HAPPY NEW YEAR IN VERSE, OF COURSE

HAPPY NEW YEAR

An open stove -

Wood-junks burn

Red-orange-yellow

In flickering flames -

A rosy glow.

Scent of smoke,

And ghostly faces

In coals and soot.

REFLECTIONS AND THE TOP TEN POSTS 2018

Not surprisingly, the Muskrat Falls Project took centre stage — again — in 2018, while in the last quarter the Commission of Inquiry stole the spotlight, including among the mainstream media.

The Inquiry heard a sordid tale and irrepressible proof that that the project was based on false premises. The integrity of the sanctioning process was undermined by a number of disclosures including confirmation that other options (power from Hydro Quebec and LNG) in addition to the Isolated Island option (small hydro, wind and thermal) offered the province less risk and possessed greater viability. Estimates for the project were “low-balled” (a long-standing claim of the Anonymous Engineer). The Commission exposed myriad instances of official interference with the very consultants whose compromised Reports Nalcor and the Government used to justify Sanction. 

DUNDERDALE DROPS TWO BOMBSHELLS ON INQUIRY

Readers of the Uncle Gnarley blog have probably heard enough of the Muskrat narrative since the Inquiry began in September. Likely, most have broken out the Christmas cheer — including the legal weed — which is sensible, as long as the car keys are buried.  Sobriety may not be good for your health right now. 

In what other way, I wonder, could the drip-drip-drip of mind-numbing testimony extracted by Commission Co-Counsel be suffered by a decent citizenry, however necessary? 

Fortuitously, O’Brien and Learmonth have been gifted the skills of interrogation, each one displaying the painstaking artistry of the dentist’s drill. It is a useful tool, too, so many of their subjects having exhibited excessively large memory cavities. Poor mental dentition was repeatedly the politicians’ escape. Ignorance of cavernous proportions was also on display, overlain with unbridled hubris. Ed Martin even elicited from the Commissioner an unscheduled interim report — actually a tongue-lashing — which described him as “rude”, though I expect an even harsher assessment awaits.

THE BARD ON MUSKRAT, MARIJUANA AND CORRUPTION

SUITS?

Do “Suits in Boots”* with greedy hand

Plunder freely projects grand,

And Shills attest the sleight-of-hand

As arrogance and hubris brand.  

Muskrat? Marijuana land? Et al, all demand

The question: who commands?

Who’s biggest suit from Newfoundland?

Democracy’s a thin veneer -

Lip service only, leads the cheer.

Dishonesty comes with curling sneer

As strings are pulled for elite sphere.

Does Province vie in corruption van

With Stans, Somalias, and Sudan

As numbers veil the anchorman?

John Tuach

Pynn’s Brook

December 23, 2018

*- Quote: Andy Wells, The Muskrat Falls Inquiry

MUSKRAT ENERGY COST – ANOTHER MEASURE OF FAILURE

Guest Post by PlanetNL

PlanetNL22: Muskrat Energy Cost – Another Measure of Failure

Several leading electricity industry research organizations compile annual estimates of utility scale generation options.  These reports roll up the expected lifecycle costs relative to energy output to provide a single energy cost figure known as a Levelized Cost of Energy (LCOE).   LCOE allows alternatives with high capital cost but low operating cost to be directly compared to options with low capital cost but high operating cost.

The energy industry consistently selects projects that can deliver competitively low LCOE numbers, however, Nalcor avoided this technique in favour of a customized and burdensome Cumulative Present Worth analysis that avoided illustrating the true economic merit of Muskrat Falls.  Although the LCOE metric was front and center in the Nova Scotia regulatory hearing for the Maritime Link, it was avoided by Nalcor and Government here.  Little wonder, as Muskrat’s LCOE is nothing to be proud of. 

DOES DUNDERDALE KNOW MORE NOW THAN SHE DISPLAYED AT SANCTION?

Former Premier Kathy Dunderdale is scheduled to appear as a Witness at the Commission of Inquiry into the Muskrat Falls Project today. The question that should be in the public's mind is whether she will display any  more knowledge of why her Administration sanctioned the scheme than she did in 2012. At that time she ought to have known that Nalcor was headed by unsuitable and inexperienced leadership and that it was driven by ego (her own and Danny Williams') as well as recklessness underpinned by several unfounded (possibly contrived) assumptions which included some 50-year forecasts. 

A few weeks after the Government sanctioned the project (December 17, 2012) this Blog featured a piece entitled "What the Members Opposite Don’t Understand" which had nothing to do with their ignorance (though it could have been about that, too). At issue was the lack of knowledge displayed by Dunderdale, herself.

Now, the former Premier will have to convince Judge Richard LeBlanc that she comprehended the complexity of  the project and enormity of its implications - apart from the justification for giving it Sanction. 

We await greater illumination from the former Premier in the coming days. Here is the January, 2013 piece:

ED MARTIN’S OVERDUE COMEUPPANCE

A comeuppance for Ed Martin was as predictable as the certainty that Muskrat Falls would become a $12-15 billion project. But it took nearly three full days of evasion, obstruction and “attitude” from Martin for the Commissioner, Richard LeBlanc, to run out of patience. Less tolerant Judges might have reined in the former Nalcor CEO during the first hour of his examination by Commission Counsel, Kate O’Brien.  

