The Jerry Earles of the world seem to be applauding their good fortune that the Ball Administration wimped out on the task of resolving our fiscal mess. Such prescience aligns completely with the agenda of the Tories and NDP. It remains a real and present danger to the province’s ability to manage ourselves as a society.
There are
three fundamental problems with Cathy Bennett’s second Budget.
The first is
that she has failed to tackle what she has described as a “culture of
spending” which took root under the Tories.
Second,
the Minister has aligned herself with the Great and Exalted Ditherer, the
Premier, having used an all too tenuous increase in the price of oil to paper
over a serious deficit and
fast rising public debt.
Third, having sidestepped any plan to rectify
public sector mismanagement and bloat, the
Minister reinforces a public view that the fiscal crisis is really not a
problem – that the Tories were bad, but not all that bad. That is a dangerous proposition when the truth is otherwise.
The great
irony of it all is that the Ball government has used the Atlantic Accord – the most hard won victory this province has achieved since Confederation – to cower
under their most elemental responsibility, which is to safeguard the integrity of the
public treasury.
irony of it all is that the Ball government has used the Atlantic Accord – the most hard won victory this province has achieved since Confederation – to cower
under their most elemental responsibility, which is to safeguard the integrity of the
public treasury.
Most irksome
is that another culture – one of deceit – continues to spread throughout the
processes of government making it difficult for the public to distinguish between what is a fabrication and what is real. The Jerry Earles see no problem as long as their interests are served.
is that another culture – one of deceit – continues to spread throughout the
processes of government making it difficult for the public to distinguish between what is a fabrication and what is real. The Jerry Earles see no problem as long as their interests are served.
Seven examples help confirm this deceptive culture.:
1. As noted, the
ability of the government to operate hinges strictly on the price of oil. Anyone
who keeps track of the machinations of the oil industry – from OPEC’s attempts to
curb production, to the vast ramp up in the number of drill rigs which threaten to bring on additional supply, along with the success with which shale producers have
lowered production costs and increased productivity – should see that oil is no
longer a commodity on which a poorly diversified economy can depend for long term prosperity. The ability to
forecast prices is now measured in weeks. Yet, Bennett has
structured around an inherently unstable oil market the prospect of budget
balance five years from now – without a plan to trim expenditures in the meantime should the bet she has placed turn out to be silly.
ability of the government to operate hinges strictly on the price of oil. Anyone
who keeps track of the machinations of the oil industry – from OPEC’s attempts to
curb production, to the vast ramp up in the number of drill rigs which threaten to bring on additional supply, along with the success with which shale producers have
lowered production costs and increased productivity – should see that oil is no
longer a commodity on which a poorly diversified economy can depend for long term prosperity. The ability to
forecast prices is now measured in weeks. Yet, Bennett has
structured around an inherently unstable oil market the prospect of budget
balance five years from now – without a plan to trim expenditures in the meantime should the bet she has placed turn out to be silly.
Only those
comfortable with falsity – or who are in denial – have the temerity to engage in such a
deceitful enterprise.
comfortable with falsity – or who are in denial – have the temerity to engage in such a
deceitful enterprise.
2. In the
2016-17 Budget, the Minister forecast a current deficit of $1.83B which was
revised to $1.1 billion. But only $81 million of the reduction is due to lower expenses. Again using the cover of forecast oil prices – not any plan it has executed – the government projects a deficit of
$778 million for 2017-18. She barely mentions the Capital Account which is funded 100% by borrowing – reflecting rising total debt levels.
2016-17 Budget, the Minister forecast a current deficit of $1.83B which was
revised to $1.1 billion. But only $81 million of the reduction is due to lower expenses. Again using the cover of forecast oil prices – not any plan it has executed – the government projects a deficit of
$778 million for 2017-18. She barely mentions the Capital Account which is funded 100% by borrowing – reflecting rising total debt levels.
3. The total public sector debt has increased during
the past year from $14.5B to $17.5B The government has announced its intention to spend $3 billion for capital purposes (infrastructure) over the next five years – $573 million this year.
the past year from $14.5B to $17.5B The government has announced its intention to spend $3 billion for capital purposes (infrastructure) over the next five years – $573 million this year.
