Monday, 29 July 2019

MEASURING AND MANAGING THE FISCAL IMPACT OF MUSKRAT FALLS

Guest Post by David Vardy
Measuring and Managing the Fiscal Impact of Muskrat Falls

Is it possible for us to manage the fiscal burden of Muskrat Falls? Moody’s downgrading of our credit rating raises serious questions as to whether we can handle this massive burden. It was Premier Dwight Ball, speaking at the St. John’s Rotary Club, who said “you cannot manage what you cannot measure”.  This is a variation on a quote from W. Edwards Deming, the father of modern quality management theory.  Can we really find a remedy to the problem if we cannot diagnose it and measure it? Surely the burden can be measured.

The PUB is relying on Nalcor’s revenue requirements in 2021 as a measure of the burden to be carried. We know that this does not take into account the 8.4% rate of return on equity on the generating assets in Labrador, an equity burden already being carried on the books of the province but deferred for future recovery from ratepayers.


By my reckoning (see Appendix)  this alone adds about $300 million to Nalcor’s latest estimate of revenue requirements (see Final-Response-PB-954-2018.pdf  in response to my ATIPPA request), namely $726 million in 2021, bringing the shortfall to be mitigated to over $1 billion, a staggering burden for a province already struggling with its huge debt and its high operating deficit which remains at a perilously high level. Unless we can measure the full magnitude of the burden how can we manage or mitigate it?

Rate Mitigation Plan
The province’s rate mitigation plan is an admission that the project is a failure and that it is non-compensatory. In other words it will not recover the enormous costs, amounting to about a billion dollars annually, the repayment of which begins in the first full year of operation. The question was put to the Deputy Minister of Finance at the Muskrat Falls Inquiry whether the federal loan guarantee, in combination with the power purchase agreement, places an obligation on the province to pay these revenue requirements if NL Hydro is unable to recover them from ratepayers. She declined to answer the question but her response was insightful.

She said that her focus is on the rate mitigation plan of the government, which is aimed at finding $726 million in 2021. It needs to be repeated that this number does not include the full cost of servicing the province’s equity investment. The deputy minister told the Commissioner that the government is responding to the anticipated shortfall through the rate mitigation program, confirming the public’s perception that government accepts this shortfall as a financial obligation which must be fulfilled by the taxpayer if the ratepayer cannot bear the full burden.

Government’s plan for mitigating the understated shortfall is found at Exhibit P-04325 of the Muskrat Falls Inquiry. We will not engage in a detailed critique of the plan in this post but it needs to be said that most of the “mitigation” pool is highly uncertain. Much of this money will be diverted from core social programs, notwithstanding the fact that some of the funds will flow from Nalcor’s oil revenues. Some will come from the federal government. Even these federal funds, arguably, are funds which could have been applied to social needs of higher priority in the province.

Some of the rate mitigation will likely come by deferring the expensing of costs into the future. The real annual cost of Muskrat Falls far exceeds the $726 million cited in Nalcor’s latest estimate of revenue requirements. The money that the province has borrowed to invest in Muskrat Falls is included in the province’s debt. This amount is then deducted from the debt when calculating net debt as it is considered to be a financial asset, meaning that the province can sell it for its book value if it is in need of cash. The book value of our equity in the project is based on its cost. The borrowed equity money is counted as a debt but then a corresponding financial asset is recorded which wipes the slate clean. The key litmus test is whether the equity value, based as it is on cost incurred, can be recovered by sale and used to pay our debts. This would not be a problem if demand was robust and if the cost of power was competitive.

Obligations Placed on Hydro
Grant Thornton, in a report for the Muskrat Falls Inquiry dealing with both the federal loan guarantee and the power purchase agreement, identified a major question. The question posed by Grant Thornton, the forensic auditors to the Muskrat Falls Inquiry (MFI), is:  how will NL Hydro meet its obligations under the power purchase agreement if ratepayers cannot pay the added costs. This incapacity to repay arises largely from the unrealistically high demand projections, in tandem with the unrealistically low cost estimates.