Like a spoiled child beyond even coddling, this grown-up couldn’t discern that his behaviour, every bit as much as his decisions, were under a judicial microscope. Contrition was never an expectation.

Triggering the Judge to intervene late Wednesday afternoon was the cross-examination by Geoff Budden, lawyer for the Muskrat Falls Concerned Citizens Coalition (this scribe is one of the Coalition’s three interveners along with David Vardy and Ron Penney). But the moment was not his as much as it was Kate O’Brien’s. Budden had merely continued a line of questioning which Martin interpreted as a licence to obstruct and to void the Inquiry of the requirement of basic civility.

ED MARTIN'S HYDRO PURGE OF 2005

Guest Post by Ron Penney

In my guest post of October 4th I explained how the 2002 Gull Island deal was scuttled by then Leader of the Opposition, Danny Williams, aided and abetted by the then Chair of the Board of  Newfoundland Hydro, Dean MacDonald, and board member Mark Dobbin.

When Mr. Williams became Premier in 2003 he proceeded to commence a series of personnel changes at Newfoundland Hydro which has led directly to the Muskrat Falls boondoggle.

The first was the appointment of Gilbert Bennett in 2003 to oversee the Lower Churchill project. Mr. Bennett formerly worked with Rogers Cable, whose work experience is in telecommunications. He is no doubt a bright and competent telecommunications engineer but it is hard to see how that experience readied him for his current role.

WHAT COULD HAVE BEEN: LOWER RATES NOT HIGHER

PlanetNL21: What the Isolated Island Option Could Have Been

In deciding to proceed with Muskrat Falls, Nalcor and Government could not see the low-cost alternative staring them in the face that was available to eliminate Holyrood and keep electricity rates stable and low.  

First, they could not identify that the Isolated Island System had no load-growth potential.  

Second, they would not recognize that there was great inefficiency in allowing high seasonal electric heating requirements to persist.  

Third, they resisted changing consumer rates to include marginal pricing that would sell Holyrood energy for what it cost to produce.  

NALCOR'S LOAD FORECAST STILL WRONG

Guest Post by PlanetNL

PlanetNL20: Island Load Forecast Still Wrong

To sanction the Muskrat Falls project, Nalcor relied on their development of a steadily growing electricity load forecast on the Island.  The assumptions used have proven so weak that in 2016 Nalcor decreased the total Island energy load forecast out to 2040 by 25%.  That’s a major error for any self-respecting utility to make.  By putting forward the 2016 revision, Nalcor has quietly admitted their prime reason for Muskrat sanction, needing a lot of power soon, was untrue.

This posting will challenge why the latest Nalcor load forecast still includes 10% net load growth leading up to 2040 instead of declining.  Does Nalcor believe this province has insatiable electricity demand at any price?  Do they remain shockingly ignorant of global trends and energy alternatives?   It appears their revised forecast was a significant step toward reality but not all the way there.  The analysis also begs the question, shouldn’t a proper pre-sanction load forecast have also pointed to declining power needs instead of increasing?

THE ROLE OF BIAS IN NALCOR’S DOWNFALL

Mr. Paul Humphries, the VP of System Operations and Planning at Newfoundland Hydro until his retirement two years ago, recently appeared as a Witness at the Muskrat Falls Inquiry. Humphries was one of the primary architects of the project, as he stated during the 2012 PUB hearings with this declaration: 

“… I'm Paul Humphries, manager of system planning and ultimately the decision on the requirement to move forward and the alternative for the best alternative, and the determination of the cumulative present worth of those alternatives is the responsibility of my department.”

The Cumulative Present Worth (CPW), to which Mr. Humphries refers, is a methodology used to discount to present value, for comparison purposes, the Isolated Island and the Muskrat Falls options. Of course, the calculation is meaningless if the inputs used aren’t prepared rigorously. In such a case, the boosters of the preferred option always win. 

NEGATIVE DIVIDENDS ONE OF THE REALITIES OF MUSKRAT

Guest Post by PlanetNL

PlanetNL19: Muskrat Dividends Will be Negative

While megaprojects have huge costs, their promoters love to talk about the benefits.  At the Decision Gate 3 (DG3) final sanction stage in 2012, Nalcor developed cost and benefit models that predicted not only that Muskrat was going to be billions cheaper for ratepayers than the Isolated alternative but that the Province would reap many billions in dividends.  Key Muskrat promoters heard from at the Inquiry so far still seem to cling to expectations of positive dividends from the project. 

This post lays out how Nalcor and Government failed to assess rate affordability and revenue risk before sanction.  As a result of one of the key risks becoming realized, Government’s anticipated dividends will be greatly exceeded by subsidies and mounting debt servicing costs.  These two-way cash flows must only be considered together in finding the true dividend or net loss on the project.  Government and taxpayers will struggle to subsidize high Muskrat costs in every year of the 50-year project payback term leading to massive new debt growth far larger than the original capital cost of the project.

