WHY DERRICK DALLEY SHOULD HAVE BEEN NAMED

The Government
should always be alert in the House of Assembly.
 They ought to be careful not to ‘mislead’ for fear one of
their number will endure the penalty arrant misbehaviour exacts in the
tradition of British parliaments.

Then too,
Opposition Members must be vigilant, ready to ‘spot’ an errant Minister or
Premier engaging in an economy of the truth. 

Getting
caught uttering a falsehood can lead a Member to be ‘named’.  Naming is a procedure whereby the Speaker
proposes a vote on the suspension of a Member if he believes that person has
broken the rules of conduct of the House.

Embarrassing
the Government is one of the jobs of Opposition Parties. In so doing, they simultaneously
magnify the Government’s incompetence and the Opposition’s attentiveness and
skill.      

For this
very reason, Dwight Ball ought to have had the new Minister of Natural Resources endure the wrath of the Legislature (not that the Tory Caucus would
have permitted the vote). But, it would have caused an important debate on
Nalcor’s new deal with Emera on virtually all our so-called surplus or Market-Priced Energy. (Maritime Link Compliance Filing with attached Energy Access Agreement (EAA)).  

Anyway, let
me explain the Opposition Leader’s missed opportunity.

Dwight Ball
asked the Minister if he planned to “build more wind power and more hydro
plants to meet the condition(s)” of the UARB, the Province having legally committed
virtually all its surplus power to Nova Scotia.

Ball was on
to something but, for some reason, he chose to let the Minister off the hook. 

The
Opposition Leader likely knew, as most people in this Province have yet to
learn, if domestic demand grows additional expensive capacity must be
constructed (in addition to Muskrat Falls) in order to meet the legal
obligations Nalcor has made to Nova Scotia. 

These are
quotes from Hansard (the record of the House of Assembly) of the Minister’s
partial reply to Mr. Ball’s question:

“We know we
have excess power that we can recall at any time but we are going to
sell and make money for the Province.”

Dalley
added: “The only way we are not going to have it is if it does not rain or snow
for twenty-four years.”

MPA Morrison Park Advisors Inc. Consultants to the UARB in its Review describes the  obligations of
Nalcor under the “Energy Access Agreement” (EAA).  Likely, Morrison Park would agree that
Minister Dalley’s suggestion that the power committed to Nova Scotia can be “recalled
anytime” is nonsense in the absence of an important caveat: ‘when
we build more capacity’
. 

The media
have not reported on the details of the EAA likely because some aspects of it
are unclear.  One Intervener at the UARB
likened it to a “term sheet” or an “agreement to agree”.  Even Nalcor and Emera have given themselves
until October 1, 2014 to provide the deal additional clarity (which is, in
part, why the UARB is expected to demand that the confusion be cleared up
before giving final sign- off).

What follows is a Reader’s Digest
version of the “Critical Features” of the EAA as outlined by Morrison Park.
 Nalcor’s commitments are etched in stone. You
would never know that if you listened to Mr. Dalley.  As Minister, he is supposed to be aware of the
commitments to which Nalcor is binding the Province.
(1 terawatt hour (TWh) equals 1 billion kilowatt hours
(Kwh).)
DON’T STOP READING UNTIL YOU FIND THE WORD “VARIANCE”.
This is where NL really gets hooked.

1.     
Nalcor
commits to make available to Nova Scotia, annually, up to 1.8 Terawatt
hours (TWh) of power and achieve a minimum average of 1.2 TWh annually
over 24 years (to 2041) to reach a total of 28.8 TWh.

2.     
Nalcor’s
offer to “Bid” power to Nova Scotia is based upon forecast annual availability
which may reach as high as 1.8 TWh or as low as zero in any one “Contract Year”
except that the EAA covers off this possibility. (Go to #3).

3.     
If
there is an extended dry period or system difficulty and Nalcor is unable to
supply sufficient energy to meet its commitment Nalcor will declare a “Variance” (ss. 7(a) and 7(b) EAA).  In such a circumstance, Emera is required to
come up with the first 300 GWh (which equals 25% of the 1.2 TWh) BUT Nalcor is still responsible
for the remaining 75%.