The Deputy Minister of Finance was asked at the Inquiry to answer Grant Thornton’s question but she could give no clear answer. While the Deputy Minister did not give a direct answer to the question (on page 38 of the Grant Thornton report at P-00454) she indicated that the province is acting to ensure that no shortfall arises. 
Denise Hanrahan, Deputy Minister, NL Department of Finance
What happens when NL Hydro is unable to make the payments to Muskrat Falls Corporation demanded under section 14.1 of the power purchase agreement (P-00457)? The province is acting through its rate mitigation program to ensure that the demands placed upon it by section 3 of Schedule “A” of the federal loan guarantee (P-00065) are satisfied, namely to  “Ensure that, upon MF achieving in-service, the regulated rates for Newfoundland and Labrador Hydro (''NLH") will allow it to collect sufficient revenue in each year to enable NLH to recover those amounts incurred for the purchase and delivery of energy from MF, including those costs incurred by NLH pursuant to any applicable power purchase agreement ("PPA") between NLH and the relevant Nalcor subsidiary or entity controlled by Nalcor that will provide for a recovery of costs over the term of the PPA”

These include payment of all annual costs that Nalcor has estimated in its 50 year forecast of revenue requirements, beginning in 2021 at $726 million. While for 2021 the total revenue requirements are $726 million they add up to $72.5 billion in dollars of the day over the 50 (actually 49) year period ending 2069.

There is a cabinet document signed by former Natural Resources Minister Jerome Kennedy and dated April 2, 2012 (on the MFI website at P-00529, page 3)  that confirms the commitment of the province to: “Ensure that Newfoundland and Labrador Hydro's (NLH) regulated rates provide sufficient revenue in each year to recover all Project costs (all capital and related financing costs including a return to the Project owners, operating and maintenance costs, payments under any applicable aboriginal Impact and Benefit agreements, water lease and management costs, and applicable taxes and fees.” Is this a categorical imperative or is it a “best efforts” clause? If sufficient revenues do not flow to Hydro, notwithstanding that the province fulfilled all its commitments under the loan guarantee, are we still liable? Does our liability include responsibility to ensure that Emera receives its 8.5% dividend on its investment in the LIL? 

These post-construction financial obligations adding to $72.5 billion over 50 years go beyond the obligations arising from the construction of the project itself. The full magnitude of these obligations should be confirmed by the Muskrat Falls Inquiry.

The people of the province need to understand that the obligations accepted by the province far exceed its guarantee to provide all the equity, both base equity and contingent equity. While the federal loan guarantee, section 4.6 (i), pledges only the assets of Nalcor subsidiaries which are borrowing the money and not those of non-borrowers, the province’s obligations are far more extensive. The federal loan guarantee is described in the cabinet submission at P-00529 page 2 as one to which there was “no recourse” to the province in the event of default.

Recourse to the province
The Cabinet Submission   (P-00529, page 2) makes this very clear:  “The non-recourse structure will mean the Project assets will be pledged as security, but that neither Nalcor nor Government would be liable, nor would the non-Project assets of either be at risk in the event of a default. This approach is commonly used in the energy and infrastructure sectors, wherein project sponsors provide the equity and lending institutions provide non-recourse loans that are typically serviced entirely from project cash flows and secured by the project assets alone, with no recourse back to project sponsors (refer to the Other Jurisdictions section below for an example of a similar financing structure used for a large hydroelectric project - Lower Mattagami in Ontario).”

While none of NL Hydro’s assets have been pledged as collateral and while Hydro is not a borrower under the federal loan guarantee the province has accepted very onerous obligations which the current administration is seeking to satisfy through its rate mitigation program. The notion of non-recourse is therefore misleading. The province is taking action to ensure that NL Hydro will meet its full obligations, thereby taking on the massive burden of $72.5 billion dollars over 50 years, including Emera’s tax free return on equity.

A cabinet submission dated August 31, 2011 and signed by former Natural Resources Minister Shawn Skinner (P-00043, page 3) describes the intent of government’s “commitment letter” to provide equity financing for Muskrat Falls to:

“Ensure that NL Hydro's regulated rates provide sufficient revenue in each year to recover Project costs. This commitment has two elements. First, it confirms that the costs to be recovered will include all capital and related financing costs including a return to the shareholder (Nalcor), operating and maintenance costs, payments under any applicable Impact and Benefit agreements, water lease and management costs, and applicable taxes and fees. Second, by confirming that NL Hydro's regulated rates will generate the required revenues, it implicitly confirms that Government will structure the electricity industry in the Province to ensure regulated ratepayers (the majority of whom are customers of Newfoundland Power) will be captive to NL Hydro to the extent necessary to support these revenues.” (My bolding.)

This is a clear statement of the intent to place all of these obligations on ratepayers by making them “captive to NL Hydro”. If they cannot be made “captive” then is the taxpayer on the hook? The answer can be found in government’s willingness to accept the burden of the shortfall between what can be extracted from captive ratepayers and the amount needed to pay for the project. 