TOM OSBORNE NEEDS A FISCAL AXE AND THE COURAGE TO USE IT

In March of this year the Finance Minister, Tom Osborne, delivered the seventh in a successive string of deficit budgets, their genesis originating in both Tory and Liberal Administrations. And like his Liberal predecessor, Osborne still offered the  assurance that fiscal balance will be achieved by 2022-23.

On what basis should we believe him any more than we did Tory Finance Minister Ross Wiseman or Liberal Cathy Bennett? Isn't the process of digging the province out of the current debt spiral less a matter of prediction than of serious intent, discipline and leadership provided through diligent oversight? 

Last year's Budget outcome offers a perfect example of why the promise of achieving a balance of revenue and expenditures in our fiscal affairs is just that - a promise. Nothing more.

THE WONKY ECONOMICS OF MUSKRAT UNVEILED (PART II)

Guest Post by David Vardy

The Economics of Muskrat Falls (Part II)

This post builds on Part I entitled Will Muskrat Falls Pay Dividends? (Part I) which was published on Thursday, November 8, 2018.  That post is recommended reading for this Part II.

I have attempted below to examine the likelihood that Muskrat Falls will cover all of its costs. To make this assessment I have used the “revenue requirement” projections supplied by Nalcor in response to my ATIPPA request for each component of the project, along with the return on equity assumptions used by Nalcor. The return on equity (ROE) for generating assets is 8.4% and is built into the PPA for 50 years. 

WILL MUSKRAT FALLS PAY DIVIDENDS? (PART I)

Guest Post by David Vardy

Part 1: Is the PPA another Churchill Falls Contract?

Russell Wangersky was right when he said in the Telegram on October 27, 2018 that Muskrat Falls is “a win for investors but the risk’s on us”, the ratepayers.  “The fundamental assumption in the financing of the project is that the revenues charged to island ratepayers for the generation and transmission of Muskrat Falls power will flow unfettered to the lenders to satisfy debt payments.”  

In this post I examine the underpinnings of this “fundamental assumption”, beginning with the take-or-pay power purchase agreement (PPA), the role of equity and the concept of freedom of choice. Does the PPA lock us in to an abusive relationship, not for 65 years but for 50? Is it another Churchill Falls Agreement which strips us of our rights? In my next post I will ask if the PPA makes Muskrat Falls self-supporting and whether revenues from rates will cover all costs and generate dividends for the government of Newfoundland and Labrador (GNL).  

THE SUPREME COURT AND THE LOSER

“Show me a good loser and I’ll show you a loser.”

                                      – Vince Lombardi

The message from the hall-of-fame coach to his Green Bay Packers was unmistakable: equanimity should never be perceived as resignation or acceptance even when a loss is beyond your control. Lombardi might have added, for certainty as much as a warning: there’ll be a next time.

Dwight Ball is no Vince Lombardi. The weakling Premier, oblivious to the greatest financial crisis since the 1930s, has confirmed — again — that he does not have the stuff of leadership.

What did he say when the Supreme Court of Canada gave its 7-1 decision last Friday on reopening the Upper Churchill Contract? “The past is the past for us. The decision is the decision,” Ball told the media in a tone of resignation. He added: “It will not interfere with the working relationship we have with Quebec.”

When a kick in the balls for the first player giving the opposing team a compliment would have constituted Vince Lombardi’s sole command, for our leader the ink isn’t dry on the SCOC decision before he is playing supplicant to Quebec. 

BIG WINDFALLS TO COME FROM CHURCHILL FALLS?

Guest Post by PlanetNL

PlanetNL18: Big Windfalls to Come from Churchill Falls?

For decades, Newfoundland and Labrador (NL) Governments have recited the lost earnings potential of the Upper Churchill and bemoaned the billions earned by Hydro-Quebec (HQ).  They long for the day of August 31, 2041 when HQ’s locked-in low-price contract for 90% of CFLCo’s energy shall expire and most of the profit will flow into NL.

It’s the kind of linear-thinking politicians thrive on: if electricity prices remain constant, demand remains constant, and production costs remain constant, then the dream seems real.  A naïve Premier today may even be thinking of borrowing billions to mitigate Muskrat losses until 2041 because the mighty Upper Churchill will quickly pay it all back and more.

That would be a terrible gamble to take as already there are a number of economic threats to the viability of Churchill Falls power.

BARD ASKS IF MUSKRAT WAS STUPIDITY OR MORE

DAM ENQUIRY

As dam inquiry grinds along,

A dismal tale unfolds.

It follows on the lines

That the Gnarley Blog foretold.

With bullying and with bluster

A ‘bill of goods’ was sold.

Next we need to ask

Of fraud and theft untold?

Or is it plain stupidity

That left us debt to hold?

John Tuach 

October 30, 2018

TODD STANLEY TELLS MF INQUIRY MORE THAN HE INTENDED?

Former senior bureaucrat Todd Stanley was on the witness stand at the Muskrat Falls Inquiry last Monday, October 22. All witnesses at the Inquiry are interviewed by Commission Counsel, but his interview is noteworthy for several reasons.

