WHO REALLY BENEFITS FROM MUSKRAT FALLS?

Guest Post written by Gabe Gregory

Nalcor’s most recent estimate of the
capital cost for the Muskrat Falls project is $11.4 billion. Emera is spending $1.6
billion for the Maritime link (ML) to NS. The total capital investment on the
venture is $13.0 billion.

The table below – at Line 2 – confirms Nalcor’s
estimate of total annual power production from the project at 4.642 TWh. The table
also puts at 
1.192 TWh Nalcor’s most current estimate (June 2016) of how much electricity
Newfoundlanders will use in the first year full power is produced.
The amount committed power to Nova Scotia, under the Nova Scotia Block, is
1.220 TWh. The balance – 2.230 TWh – is the amount Nalcor can export – though approximately
80% of this power is also committed to Nova Scotia.


Nalcor estimates the annual cost of the
electricity for the first full year of power at $737 million. Based upon
consumption estimates for the Island of 1.192 TWh, the math suggests the rate for the power from Muskrat Falls will
cost Newfoundlanders 61.8 cents per KWh.

By comparison, Nova Scotia estimates its
costs at $160 million for the 1.220 TWh it will receive. The math calculates that province’s rate at 13.1 cents per KWh.

Nova Scotia has the advantage of a contract
(known as the Energy Access Agreement or EAA) to buy most of the excess power
from Muskrat Falls. It will be purchased at market rates. The table below is
based upon 5 cents per KWh (in line with market rates in New England where they
are set by auction).

With the advantage of buying the additional
power, Nova Scotia has ensured electricity costs from Muskrat Falls will be very
competitive. The combined rate – for the Nova Scotia Block and power purchased
under the EAA – could reach below 8 cents/KWh, as shown below. Newfoundlanders
will have heavily subsidized Muskrat Falls power to Nova Scotia.

In stark contrast, Newfoundlanders will
have to pay 52.4 cents for Muskrat Falls power even if Nalcor reduces the rate
by the full value of the export revenues. In a nutshell, Nova Scotia has
secured most of the power generated from Muskrat Falls for only 12% of the
total capital cost. Newfoundlanders, on the other hand, will have to pay 88% of
the capital costs while using only 26% of the power.

Readers will recall that under the original
plan for Muskrat Falls Nalcor invoked the 20/20 provision – Nova Scotia was to
get 20% of the power for 20% of the capital cost.

The public review process protected the Nova
Scotia consumers. In this province, the government denied the people their
right to public review – a process that might have protected us from the mess
our political masters have bestowed on us.

It is reckless for the current government
to proceed without giving the public the evidence on which its decision to
continue building this “boondoggle” is based. 

The government should at least refer the
continuation of the construction of this project to our PUB.

We have a right to know whether or not
cheaper options are available.

One option that needs review is whether it
is feasible to complete the transmission from Labrador and import power at
market rates rather than build a powerhouse and dam at Muskrat Falls.

Without a dam and powerhouse, there is no
methyl mercury, no safety risk of dam collapse, and power rates that will
likely be far less than 61.8 cents per KWh.

In short, Muskrat Falls is denying us very
low electricity costs we would have realized from Churchill Falls in 25 years.
1. based on most recent estimates from
Nalcor
2. based on Nalcor’s estimated net MF power
generation & contracted power committed to NS
3. based on cost from Nalcor June 2016
& costs presented to UARB in NS
5. assumes export sales at 5 cents /KWh

6. assumes all surplus power is purchased
by NS – 80% of it is committed

OPINION POLL OVER-RATES INEFFECTIVE TORY OPPOSITION

Having survived in spite of themselves, in Opposition the Tories have been lazy and uninspiring.  The fact that it is summer, and the House of Assembly is closed, admittedly makes their job tougher, except that the Party’s manifest weakness is not a seasonal problem.

REMEMBERING CABOT MARTIN (1944-2022)

He was an exceptional person. A gifted intellect for sure; irascible and argumentative, too. What endeared him to many was not just that he was analytical and insightful, but that he was honest and forthright. He was a public policy wonk; resource policy interested him most. He loved to travel and read; people, with something to say, were always important.

GNL RUSHING INTO ANOTHER “SCHEME”: CABOT MARTIN

I must say that after the Muskrat Falls fiasco, I thought our government had finally learnt its lesson and would not to rush into another such scheme where calling it “green” was enough to suspend all critical analysis.

13 COMMENTS

  1. Ahhhh. Great to see some clear-headed, easy to understand analyses of what the 'naysayers' have been saying for years now. Well done Mr. Gregory (Now where is Dwight Ball's "evidence-based" decision?) — Maurice Adams

  2. A clear & frightening analysis for the future in store for the average struggling NLer. I guess we are all suppose to take solace in the fact that a select few became multi millionaires off this mess, as they check their Emera stocks from their Florida condos.