Conclusion
What impact will this have on our social programs? Has the province investigated the option of simply defaulting rather than accepting this huge burden? Has the province advanced an alternative proposal to renegotiate the terms of the federal loan guarantee and to abandon the power purchase agreement as a flawed attempt to make our citizens captive to Nalcor for 50 years? It was flawed for many reasons, including the failure to anticipate the combined effect of demand elasticity and massive cost overruns. Will the Commissioner recommend such a proposal and will the Commission assess the option of default?

If we are to manage wisely we need first to measure the magnitude of the problem along with our fiscal capacity to cope with the burden. Who is measuring the problem and who is assessing the options? The answer given by the Deputy Minister of Finance and by the government of the province provides no assurance that anyone in authority has assessed any option other than “rate mitigation”.

The rate mitigation plan offers no comfort that this is a measured response to a problem that has become even more challenging as a result of our unsurprising downgrading by Moody’s.

Has Moody’s fully assessed the problem? Their credit report, surprisingly, fails to mention the fact that the “rate mitigation” plan is an open admission that the project is not cost-compensatory or self-supporting. The plan is an admission that the province is effectively writing off its equity and thereby will ultimately add the equity investment of $4-5 billion to its net debt. Are we also accepting responsibility to continue to operate the facility and to guarantee a rate of return to Emera as well as to fulfill our obligations to supply a large block of power, including the original Nova Scotia block as well as market power under the Energy Access Agreement?

David Vardy 

Appendix
Calculation of 2021 Revenue Requirements

How much should be added to Nalcor’s revenue requirements as reported in PB-654-2018 to account for the cost of the province’s equity investment in generation assets? The simple approach is to take the value of generation assets as reported to me by Nalcor in an email from Karen O’Neill dated March 19, 2018 (below) and filed by the Muskrat Falls Concerned Citizens’ Coalition as Exhibit P-01557 of the Muskrat Falls Inquiry and multiply it by the 8.4% established as the internal rate of return under the power purchase agreement. The value of the generation assets (MF + LTA) reported below is $3.2 billion and the value of the 2021 return on equity is calculated at $269 million. When added to the $726 million the revised revenue requirement becomes $995 million. The second estimate is slightly higher, namely $326 million which, when added to the $726 million produces a revised revenue requirement of $1,052 million.
The second approach is to estimate the return on generation equity using Nalcor’s estimates of the return on equity in the Labrador Island Link (LIL). Nalcor’s return on equity for the equity investment in the Labrador Island Link (LIL) is shown in PB-654-2018 as $136.854 million. This is the return on a combined equity investment of $1.6 by Emera and GNL. In order to calculate the return on equity for generation assets in Labrador (Muskrat Falls generation, MF, and the link between Churchill Falls and Muskrat Falls known as Labrador Transmission Assets, LTA) we have taken the ratio of direct capital cost for MF + LTA combined to LIL costs from the latest oversight committee report (1.724) and multiplied it by $136.854 to provide an estimate of return on generation equity  ($235.936 million on GNL equity investment of $3.2 billion) assuming that the equity/debt ratio is the same as it is for the LIL.

But we know that the minimum equity for generation assets is 35% compared with 25% for the LIL, or 1.4 times as much (0.35/0.25=1.4) so we multiply the $235,936 by 1.4 to get $330.311 million as an estimate of the return on equity for generation assets. Recognizing that the rate of return for generation equity (8.4%) is slightly less than that set for the LIL (8.5%) we adjust this estimate  (0.084/0.085 = 0.988) to get $326.347 million as our estimate of the return which must be added back to place the estimate on a cost of service basis. When we add $326 million to the 2021 revenue requirements of $726 million shown in PB-654-2018 we get $1.052 million.


46 comments:

  1. The answer to Ball's question “you cannot manage what you cannot measure” is of course nonsense. It amounts to the perpetual actions by your government in particular to kick the can down the road and avoid admitting you are facing disaster.

    "Has Moody’s fully assessed the problem?" Of course not! They suffer from the same optimism bias and apart from the downgrade that guarantees default they too kick the can down the road.


    As to the guarantee a rate of return to Emera one last kick down the road and hope we are not the party in power when the shit hits the fan!

    Some legacy for the emperor! Three cent tea bags anyone?

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  2. The 2 words that jumped out at me in this post were, "nalcor's oil revenues" and "default". May as well said nalcor's oil and GAS revenues. We have no Gas revenues, and the so called nalcor's oil revenues, were well under way and major returns to the province long before nalcor's inception and later raised its ugly head as Dracula, and his other half. Hebron, the only real addition to production, will not add revenues for at least a decade, when its principle is paid off. So nalcor should go. I mentioned "default" a few years ago. That the province should have had a group of legal begals and economist working on the ins and outs of that very possibility, default. To weigh the options and have default as one of the options. Is it to late to start the homework on that option, ask Joe blow. Now I know others will poo poo the idea, but investigate first, or get the right people to do it.