Far too many operating expenditures are
dumped into the Capital Account. Government uses no depreciation schedule for physical
assets. The bonds raised for this purpose – as in the past – are certain never to be re-paid. They are rolled over and over. The bond market does not distinguish the source of the debt anyway.
And by the way, one of the great difficulties with public accounting methods is that total debt is by no means “total”.
In NL’s case you still have to add over $4 billion – the shortfall in various pensions plans. The practice serves the government’s purpose well. But failing to note the figure is to suggest it doesn’t exist.
The Jerry Earles of the world would never warn their membership of the perils facing those pension plans if the government’s gamble with oil is wrong.
In case you doubt that the Total Public Sector Debt is actually $21.5B – and going far higher as continued planned borrowing including for Muskrat Falls persists – you might want to read the caveat (highlighted in yellow below) found on page A-3 of the Budget Estimates.
dumped into the Capital Account. Government uses no depreciation schedule for physical
assets. The bonds raised for this purpose – as in the past – are certain never to be re-paid. They are rolled over and over. The bond market does not distinguish the source of the debt anyway.
And by the way, one of the great difficulties with public accounting methods is that total debt is by no means “total”.
In NL’s case you still have to add over $4 billion – the shortfall in various pensions plans. The practice serves the government’s purpose well. But failing to note the figure is to suggest it doesn’t exist.
The Jerry Earles of the world would never warn their membership of the perils facing those pension plans if the government’s gamble with oil is wrong.
In case you doubt that the Total Public Sector Debt is actually $21.5B – and going far higher as continued planned borrowing including for Muskrat Falls persists – you might want to read the caveat (highlighted in yellow below) found on page A-3 of the Budget Estimates.
4. The government
claims success on the deficit, but the budget forecast confirms it has
no intention of reining in spending –
notwithstanding the bloat throughout the government. The Exhibit below needs no additional comment.
claims success on the deficit, but the budget forecast confirms it has
no intention of reining in spending –
notwithstanding the bloat throughout the government. The Exhibit below needs no additional comment.
The Minister of Finance released the Exhibit below with the Budget Summary. She commits to reducing spending by only $283M but, based upon government’s performance to date, even that relatively small sum – against an $8.4B budgeted expenditure – likely won’t get done. Next year is one closer to an election and the next one has no room for the truth. What does it matter if everyone is party to the denial!
5. One of the government’s claims is that it has reduced borrowing this fiscal year by $2 billion. It doesn’t tell the public that that this occurred chiefly because borrowing for the Dept. of Natural Resources has dropped from nearly $1.1B last year to $485M for this fiscal year in relation to Muskrat Falls – borrowing which has nothing to do with normal government expenditures.
The deception is manifest in two other ways. First, the government fails to write-down the capital cost of the Muskrat Falls project even though it claims to be pursuing “rate mitigation” – proof that the revenue from the project can’t sustain its capital cost – making it worth far less the Nalcor’s books record..
Second, the government doesn’t acknowledge that the interest costs on those borrowings show up each and every year under the “Costs of Servicing the Public Debt”. It doesn’t go away. Yet, the government soft- pedals Nalcor’s complicity and Stan Marshall’s flat-footedness, as the Jerry Earles of the world maintain the fiction, on their behalf, that the continued piling on of these costs is sustainable.
The deception is manifest in two other ways. First, the government fails to write-down the capital cost of the Muskrat Falls project even though it claims to be pursuing “rate mitigation” – proof that the revenue from the project can’t sustain its capital cost – making it worth far less the Nalcor’s books record..
Second, the government doesn’t acknowledge that the interest costs on those borrowings show up each and every year under the “Costs of Servicing the Public Debt”. It doesn’t go away. Yet, the government soft- pedals Nalcor’s complicity and Stan Marshall’s flat-footedness, as the Jerry Earles of the world maintain the fiction, on their behalf, that the continued piling on of these costs is sustainable.
6. The
government made no effort to rein in the cost of healthcare, offering neither
discussion of a new model of delivery or a strategy to rid the system of waste
and inefficiency. It seems crazy that we would allow a poorly-run public administration to trump fiscal sanity, to endanger vital programs, and even to threaten the payment of public sector pensions. But that is the choice that has been made.