Mr. Stanley's constituted the most frank appraisal yet of the relationship that existed between public servants and Nalcor senior executives when approval of the Muskrat Falls development was being whisked through the Government's  approval process.

A 17-year veteran (2001–2018) of the public service, Stanley rose to the position of Deputy Minister of Justice. He also served as Counsel to the Department of Natural Resources in the early days of the Muskrat Falls development.  

EXPLODING TRANSMISSION COSTS A TERRIBLE BLUNDER

Guest Post by PlanetNL

PlanetNL17: Exploding NL Transmission Costs A Terrible Blunder

While Muskrat Falls “the dam” is the object of much well-deserved scorn, the transmission line parts of the project may not be receiving all the critical attention they deserve.  This post examines cost recovery for the transmission assets on A C/kWh basis to demonstrate just how uneconomic they are.

Along the way, transmission costs in other jurisdictions are compared and the economics for importing or exporting energy over the Maritime Link are examined.  The conclusion is that Muskrat and the Maritime Link will do only thing well: deliver benefits to Nova Scotia.

BEYOND REDEMPTION: NALCOR MEDDLES WITH INDEPENDENT PANEL

Surely there must be some aspect of the Muskrat Falls affair in which there is evidence that the public interest mattered? Actually, no. So far, the facts only show a myopic determination to get the project sanctioned. At the Inquiry, even the fundamental integrity of Nalcor senior management is now under scrutiny.

On the witness stand, Derek Owen confirmed email evidence that Paul Harrington, MF Project Director, attempted to influence the conclusions of a process known as a Cold Eyes Review. The Independent Review Panel (IRP) struck for the purpose was chaired by Owen. It was an electrifying moment to be sure, possibly in part because we may be witnessing how unfettered executive privilege becomes empowered in an atmosphere of political bombast. The Commission has not even been able to find government-prepared analysis of the project. Former Premier Williams was asked by the Commissioner to help locate the work. 

The Harrington story is serious business. 

ED MARTIN TOLD ABOUT LOW-BALLED PROJECT COSTS

According to some observers, John Mallam, P. Eng. ought to have been — minimally — the Vice-President of Nalcor. He had served in senior roles at Hydro for most of his engineering career and rose to the position of Vice-President of the “regulated” subsidiary — utility speak for an entities under the control of the Public Utilities Board. He now serves on the Nalcor Board of Directors.

On the witness stand at the Muskrat Falls Inquiry, Mallam did not seem to fit the pliant mould that afforded cronyism to run rampant at Nalcor's senior level. Upon Nalcor’s creation, becoming the parent of Hydro and other subsidiaries holding provincial assets including Bull Arm, some senior executives were shown the door following Ed Martin's arrival. 

WILLIAMS TAKES WRONG PATH TO REDEMPTION

Danny Williams' inability to address the issues raised in the Grant Thornton Forensic Audit or answer for why the Commission of Inquiry is unable to find any detailed analysis performed by his Administration on the Muskrat Falls project seems not to have inspired in himself even a moment of reflection. Rather, he returned to the Inquiry evidently for his pound of flesh as early critics, David Vardy and Ron Penney, sat in front of the Commissioner, too.

Williams could be seen lurking on the sidelines, the former Premier still hoping that some of his dignity might yet be salvaged. He was waiting for his brother, Tommy, to land a few body blows on Vardy and Penney. He left disappointed. 

Observing Tommy brought to mind a well-known citation attributed to Napoleon, one I had hoped our legal counsel would be mindful of. A paraphrasing of the adage might read: never interrupt your adversary when he is in the process of self-destruction. 

NEEDLES IN HAYSTACKS AN ON-GOING ACCOUNTABILITY PROBLEM

Guest Post by PlanetNL

PlanetNL16: Needles in Haystacks, Symptoms of An Ongoing Accountability Problem

Participants and followers of the Muskrat Inquiry and earlier Muskrat reviews suffer simultaneously from information overload and yet a dearth of the vital information they are often seeking.  Nalcor and Government may have provided reams of materials but much of it is window dressing that gives little insight into key decision-making issues.  Take for example the Commissioner’s direct message to former Premier Williams that there is no evidence of anyone inside Government performing a critical review of Muskrat information supplied by Nalcor.

Too often it appears that the more important the issue, the less there is to be found.  In today’s post we revisit the issue of post-Muskrat rates being based on a two-tier declining rate scheme as a tiny but significant new nugget of information has been found about it.  Such a rate scheme would be a huge change in policy and one deserving of considerable study, yet it was buried in a mundane technical report with no basis of justification or analysis to defend it.

…. 