  3. The project that just gets better and better, if you are not a resident of this province. Great analysis. So where's the case to continue, as Stan Marshall says. Spell out how this train can be put back on tract, and will not crash.

  4. The recent figures from Nalcor in June reduces the demand for energy for these reason: slow economy, lower oil prices and therefore some competition from customers using oil for heating, and some impact from a decline in energy use based on higher (based on 15.4 cents rate) electricity costs.
    Not included is the impact from people who will burn wood, or use wood pellet stoves, and especially heatpumps (which are all electric but use 65 percent less electricity). Nfld Power's own surveys showed conversion that went from just a few unit in 2010 to 1000 conversion last year for minisplit heatpumps, and continue growing rapidly. Imagine the rate of conversion when power rates double. So will 61.8 cents go to 70 or 80 cents per kwh?

  5. There should be more NL residents reading this blog. This whole "debacle" gets scarier by the day. The majority of NLers are not speaking up and expressing their views. Saying nothing does not make this go away as it will NOT go away. At the very least a public uproar may expose the contempt that public officials and those in charge of Nalcor had and still have for the citizens of this province.
    When Danny Williams first became Premier, I and most other NLers had high hopes for this province but his monumental ego got in the way. Then we went from the frying pan to the fire when Kathy Dunderdale took the reins. The money we had flowing into the coffers of Government was tossed around like confetti and allowing the likes of Ed Martin to have access to a bottomless pit of cash got us to where we are today.
    Given the absence of information about this whole "boondoggle" (which started with bill 29—imagine, not allowing the PUB to scrutinize this project!!!) Absolute power corrupts and I smell a skunk here.
    I'm surprised The Fifth Estate or W5 hasn't latched on to this–this is when we would get more shocking news leading the way for heads to roll.
    I'm almost 70 years old and retired on a comfortable pension (not a lot,but comfortable) and have always been able to pay my bills.
    When the electricity bills increase to where we know they are going, it is not only these bills which will increase—it will affect every single facet of living in this province–bar none.
    With the installation of heat pumps, NL Hydro will not have the predicted demand,thus less revenue for the Government to pay for MF. Guess what happens then! Taxes will increase (again and again) and we're into a neverending cycle.It wouldn't surprise me if food will be taxed.To top this off we're committed to providing power to NS for nothing. At least those in charge of Emera had good business sense, not like we had here.
    There's more to this than meets the eye and an investigation by The 5th Estate or W5 should spark a Public Inquiry.
    If nothing else,those who unleashed this scourge upon NLers would be exposed and hopefully held accountable.
    I can see no other way out of this for me but to move permanently out of the province. I fear for my grandchildren.

    Mr. Williams and Ms. Dunderdale should hang their heads in shame and the current Premier is doing absolutely nothing that I can see to even keep us informed with "truthful" information.
    If "Galway" was being administered the same way MF was it would have been scrapped long ago–but no! the people's money was and still is readily available —"how much do you want? sure and there's more, just tell us how much".
    I'm not surprised Ottawa increased the loan guarantee. Lower interest rates means not as much for them to pay back as it will be the rest of Canada paying for the STUPIDITY of our "illustrious" heads of state.
    God help us all!

  6. Newfoundland residents have extensive experience running their cabins with gas generators, batteries and propane. Very little comfort is sacrificed: propane fridge/freezer, propane stove/oven, on-demand hot water and gas or wood fireplace. The electric water pump, LED lights and satellite dish don't consume much. The generator is fired up in the morning for coffee and toast. Many cabins are insulated and livable year round too. I wonder when people in St. John's are going to have their power disconnected for non payment and end up staying off-grid out of necessity? With these potential monstrous rates, all sorts of alternatives make economic sense – including sophisticated integrated solar/diesel/wind/battery systems and even leaving the province and starting over. Personally, I'd rather stay and fight the battle to have those responsible for pillaging the province in permanent exile, if not behind bars. We need a #DrainTheSwamp movement.

    In the meantime, please use Twitter and Facebook to spread the articles on this blog. The US election just proved that social media trumps mainstream propaganda.

    • I love this comment. I believe Danny and all his cronies should be locked up…ball changed the face but its still business as usual. nothing has changed since 03….full steam ahead. Onward through the fog. Cant wait for the inquiry and all are jailed or tarred and feathered.

  7. Who is Gabe Gregory…….I Googled the name and I came across a Gabe Gregory that was with Quinlan Brothers Fishery. Anyway,I have been surprised that the fish plant owners in general and the fishermens union have not been vocal in opposition to this Muskrat Falls project and the impact of double the cost of electricity will have on their industry. Freezer plants use considerable electricity and low energy costs are an important input to being competitive and if possible grow the fishing industry.
    Winston Adams