4.     
If
Emera chooses to satisfy its obligation of the 300 GWh by building wind, tidal
or solar Nalcor will support that intermittent source with 100 megawatts of
balancing services at a fixed price as it continues to fulfil its own
obligations.

5.     
Nalcor
cannot commitment 1.8 TWh of power to a third party for longer than a 12 month
period.  Even if Nalcor fulfils the 28.8
TWh commitment before 2041, Emera retains a “right of first refusal” on 1.8 TWh
every year until 2041.

6.     
Morrison
Park notes, of concern to the UARB, that domestic load growth in NL “could
reduce the available supply of energy for export” but states that because of
the Variance Clause in the Agreement
“Nalcor and Emera have jointly assumed final responsibility for the supply
of Market Priced (surplus) energy to Nova Scotia
…” (emphasis added).
Nalcor’s Variance obligations are
limited only by “force majeure” events which have not been defined.

7.     
Nalcor
has committed to Emera that if NL’s firm demand increases resulting in
insufficient surplus power available to meet its obligation to Nova Scotia including Supplemental Energy, it
will “build additional…facilities to increase…production”. (For this conclusion Morrison Park cites pp. 14-15 of the Compliance Filing and slides 3-6 of the Nalcor’s Presentation to UARB Technical Conference, Oct. 28, 2013.)

8.     
If
Nalcor fails to meet its Variance requirements to NSPI subsidiary of Emera it
must “compensate NSPI accordingly”. (s.7e (viii) of Energy Access Agreement).

There is
more in the EAA but these are the
most salient issues.

While the
language of the “deal” is technically a hard slog no should misunderstand the
effects of Item #8 regarding compensation for non-performance.  When any agreement contains penalties it demands
a clarity no lawyer can obscure.

It is the
last point #8 that Dwight Ball should have flown at Derrick Dalley.

The
Government seems to be relying upon the complexities of the Energy Access Agreement to
keep people in the dark.  Little wonder we
are forced to go to Nova Scotia’s UARB to find details of Nalcor’s commitments.
Little wonder the media, in this Province, would rather puke than report details
of an Agreement like the EAA.  But, I digress.  

Mr. Dalley
told the House “it is going to be a great day in this Province if we get to the
point where we have to use all of our power and have to create more”.  Like Ms. Dunderdale, Mr. Dalley would have us
build 30 cent per KWh power (or higher) so that Nalcor can sell it to Nova
Scotia for 4-5 cents per KWh! Anyway, when the power is committed, how can
it be called ‘surplus’?

Lest, dear
reader, you think I am in error and that Nalcor has no such legal obligation to
supply our ‘surplus’ power, consistent with the EAA with Emera, and  consistently
over the 24 year period until 2041, let me entertain you with quotes.

The first is
from the Nova Scotia Minister of Energy, Mr. Younger. Referring to the Energy Access Agreement as he headed to
intervene at the UARB Hearings, Younger stated:

“A significant amount of energy is
now guaranteed…and Nalcor is prevented from selling energy on long term
contract to anyone but Nova Scotia. As well, Emera and Nalcor would now be
financially and legally responsible for ensuring energy commitments are met.
These were limitations in the previous deal, and are certainly improvements.”

The second
quote is straight out of the UARB Hearings, in Nova Scotia, on the Energy Access Agreement.  John Merrick
is Nova Scotia’s Consumer Advocate. Rick
Janega
is President of Emera
Newfoundland and Labrador. (Page 2670/2671 NSUARB-ML-2013-01/M05419)

Let’s listen in:

Mr. Merrick:
 But let me continue with my questions.
MR. JANEGA: Mr. Merrick,
though,
before you do, if we
could, your questions are perfectly
reasonable relative to
understanding and providing clarity
over the obligations that
Nalcor has; nothing unreasonable
about them.   

The energy will be
delivered
by Nalcor and the minimum
of 1.2 will be achieved with an
upper limit of 1.8
terawatt hours per year.

