play out their idea of “big
picture” politics, our Ministers and MPs send us “selfies” oblivious to the
issues and their implications.
We are destined to make a
virtue of stupid.________________________________________
Editor's Note: This piece was written with research contributions from David Vardy and PlanetNL. The opinions expressed are mine.