FIVE WORRYING TAKEAWAYS FROM DANNY WILLIAMS’ TESTIMONY

Former premier Danny Williams fired back at critics at the Muskrat Falls Inquiry calling their opposition to the project "reckless, irresponsible and shameful." Williams went so far as to term them “bottom feeders”. Even the Uncle Gnarley Blog earned his wrath referred to as “Uncle Nobby, Nutty or whatever”. Eventually, it seems, the Commissioner had heard enough. This is an excerpt: 

But Mr. Williams we are living in a democratic society so you being a politician in the past would know that there are people who are going to agree with you and people who are going to disagree with you. So people have a right, I assume, to disagree and while you may not like the tenor of their statements I suspect that, in a democracy, we have to give people the right to express their views. – Judge Richard LeBlanc

The Commissioner’s rebuke of Williams’ disparagement of Muskrat Falls’ critics was one noteworthy moment of Williams’ testimony last Monday and Tuesday, October 1 and 2.   

MISSED OPPORTUNITY: SCUTTLING OF THE 2002 GULL ISLAND FRAMEWORK AGREEMENT

Guest Post by Ron Penney
MISSED OPPORTUNITY: THE SCUTTLING OF THE 2002 FRAMEWORK AGREEMENT FOR DEVELOPMENT OF GULL ISLAND 

The full development of the Lower Churchill consists of two projects: Gull Island and the much smaller Muskrat Falls project. Gull Island is projected to be a 2250 megawatt project as compared to the Muskrat Fall’s 824 megawatts. Gull Island was always felt to be the far more economic project.

In 2002 a draft Framework Agreement was negotiated with Hydro Quebec to develop Gull Island. A link to that agreement is found here.

At the time, the then Chair of Newfoundland and Labrador, Dean MacDonald, and another Board member, Mark Dobbin, broke with the rest of the Board, and opposed the agreement. The then Leader of the Opposition, Danny Williams, became aware of the agreement and mounted a vigorous and ultimately successful campaign to scuttle the agreement.

This represented the most recent attempt to develop Gull Island and led directly to the Muskrat Falls debacle.

FIRST THOUGHTS OF MUSKRAT INQUIRY

When former Premier Danny Williams stood to be Sworn-In before Inquiry Commissioner, Judge Richard LeBlanc, last Monday, thoughts of Hans Christian Andersen’s memorable phrase – the Emperor has no clothes - was difficult to suppress. 

The moment had nothing to do with the witnessing of the diminutive former Premier being held to account. Rather, it was the recall of a phrase spoken by a child in the Danish novel who in his innocence described what he saw. “But he isn’t wearing anything at all”, the child exclaimed. It was the one truth that every one of the emperor’s subjects had been afraid to utter.

UNCLE GNARLEY BLOG LOOKS AT ITSELF AT SYMPOSIUM

Comments for Muskrat Falls Symposium sponsored by the Sociology Department of Memorial University organized under the leadership of Dr. Stephen Crocker:

I have been asked to discuss the Uncle Gnarley Blog and the impact it might have had on public understanding of the Muskrat Falls project. I will be careful not to perform an appraisal best left to others.

One might ask: why blog anyway? It’s a lot of work. One reason was that no clairvoyance was required to see that this project would end badly and those who saw it that way had an obligation to warn the public.  The business case could not stand up to scrutiny.   Those responsible needed to be held to account.

FORENSIC AUDIT ONLY SCRATCHES SURFACE OF SANCTION COSTING ERRORS

Guest Post by PlanetNL

Planet NL15: Forensic Audit Only Scratches Surface of Sanction Costing Errors

The release of the Grant Thornton report on Friday raised serious doubts about Nalcor’s pre-sanction justification for the Muskrat Falls project.  The report indicated enough areas where weakly constructed assumptions would add up to show that the Muskrat Interconnected option would not be the least cost alternative compared to the remaining Isolated Island option.

Despite these very persuasive snapshots, the Inquiry may only have gotten just what it asked in terms of the forensic audit’s time and budget limitations from a team with little experience in electricity utilities.  The story is not yet complete enough and the Commission should pursue reconstruction of Nalcor’s cost models using an extensive revised set of assumptions developed by an experienced utility consultant.  It’s a significant undertaking but one that appears essential to allow the Commissioner to concisely explain the project’s economic fallacy.
……

WHERE YOU CAN ASK QUESTIONS YOU WON'T HEAR AT THE INQUIRY

BAY DU NORD: TURNING GOOD NEWS INTO DISBELIEF

Guest Post by Agent 13

The decision by Equinor (formerly Statoil of Norway) and Husky Oil to further assess the feasibility of developing the Bay du Nord oil field, located some 500 km offshore in the Flemish Pass region, represents good news for the province. Unfortunately, the Ball Government turned what was a good news day on July 26, 2018 into one of disappointment and disbelief.  

That the provincial government thinks it is solvent enough, knowledgeable enough, or savvy enough to deal with one of those major oil companies — with their mixed portfolio of huge capital assets — is a prolongation of the same pretense that facilitated the reckless decision to sanction the Muskrat Falls project.

FORENSIC AUDITOR CONFIRMS NALCOR UNDERSTATED COST ESTIMATES FOR MUSKRAT

This post co-authored with David Vardy

The Forensic Auditor's main conclusion was that based upon its “findings and observations, at the time of sanctioning” a “combination of…potential misstatements may have resulted in the Interconnected Island Option (the Muskrat Falls project) no longer being considered the least cost option at the time of sanctioning.”