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  3. Let me tell you why I wrote the post. I was trying to understand just how extensive are the province’s financial obligations under the federal loan guarantee. It was very clear we had the obligation to supply all the equity required and if cost overruns occurred it was our responsibility to find the extra money.
    The federal government would not supply more than the amount to which they had committed, initially $5 billion. We were responsible for the completion guarantee, which meant that we had to complete the project and to supply whatever funds were needed to complete construction. We were told that if things went sour and if the project could not recover costs then the federal government would have the security of the assets that had been built and these were being held by new crown corporations set up under Nalcor.
    Then I asked what about after construction is complete? What obligations do we have to keep the project going and to pay all the bills? What role does the power purchase agreement play in guaranteeing that the province’s financial obligations are discharged and what is the impact upon ratepayers and taxpayers?
    Through access to information I wrote to Nalcor and asked for the cost projections, known as revenue requirements. Nalcor gave me the information, showing that in 2021 the revenue requirements are $726 million and they rise each year over 50 years. I reviewed the agreements and consulted with colleagues who have been keeping abreast of the project. I gave them my interpretation of the obligations and they told me that they agreed with my interpretation but we needed confirmation, recognizing that the legal agreements are complex and that we as volunteers do not have the resources to review all the documents.
    Through the Muskrat Falls Inquiry the Concerned Citizens’ Coalition asked witnesses to provide their interpretation of the province’s obligations after construction is finished, both those of ratepayers and of government. The witnesses to whom we put the questions included the Deputy Minister of Finance. She told us she could not answer the question.
    The question remains outstanding but it must be answered. It is critically important that the Inquiry find an answer. The question is as follows: if ratepayers cannot pay the annual costs beginning with $726 million in 2021 and amounting to $72.5 billion over 50 years must the government of NL accept the responsibility?
    Do these costs include guaranteeing that Emera’s after tax return on equity of 8.5% is paid? Has the government assessed other alternatives including the option of default, rather than prostrating the province to meet these crushing obligations? Has government considered renegotiation of the loan guarantee and fundamentally restructuring the power purchase agreement in light of the impossibility of recovering such massive costs from ratepayers?
    David Vardy

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    1. All good questions David but you forget one more. We have not seen an increase in the capital cost of MF for 2 1/2 years. In the interim Astaldi went belly up and Pennecon have replaced them. Despite the usual bungling we are expected to believe there has been no cost increase.

      If as we "naysayers" think the cost is likely to be closer to 15 billion. Why has this very likely scenario not been considered David? What would the cost be in this likely scenario?

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    2. The MF amortization was for 57 years. Why do you keep quoting 50 years?

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    3. And given that there are still significant known unknowns, how can government say that there was any kind of suitable dam/generation component stop/go analyses done in 2016?

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    4. One more unknown unknown that you need to reasonably consider is what if first power is delayed two years?? Should not this be considered? If commercial power does not happen until 2023 (assuming the dam is not bypassed) what does that do to the 57 year payback?

      We can't keep taking Nalcor numbers long after they have demonstrated no ability to be transparent or honest about first and commercial power production.

      Lets all sing a few chorus of Always On The Sunny Side (of life)!

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    5. Bruno, there are 7 years of construction and commissioning prior to commencement of the 50 year payback period.

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    6. 7 years construction as of now. Originally it was 3 to 4 years if I remember correctly.The final completion is anybody's guess.

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    7. Some day the sun will shine and have not will be no more.Still waiting,Brian.Still waiting too for Danny's big "have not"party.

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  4. "We cannot manage what we cannot measure". It is 9 days to D-Day, Aug 7th, and filling of the reservoir.
    Can we manage the pressure of the water and the ability of this natural dam to stay in place? One, such as PENG2 can readily calculate the pressure upstream, but he cannot readily calculate the ability of the dam to stay in place. He, a geotechnical engineer, says there is insufficient measurements of the natural materials making up this natural dam to calculate it safety. He personally takes a "conservative approach" to such matter, and others may be less conservative. He says he would not live downstream of this dam.
    I had mentioned that 100 MPH winds give a 960 lbs force on a 4 x 8 window glass, 30 lbs per sq ft.
    A rough estimate is perhaps 100 times that per sq ft water pressure on the North Spur, but I defer to PENG2, or MA or other, whether this is anywhere close? If so, what is the total pressure?
    And what is the counteracting force, calculated by Nalcor and the "assumed " safety factor?
    Residents downstream should have confidence in the quantity and quality of measurements that is the basis for Stan's assurance that the North Spur is "absolutely safe", as he testified at the Inquiry. What engineer and firm is the engineer of record that signed off on this?
    Winston Adams

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  5. Ulysses S. Grant said that "wars produce many stories of fiction some of which are told until they are believed to be true."
    It seems to me that the Muskrat fiction was told so often by folks over at Nalcor and their cheerleading previous provincial governments, while deceiving the people of the province in order to sell this project, that they still believe their voodoo economics, even today?