Your questions over the
last few
minutes have essentially
supported what we’ve been
presenting….those clauses
are intended to ensure that
Nalcor can’t just, at the
end of the year, roll over and
say, “Well, we can’t
get the energy to you.”
It continues to keep them
committed,
and they agreed to these
terms. They agree with the
principles and the
representations….

They have the same
interpretation of it.
This is not an agreement
that leaves Nova Scotia
Power customers with
risks. It’s an agreement that
actually satisfies the
conditions and provides the
assurances that they have
to be delivered.

 

In the immortal
words of John Crosbie (paraphrased): ‘I didn’t make this goddam stuff up’.  

In time, Dwight Ball will
learn that he must have no mercy on a Minister like Derrick Dalley.  Perhaps, he needs reminding what happens
to nice guys.

He
must commit to never again let this Government play fast and loose with the
truth, at least not without consequences.

Mr. Dalley should have
been named. 
Des Sullivan
Des Sullivan
St. John's, Newfoundland and Labrador, Canada Uncle Gnarley is hosted by Des Sullivan, of St. John's. He is a businessman engaged over three decades in real estate management and development companies and in retail. He is currently a Director of Dorset Investments Limited and Donovan Holdings Limited. During his early career he served as Executive Assistant to Premier's Frank D. Moores (1975-1979) and Brian Peckford (1979-1985). He also served as a Part-Time Board Member on the Canada-Newfoundland Labrador Offshore Petroleum Board (C-NLOPB). Uncle Gnarley appears on the masthead representing serious and unambiguous positions on NL politics and public policy. Uncle Gnarley is a fiscal conservative possessing distinctly liberal values and a non-partisan persusasion. Those values and opinions underlie this writer's views on NL's politics, economy and society. Uncle Gnarley publishes Monday mornings and more often when events warrant.

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3 COMMENTS

  1. By committing this non firm power to Nova Scotia the government has shackled the province with paying for the project, where Nova Scotia reeps the benefit of the gravy. There is a committment to provide the balance of FIRM and AVERAGE energy from not just Muskrat Falls but also the existing assets in Newfoundland. The province has about 1200 GWhr of energy remaining for industrial development, but this subsides very quickly in the absence of additional energy coming onstream.

    But what is more concerning is the availability of Capacity on those cold winter days when we need the power. Nalcor have already sold the remaining 80 MW of winter capacity from RECALL power to Alderon. That leaves about 760 MW of capacity from Muskrat Falls, when it is delivered to Soldiers Pond. Of that there is ~150 MW dedicated to Nova Scotia. This leaves about 600 MW for Newfoundland.

    The province is unable to commit any firm capacity to almost anyone else, without impacting the NL ratepayer. That is because even with Muskrat there is little capacity in the winter. If any additional firm capacity is sold in winter then Nalcor will rely on thermal generation, and burn more oil. Which is not consistent with the model presented to our PUB, and to the HOA, where the economics was based on having access to the full MF at ANY time.

    What was presented to the PUB and what is reality are 2 very different things.

    All eyes should be on the PPA between Nalcor and NLH, and how the energy will be delivered in the winter months. Will we have access to the full output of MF when we need it? What will it say about Capacity in Jan, Feb, and March.

    This is Nalcor's greatest test. Will what was promised to the NL ratepayer, be consistent with what was promised.

    Unfortunately the PPA looks like it will not be released until after the fall sitting. Or maybe Nalcor are delaying its release until after the Quebec trial.

    In any respect the leader of the opposition will not be able to challenge it, in the peoples house until next year!. You can not make this god dam stuff up…

  2. Great work, Mr. Sullivan. I hope Mr. Ball is reading this, or, better, yet, hires you on as an energy consultant.

    On the one hand, the scenario you describe is absolutely scary for the province of Newfoundland and Labrador. On the other hand. there may yet be a faint hope that the project can be derailed and that we would only suffer the loss of capital expended thus far. That is not a pleasant thought but the alternative is too catastrophic to contemplate.