In coming to this conclusion, Grant Thornton has confirmed long held suspicions that Nalcor planned to advance sanction of the MFP regardless of the consequences. Essentially, the Forensic Auditor chronicles a narrative that suggests recklessness on the part of Nalcor Energy. The Forensic Audit was made public by the Commission of Inquiry September 21, 2018.

"AT THE MERCY OF THE WEATHER": HYDRO NOT READY FOR WINTER, SAYS PUB CONSULTANT

Guest Post by PlanetNL 

PlanetNL14: Hydro Reliability This Winter - At the Mercy of the Weather

The Liberty Consulting Group is a specialist frequently utilized by regulators to provide critical analysis of how utility businesses are performing, especially in the wake of major failure.  The NL PUB hired Liberty in 2014 to assess the causes of the January 2014 outage event known popularly as Dark NL and to subsequently monitor NL Hydro’s plans to upgrade the system.  Liberty has evaluated Hydro’s winter readiness every year since and is monitoring the Transition To Operations (TTO) efforts to integrate Muskrat Falls, the Labrador Island Link and the Maritime Link.

TRUTH GETS A ROUGH RIDE IN WINDSOR LAKE BYELECTION

When Premier Dwight Ball kicked off the Windsor Lake byelection claiming that ratepayers and taxpayers – both – would be spared the burden of the Muskrat Falls project he wasn’t being fanciful; he was being dishonest. Hyperbole is seldom a sidebar in any election.  But this time the sheer size of the promises surely made them the main event.  Particularly disconcerting is that Ball's rate mitigation claims lacked any proof of viability. 

Sincere and sensible politicians will avoid over the top promises especially when they know that they are playing a limited hand. The Premier squarely placed himself among the less disciplined. Likely, for that reason, the public seemed to treat them with something ranging from scepticism to derision.    

Ball’s dark side has been exposed before. His doubtful narrative around the sacking of former CEO Ed Martin and how the latter still ended up with a multi-million-dollar severance package contains the same insincerity.

MF COALITION TO HOLD FIRST MEETING TONIGHT

Notice of General Meeting of the Muskrat Falls Concerned Citizens Coalition (MFCCC) The first meeting of the Coalition will take place at 7:30 p.m., Wednesday, September 12th at the Holiday Inn, 180 Portugal Cove Road, St. John’s, to bring our members up to date on our preparations for the hearings which will commence on Monday, September 17th.

This meeting will also be broadcast Live via our Facebook page for those not able to attend in person.

Please let us know if you will be attending in person by RSVP to info@mfccc.ca.

PREMIER'S STATEMENTS FALL SHORT SAYS COALITION

The Muskrat Falls Concerned Citizens’ Coalition, headed by David Vardy, Ron Penney and Des Sullivan (the latter also hosts this Blog) wrote the Premier on September 3, 2018 seeking specific commitments and clarity following his statements to the effect that ratepayers would not be expected to bear the costs of the Muskrat Falls project and offered to reinstate the authority of the PUB to set rates.

Following receipt of the letter, the Premier made a further statement on September 6 which fell far short of his earlier commitments. This is the text of the Coalition's response to the Premier's latest comments. This post also provides a link to the full text of the letter sent to the Premier.

WHEN NL NEEDS A HEAVYWEIGHT THERE’S ONLY SEAMUS O’REGAN

Politics is not so comfortable an arena that politicians need only do soft-sell through photo ops and nice-sounding press releases.

Sometimes public policy issues are complicated, require intervention at a high political level and demand considerable analysis. Solutions to the big problems require political shrewdness, dexterity and good relationships at the Cabinet level.

If the politician, even having been appointed to Cabinet, doesn’t grow in the job and fails to learn how to get things done in that highly competitive business, likely he/she will have little to report at the next Poll. While many politicians prefer the soft-serve of social media platforms, the savvy ones — and survivors — will spend a good deal of time making political alliances and setting the stage for when they will need support on a make-or-break issue.

I get no sense that the Minister of State for Veterans’ Affairs, Seamus O’Regan, either understands those rules or has the heft to position himself for the long game.

CHES CROSBIE SENDING WRONG MESSAGES

I am not quite sure who the new Leader of the PC Party, Ches Crosbie, is trying to impress with some of the positions taken in recent weeks.

While he shares the well-known Crosbie name, he is coming up short in proving that he is his father's son. Regardless of the side of the partisan divide upon which one sits, John Crosbie, Ches' father, could be counted on to be forthright and to say publicly — in the Halls of Parliament and in the provincial and federal Cabinets — exactly what was on his mind.

One example is often repeated in a CBC clip in which he is surrounded by a throng of frustrated fishers following the declaration of the Cod Moratorium. Crosbie the elder forthrightly answers one indignant protester: “I didn't take the goddamn fish out of the goddam ocean!”