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  6. I see two possibilities:

    We fight as a group to settle on our own terms (like Brexit), selectively default on MF and renegotiate our position with Canada. As leverage, NL currently provides Canada with offshore territorial rights and a fishery. We can cause havoc by threatening to succeed and forging deals directly with China (trade, and financing infrastructure like mining and ports) and even Russia.

    The second and easy option is do nothing and let the rest of canada get the spoils. We become a territory or like Nunavut, natural resources are sold to large corporations, Canada gets all the oil revenues, all the fish, all the mining (e.g. Nickel and Iron) and the offshore jurisdiction. This would not be much different from being a British colony. Our politicians will gladly facilitate this pillage for their own personal gain.

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    1. NLexit should not even be a "possibility".

      Canada's own inability to make the best of the "Crown Assets", since the time of the Confederation is the major problem to be resolved. Many attempts have been made to develop a coherent National Energy Policy, and we still let Provincial power corporations use their respective assets for political playbox notions. Muskrat is but one of the long line of megaprojects used as job-making political actions, raiding the public purse, for private profit. If Muskrat survives the named risks and threats, and is subsidized, it can simply be absorbed into the Quebec power grid, and we should enable the best use principal without perpetual colonial rule. Vive Canada.

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    2. Put it another way, our own MPs will hopefully rise above the malfeasance and rancour, and lead us from the sorry mess. Haven't heard much excellence and potential from the current lot of MPs.

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  7. No matter what anyone says, David’s question needs an answer.

    No one knows what the answer will be, but rest assured, when it comes it will not be pretty!





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  8. What effect on our social programs? A devastating one.

    We have fixed obligations that we cannot cut like the P3 long term care homes just announced. $750 million for Corner Brook https://www.cbc.ca/news/canada/newfoundland-labrador/corner-brook-new-hospital-1.5193775 and this 30 year contract with SNC https://vocm.com/2019/07/28/snc-lavalin-awarded-30-year-contract-with-two-nl-long-term-care-homes/

    So what can you realistically cut to save 2 Billion a year (1 billion for Muskrat Falls related things, another billion just to approach a balanced budget? We can't cut Muskrat Falls or various P3 because they all have contracts.

    The most likely thing is that all departments will have their budgets reduced and positions will not be refilled when people quit or retire. It will be left up to each dysfunctional department to figure out what to do - so they will just do nothing. Doing nothing is easy.

    Unlike larger provinces, many job functions in government are performed by a single individual. If that person retires, and there is no transition plan (there almost never is), then whatever they do ceases and a lifetime of knowledge walks out the door. For example, If someone maintains the road database so that the federal government and users like Google have accurate maps and then quits, you will find gravel roads marked as paved, missing highway ramps or just nothing at all. Police and emergency services then have to maintain their own maps.

    Most organizations will be too disfunctional to even realize they have a problem until chaos erupts. I would expect things like: workers that cannot work because their equipment is broken (no mechanics left), someone forgets to order road paint or salt and there is a multi month lead time, huge waits for medical appointments, no ambulances available, grants to MUN and municipalities dry up so property tax and tuition soars along with unemployment, terrible roads needing new pavement, guard rails not being replaced after accidents, MCP is no longer free, sales tax goes up etc.

    It will be a slow descent towards a failed state.

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    1. Yep, a lot of people knew that a decade ago, that there was only one pot of money, called the government. Others with in govt. talk about this pot of money and that pot of money, as if it was growing on different trees. And nalcor people, at the lower levels said nalcor or muskrat falls was a different pot of money, that had nothing to do with social programs, roads, health etc. They were brainwashed by the higher ups within nalcor and govt.,who were suffering from oil on the brain. Now the chickens are coming home to roost, and the most venerable will be hit hardest. And what the hell is this, nalcor people still getting their bonuses, have they no shame. The ones approving those bonuses should be tarred and feathered. And some say, don't flog them in public, they are just doing their jobs. So we flog the little people on social services and those who are not able to help themselves, like the sick and the in invelient. Joe blow.