BIG BALL PROMISES: LET'S GET THEM IN WRITING

“We just want to clarify, there is no way ratepayers in our province could pay or should pay for the burden of Muskrat Falls.”  The province will be “separating the ratepayers from the Muskrat Falls debt.” It is a “tremendous burden… a debt issue, not a ratepayer issue.”  These are all direct quotes which the CBC attributed to the Premier in a by-election kick-off for Liberal Candidate, Paul Antle, in the District of Windsor Lake.

What else did the Premier say? He said, “we are not looking at increasing taxes for people in Newfoundland and Labrador.”

As others have asked, if both ratepayers and taxpayers will be spared responsibility for the $12.7 billion Muskrat Falls debt, who is going to pay?

BUSTING THE PREMIER'S NUMBERS AGAIN

Guest Post by PlanetNL

PlanetNL13: Busting the Premier’s Numbers Again

In PlanetNL12, an analysis of Government’s secretive two-tier declining rate scheme calculated the impact on three types of electricity customers.  The unfairness of such a rate scheme was made clear: the less electricity you use, the more steeply your Government wants you to pay for Muskrat.  This approach will tend to hit the many poor and working-class who struggle to pay their bills especially hard.  Meanwhile at the other end of the spectrum, the few who tend to have large high-energy homes will be pleased with little difference they’ll find on their power bill.

How did Government and Nalcor keep this unexpected twist of rate design?  Well, they simply didn’t want to tell us and for about two years they carefully misled us.

18 c/KWh – WARNING – NOT EXACTLY AS ADVERTISED

Guest Post by PlanetNL

PlanetNL12: 18 c/KWh – Warning – Not Exactly as Advertised

The last day of NL Hydro witness testimony at the General Rate Application hearings at the Public Utilities Board revealed a cruel and regressive plot twist. 

A senior NL Hydro manager on the witness stand indicated that Government’s post-Muskrat mitigated rate target of 18 c/KWh was merely an average figure.  He said Hydro was already considering a rate design scheme that would be presented to the PUB in the coming months based on two-tier declining rates.  In other words, the first part of energy used will cost more than 18 c/KWh but the rest will be priced lower.  When all residential users are added up together, the increase will average out to a 55% over today’s rate.

We won’t know Hydro’s exact details for a while, but a model is presented here that plainly shows not everyone will be hit equally.  A substantial number will be hit hard while a small number barely take a hit at all.
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"VOODOO" ECONOMICS RE-VISITED

My late brother, Brendan Sullivan, was one of the first opponents of Muskrat Falls and wrote a pre-sanction article employing the term “voodoo economics”.  It described a scheme contrived by Nalcor to lower power rates early in the project by back-loading the equity repayment onto future generations. His post of November 29, 2012 stands the test of time. He was efficient in his words of caution, too. Brendan could see the project for what it was: economic smoke and mirrors. 

NEWFOUNDLAND POWER SHOULD FEEL THE PUBLIC WRATH, TOO

As NL Hydro looks for an illegitimate 6.5% rate increase — smoothing in advance of socking you in the kisser with a Muskrat-sized punch — Newfoundland Power (NP) has applied for a 1.2% increase also to take effect January 1, 2019.

Electricity ratepayers are under assault at every turn.  

The PUB has the best (legal) ammunition. It can say “no”.

The public shouldn't get careless either just because the increase sought is smaller than Hydro’s. NP is attempting to establish a precedent.

HEAT WARNING! (From the Bard)

HEAT WARNING!

(Alert issued by Environment Canada for Humber Valley, July 17, 2018)

The sun now shines in Newfoundland,

Two-months of summer is at hand

Where many move at winter times

To warm their bones in hotter climes -

As Humber Valley holds hot air

An alert is issued to take care.

It happens every summer -

‘Some muggy!’ and ‘some hot!’

In late July and August,

Nerves with thunder shot.

PREMIER SHOULD SEIZE ON BETTER SOLUTION FOR POWER RATES

Guest Post by David Vardy
Premier Dwight Ball said this week that power rates will not be allowed to double. This statement is an important step toward a better solution. It recognizes that the take-or-pay power purchase agreement (PPA) is not a workable solution to the question as to who will pay for Muskrat Falls. The PPA places the burden on ratepayers which is unfair because ratepayers did not ask for Muskrat Falls. It was imposed by an overbearing government, supported by a relatively small group of people who stood to benefit.

The government proposes that ratepayers bear roughly half the cost and that taxpayers pay the rest, citing 2021 rates in the Maritimes at 18 cents per kWh, compared with 12 cents on the Island. Such high power rates, even when reduced from 23 cents to 18 cents per kWh, would still be unaffordable for low income people. They represent an increase of 50%.

MUSKRAT: A FAIR RATE IDEA THAT WON'T SHOCK YOU

Guest Post by PlanetNL
PlanetNL11: A Fair Rate Concept for Post-Muskrat

Premier Dwight Ball has been justifying a massive rate increase to 18 c/KWh as fair because he suggests it is comparable to rates paid in our neighbouring Atlantic Canadian provinces.  Such logic might succeed if only it were true: in the last PlanetNL post, it was clearly demonstrated that the expected rate in those provinces would be 12 c/KWh. 