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    2. We need to start looking for all the money stored in the basement of the confederation building and at Hydro Place that Danny and Ed eluded to on many occasions while leading the cheer for the big rat. Don't we??? Or do we need the CHEAP plan and gut healthcare to find the money?? Or do we need to leave for higher ground?

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    3. Watch carefully how the Tory-minded political power brokers in Ontario, and Calgary squeeze social programs, to provide subsidies to their buddies. Time for the NL opposition MLAs to hold the Ball inside the game boundary line.

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  9. The right thing to do here now is try and figure away outta here. Wash your hands clean of this mess and never look back.

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  10. Who are you talking to, the mirror. Sure by go on, you won't be missed. Not hard to figure out, can only go by plane or ferry.....or the ultimate ....Harry carry.....

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    1. You're right, i wont be missed, but my tax dollars will be. I'd rather put my hard earned money towards something good for me instead of dishing it over to GovNL to cover interest on BILLIONS BORROWED !!

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    2. Unfortunately Levy Payer is quite likely correct in his assessment. Life in this province will become untenable for many, many people after a few short years, especially those with young families trying to make ends meet. They'll no doubt say right to bloody hell with the idiotic partisan politics and the dimwitted, corrupted governance associated, and they'll be voting with their feet.

      And who can blame them?

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    3. According to this post, NL needs about 2 billions per year from next year and increasing over next 50 years. That represents about 4 000$ per person per year, from new born to invalid, retired, ... everyone. Such money does not exist.
      Stop looking for it. It does not exist.
      To fly like Levy Payer said is the only choice for anyone who can do it. Once these most valuable (money-wise) people are gone, the poorest behind them will just end up deeper in it.
      NL is doomed unless government starts looking at ways to pay with assets like UC instead of paying with that non-existing money.

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  11. UG readers must be in shock from the public hearings last night? I thought there might be hundreds lined up to have their say,and requiring several more sessions. I thought UG would be loaded up with fresh comments this morning.
    I think it was I who said, a few years ago, the outrage will not start until the high power bills kick in.
    This arranged by the Harris Centre.......does this event give honour to Harris's legacy, what would Harris think? About 15 or so got 5 minutes each to speak, the host smiling I found disgusting, and then saying they should receive medals for attending this fine summer evening. A mockery I thought. Sure it was great a few attended, perhaps an audience of 75, and about 15 speakers, so this represents the concern of half a million people that about 13 billion has been wasted and the fallout soon to kick in.
    Should not more than 100 of MUN faculty alone been lined up to speak?
    Has the fear of retribution on those that go public silenced the whole of our citizens, except those few brave souls? Any MHA's attended?
    What type of medal would be appropriate for the speakers?
    What were the key issues raised by them that is memorable to UG readers?
    Winston Adams

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    1. If you work for the university or government or any government agency or any consulting company that depends on government contracts, or Fortis or local media like VOCM / The Telegram / Independent / CBC -- then you cannot speak out without risking your job. Journalists have told me they have written pieces that their employers refused to publish. Given that there are very few jobs available, speaking out could force you to relocate your family out of province. Only the retired are safe to speak out. This self-censorship is part of our "managed democracy".

      You are correct that it won't really hit home and people won't be upset and really desperate until the billion annual bill arrives. It doesn't matter of power rates double or we get hit with an extra $400 a month in fees - the end result will be the same. Only when the ability to obtain food and shelter is threatened will there be public outrage.

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    2. All clear Captain, no icebergs in sight!

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    3. 15 or so speakers of 500,000 is 0.00003 of the total
      For Labrador 3 is scheduled to speak, 3 out of 28,000 is 0.000107, which is actually about 4 times more, relative to the island population.
      In either case it is near ZERO. "Houston we have a problem",it was said at times during the moon landings. Nfld and Labrador, we have a problem, we have a much bigger problem.
      Was this small turnout a snub to Leblanc and his Inquiry? Or something unique about our culture? Does it expose the myth of "fighting Nflders",and prove we are but frightened Nflders, a hangover from centuries of brutal colonial rule maybe? Westminister democracy they call it. If you don't like it you can leave, as Trumpie would say. Live in hope but die in despair, as to any improvement.
      Several years ago the UG author said we need a revolution. In the USA Bernie Sanders says the same thing, as to a few individuals and corporations having over 90 % of the wealth and controlling the affairs, politicians being bought and paid to advance agendas. Same here , is it not?
      Winston

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    4. The comfortably well to do, rarely will produce a revolution. Maybe the low turnout is because the socially and financially downtrodden were simply distracted from the event.

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  12. Out of curiosity did Wade Locke speak at the Harris Centre last night?

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  13. I was somewhat taken aback when Steven Wolinetz a political scientist at MUN said that we, the public were partly at fault?