The Premier’s admission of error has not been heard, therefore it appears Ball is sticking to his plan to punish ratepayers despite the widespread harm it will cause.

In this post, a case is developed for a post-Muskrat rate that would be fair to ratepayers. But it’s sure to be a solution the politicians will fear.  The outcome may shock many. The future proposed rate is coincidentally - and surely to Premier Ball’s chagrin - 12 c/KWh.  

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POPULAR COMMENTS SECTION TO GET GNARLY ATTENTION

Comments on blog posts bring fresh perspectives and unknown issues to attention.  

Wise, interesting and thoughtful comments come from people in all walks of life, many of whom would never think of writing a letter to an editor or calling a political office.  Not all points of view need to agree either – an exchange of views can enhance the posting under which they appear and benefit many readers.  Comments can also be a source of considerable disdain for the posting author and many who read the comments section.

THE DECEPTION OF PARITY: PREMIER'S CLAIM BUSTED

Guest Post by PlanetNL

PlanetNL10 – Atlantic Canada Energy Rates – the Deception of Parity

Where Muskrat Falls is concerned, the Government, regardless of party, has a clear track record of getting the facts wrong. The trend continues as we transition toward the operations and cost recovery phase of project.  The latest misguided gem – being relied upon by NL Hydro at the General Rate Application hearings last week – is Premier Dwight Ball’s stated rate target of 18 c/KWh for residential rates.  The Premier defends this as being comparable to expected rates in the other Atlantic Canadian provinces.  It doesn’t take much research and insight to demonstrate that the Premier couldn’t be more wrong on this issue.
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EXPERT PANEL NEEDED NOW TO EXAMINE NL'S FINANCIAL MESS

Noticeably more people, including readers of this Blog, want to see public discussion of a resolution to the financial mess created by Muskrat. While their numbers are still small, their voices are discernible. It seems that most people are still in denial as to the scope of the problem. Delusion causes them to believe that government would never imperil the solvency of the province.  

Yet, as one Muskrat watcher observed recently, the public will be in a "rage when they learn just the simple truths" of what the project will cost them in relation to the cost per KWh of thermal generation at Holyrood.  Likely, that rage will be compounded when people learn the extent to which the Tories and the Liberals failed to share with them the whole truth of the debacle.

MUSKRAT FALLS: BETTING ON THE WRONG HORSE

Co-written with PlanetNL

Netflix features an interesting PBS documentary called The Race Underground dealing with the technological, political and social challenges of building the first U.S. electric subway, in Boston, in the late 1800s. 

The project had a lot of naysayers. Some were concerned about the destruction of the historic city (especially Boston Common, America’s oldest public park); others about the enormous financial risk described as “… a jump into the unknown.”  The superstitious and the religious feared that going underground meant getting close to “the netherworld”. Then there were the dangers of electricity.

A vote “by the narrowest of margins” brought the matter to a close and the subway was built. The people loved it. The subway cars were clean and clothes ceased being fouled by sooty coal-fired steam engines. Congestion in downtown Boston disappeared and allowed even more people to come in. The suburbs grew rapidly. Not lost on anyone was the presence of far fewer stinky, slow horses on the streets. For investors, the new system was more profitable than the old one. 

ED AND STAN WOULDN’T LIKE GORD

Forgetfulness must be nature’s screen; one that affords people the capacity to not be weighed down by the skewed and self-serving utterances of others.  Gord, an old University friend, had a single word for them… which I plan to share with you.

Not surprisingly, the press release recently issued by former Nalcor CEO Ed Martin on the heels of comments by Stan Marshall comes to mind.

Ostensibly, the current CEO was attempting a little morale building — at the expense of the truth — following the successful transmission of Upper Churchill “recall” power across the Labrador Island Link. Understandably, he couldn’t wait for VP Gil Bennett to get the lead out on the generation component of the Muskrat Falls project.

JIM GORDON'S FINAL COMMENTS ON THE NORTH SPUR

THE NORTH SPUR – MY FINAL COMMENTS
Guest Post by James L. Gordon P.Eng.(Retired)

Way back in 2014, my interest in the North Spur started when I read a short book by Cabot Martin titled “Muskrat Madness”. It concentrated on the questionable stability of a natural side dam called the North Spur which contained layers of sandy silt and sensitive clay. I emailed Cabot, a member of the 2041 committee, on August 27th commenting on his book, and have commented several times on the Uncle Gnarley blog on the North Spur safety. NALCOR describes the Spur as -

The north spur forms a natural earthfill dam, with a crest elevation of about 60 m, and about one km long, which connects the rock knoll to the north bank of the valley……. The crest width varies from about 1,000 m at its north end to about 70m at its south end where it has been narrowed by erosion and landslide activity in the past. The head across the spur is presently 16 m from river level upstream to downstream. The impounding of the reservoir to El. 39 m will increase the hydraulic head across the spur to 36 m and stabilization measures are then necessary to ensure its long-term stability under both normal and extreme water levels. The soils forming the spur consist of a complex interbedded sequence of relatively low permeability silty sands and sands, and sensitive marine clays.