    I don’t know about you, but NALCOR along with a very own political masters of the day, did everything in their “power”, pun fully intended, to make sure that we, the public were literally kept in the dark regarding anything pertaining to NALCOR or Muskrat Falls!

    In fact our Government was actually complicit in this whole mess by actually spewing the propaganda that NALCOR authored regarding everything and anything related to Muskrat Falls.

    I think his word “we” would better to be used describing our so-called academics at MUN which “he” is a part of himself?

    Where were all these people when there were some serious concerns being raised about Muskrat Falls before there was even a shovel put in the ground?

    I won’t even venture into my opinions of Wade Locke.

    Other than to say how he is still gainfully employed by MUN beyond me!

    Other than that I am much afraid I am highly offended by anyone who suggests that we, the public of this Province, are somehow to blame for Muskrat Falls!

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    1. It seems that the government line going forward is that we are all to blame for the boondoggle, never mind that we the public were Lied to and manipulated at every step in sanctioning this project.

      The government is trying to rewrite the history of the sanctioning of this boondoggle. We need to call them on it whenever they manipulate the truth on this boondoggle’s history.
      Terry

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    2. I agree it is an insult. Blaming the public is blaming the victim. We were lied to by Nalcor and government. We do not have an independent press and good journalism is rare, other than a few blogs like this one. We have also seen that it doesn't matter who is in power -- all pre-picked leaders march to their masters orders - and that master is definitely not the public.

      The only thing we can blame the public for, and humanity in general, is our willingness to follow others and not think for ourselves and to defer to pack leaders.

      There is even a new disease called ODD or Oppositional defiant disorder. Children that defy authority are now a problem to be managed. https://www.aacap.org/App_Themes/AACAP/docs/resource_centers/odd/odd_resource_center_odd_guide.pdf

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    3. Think beyond the valued Inquiry Report, the hand wringing. What can we all contribute towards a more sustainable future, for our children?

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    4. We need to teach children to think for themselves.

      W need to get them to read things like Orwell's 1984 and show the parallels to today. Burning old news articles and rewriting history (Wikipedia editing, hiding search results, take down notices) and "2 minutes of hate" (ad hominum against Assange, labeling people narcissists), the TV spying (cell phone, Alexa, recording search keywords), big brother watching (CSIS spy palace, billions for surveillance, 5 eyes alliance).

      Teach them that history is written by the victors, Have them watch "The new Pearl Harbor". Watch Dr. Albert A. Bartlett lecture on the exponential function and discuss.

      Show them that the excel formula =FV(0.07,2000,0,1) gives the value of a dollar invested at 7% at the time of Jesus. Then discuss the result: ($58,553,838,483,794,200,000,000,000,000,000,000,000,000,000,000,000,000,000,000.00)
      and that the coins would weigh more than the observable universe. Ask, is our economics system a fraud based on an ignorance of basic mathematics?

      Get them to read the Uncle Gnarley Blog, or Paul Craig Roberts, or globalnews.ca and read read journalists like Eva Bartlett. Tell them to read article comments because they can often be more insightful than the article and learn how to identify AI bot and troll farm comment propaganda.

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    5. All good, but beyond education, we need, as Tor would say, an action plan. "Ask not what your country can do for you.....". But he was assassinated by the deep state people, who select our leaders to do things like Muskrat, TMX, wars and other nasties. Love thy neighbour.

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  14. There is a big difference between "public consultations" and a 'public relations' exercise.

    This does not auger well for the inquiry's credibility.

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  15. A plug for improved journalism, in these times of climate crisis;

    https://thetyee.ca/Tyeenews/2019/07/31/Tyee-Network-Climate-Reporting/

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  16. The long term FORTIS game is afoot ! It is moving very smoothly. It did not work well for Clyde who lied in 1993 but is well within sight now for he current LIBERAL party.
    The province has been turned against it's crown corp NL Hydro (nalcor) and so will not fight back when it is sold off for pennies on the dollar to FORTIS !!! Not like last time when the people stood up to the Liberals.
    As we speak the NF Power - Fortis sharkes sit at the table at NL Hydro looking at the assets it will take. A wonderful set up I say. Satn the man at the heml of Nalcor to arrange it all. One of the largest FORTIS shareholders he has even put a former FORTIS worker in charge as president of NL Hydro and a 2nd as the NL Hydro CFO !!!!

    ahhhh..... the sharkes live among us ~!

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    Replies
    1. And is not Clyde Wells the chairman of the Appointments Commission, appointed by fellow Liberal Ball?
      Falling in place like clockwork.

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    2. I can foresee Fortis writing off muskrat debt for us Newfoundlander’s, all they will ask for in return is the maligned muskrat falls and the upper Churchill power plant, a two for one sale or a mega giveaway. Now that sounds like a deal or world class politicians can negotiate.
      Terry

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    3. If ONLY the private sector was responsible for electricity supply in Newfoundland we wouldn't be in this f??cking Muskrat mess today. The power sector would have been regulated by the competent PUB instead of the motherf#$%ing politicians and bureaucrats. What have we ever gained in history from public ownership of NL Hydro/ Nalcor?

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  17. I divert to some relevancy;

    Reading from "A river lost", Blaine Harden, about the effect of utility dams on the Columbia;

    "Downstream from Portland, in a century-old fishing village called Skamokawa, Washington, I spent two sad days with a family that had been forced to give up gillnetting in the Columbia. Kent and Irene Martin's annual gross income from the river fishing had fallen in five years from sixty thousand dollars to one thousand dollars. The strictest fishing restrictions in the history of the river, along with "virtually no fish to catch", convinced the Martins in 1994 to give up a way of life that had served their family for four generations.
    The thing that has been most difficult to accept is that it's our own fault. We in the Pacific Northwest have crapped in our own nest, said Kent Martin, a bulky bald man with muttonchop whiskers. He found it difficult to keep his voice down and his anger under control.
    It is extermination for us. We have lost the guts of our fishing season. We have not been allowed to catch summer chinook since 1964, but their population continues to go down. You tell me there are fish dying. Of course, most of it is the dams.But the utilities and aluminum companies and federal power agencies continue to tell anybody who will listen that ""IT is EVERYBODY'S fault but THEIR OWN"".
    I call them poachers in pinstripes. They ought to be in jail. They do not have the will, the intention, or the desire to save the fish."

    ref page 219 of a very topical read. The absolute irony of this in an age of the little people against the Corporations and our elected representatives.

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  18. If we are to pay Emera 70 million dollars or there abouts each year for I believe 60 years for their 800 million investment in the Labrador Island Link at 8.5% that's 4.2 billion dollars. Since we don't have that money Emera will most likely want power of equivalent value which at about 3cents a kilowatt hour at current rates would amount to about 260 megawatts. With the 170 megawatts we already owe them for the Maritime link for 35 years and the 10% power drop over the Maritime link that accounts for just about all the export power the government was counting on to sell for rate mitigation. Emera will then sell that power to the Nova Scotia ratepayer for 4 to 5 times of their so called investment. No more give aways Danny. It is my understanding on reading the agreement between Emera and Nalcor regarding the Labrador Island Link that Nalcor can buy out Emera's steak for market value. Instead of pissing away the 2.5 billion we are getting for free from the federal government why not use some of that money to leverage Emera's steak in the LIL. Instead of giving Emera 70 million in power we can then sell Emera 70 million in power which in accounting terms is a 140 million dollar turnaround in fiscal position.

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  19. I believe this is one of the most important articles to appear on the Uncle Gnarley blog. I thought I had been paying close attention to the Muskrat Falls project since 2010 but this is the first time I’ve heard the debt is non-recourse.

    If Muskrat Falls borrowings are indeed non-recourse then there should be no shame in our default. This is the way project finance works. Corporations regularly employ such structures all the time to protect assets at the holding company level or in its other subsidiaries. In many jurisdictions (not NL), home mortgages are non-recourse so if the homeowner decides to no longer pay the mortgage, he can hand the keys over to the bank and walk away (or wait a few months/years for foreclosure and eviction). Some believe there is a moral imperative to repay all debt even if it is non-recourse but that is not the way this debt is structured. Corporations walk away from non-recourse debt all the time. The lender agreed to the loan taking just the security of the asset without recourse to the borrower so it’s the lender left holding the bag. It’s nothing personal, just business.

    If it is confirmed that Muskrat debt is non-recourse, how should the province proceed? Shouldn’t we be strategically using the non-recourse nature of the debt as leverage in discussions over rate mitigation with the federal government? Does the province really need to provide any rate mitigation at all (it is hardly in a financial position to do so)? Shouldn’t it be the federal government that bears responsibility for rate mitigation since any mitigation the province provides is really a subsidy to the federal government that reduces the financial burden of meeting federal obligations under its loan guarantee?

    I think we are close to settled on the idea that the Muskrat assets are worth even less than the project debt so there is no value remaining for the province’s $4 billion equity. Shouldn’t we just write that off and walk away? Maybe put the ball in the federal government’s court since they are the party with the financial resources to fix this mess that the former Conservative government enabled with its guarantee in the first place.

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