The Minister talks about altering the “culture of
spending” – but she has not a clue where to begin.
7. The
government has committed itself to future “electricity rate
management” to soften the impact on ratepayers for the catastrophe that is
Muskrat Falls. The public is not permitted a single shred of information as to what public assets it will
sell, whether it will borrow for the purpose, or if it will be forced to reduce public
services – rob from Peter to pay Paul. That
is one part of a larger problem.
government has committed itself to future “electricity rate
management” to soften the impact on ratepayers for the catastrophe that is
Muskrat Falls. The public is not permitted a single shred of information as to what public assets it will
sell, whether it will borrow for the purpose, or if it will be forced to reduce public
services – rob from Peter to pay Paul. That
is one part of a larger problem.
Another, is
that the disclosures on this Blog regarding “phony” cost estimates for the project.
A former Nalcor engineer has reported a record of systematic
“low-balling” of both the estimates and the budget figures,
ostensibly to pave the way for easy sanction – in the beginning – and later, to
keep the truth of egregious cost overruns from becoming an issue in the 2015
general election.
A government concerned about the integrity of the political system would have sent a full team of forensic accountants to assess Nalcor’s complicity and to expose the crown corporation..
In summary, a feckless Liberal government has placed all its trust on the oil market, adopting not a prudent program of fiscal management but a reliance on providence – even in the face of declining forecast GDP, declining employment and population, and a demographic trend that would rattle far wealthier places.
The Jerry Earles may be feeling pretty smug. But they do their membership – and the province – a great disservice by applauding the government’s inability to lead.
that the disclosures on this Blog regarding “phony” cost estimates for the project.
A former Nalcor engineer has reported a record of systematic
“low-balling” of both the estimates and the budget figures,
ostensibly to pave the way for easy sanction – in the beginning – and later, to
keep the truth of egregious cost overruns from becoming an issue in the 2015
general election.
A government concerned about the integrity of the political system would have sent a full team of forensic accountants to assess Nalcor’s complicity and to expose the crown corporation..
In summary, a feckless Liberal government has placed all its trust on the oil market, adopting not a prudent program of fiscal management but a reliance on providence – even in the face of declining forecast GDP, declining employment and population, and a demographic trend that would rattle far wealthier places.
The Jerry Earles may be feeling pretty smug. But they do their membership – and the province – a great disservice by applauding the government’s inability to lead.
The deficit/debt problem has not gone away.
It’s just that the Jerry Earles have figured out what OPEC can’t seem to.
Good job, Premier Dithers. By making all of Danny Williams' screw-ups your own, you are going to end up letting him off without blame… both now and by the future historians.
Sorry, although he is as bad…I do (and anyone that has a grain of sense)know it was danny and his cronies that started this path of destruction.
History will look upon Joey as someone who did the best he could with what he had to deal with. And danny as the demon. It is (afterall) him and the pc government that killed this province. History will not be kind to any pc from 2003 onward, or any politician for that matter as they all allowed it to, and continue it to happen.
Remember when Dwight was gonna open all the bookS? I had such high hopes for him, but alas fool me once.
If there soon doesn't have a viable option for the people (a party that cares) riots will happen when muskrat comes online and power rates double and people become desperate.
God help us all, because the people in power don't care!
Should be a review from 2003 onward into the pc government. And now since Dwight took over. Same church, different pew. The elites have their claws in tight….theyre all one and the same.
Hope I don't get shot. LMAOOOOOOOOO….thanks Uncle for letting me comment anonymously. Its the only place I get to voice my opinion safely. LOL! Cheers
WE, the owners of MF should have the power to demand that the books be opened. I could care less about the cost of a full investigative review/inquiry… tack it on to my bill over the next 57 years. I'd like to see who' inept, or just flat-out stupid and or corrupt. I'm sure this would make for some uneasy times.
D
Exactly. I hope they all truly burn. literally and figuratively. 🙂
I agree. Everyone knows (or should know by now)our demise because of MF which was hatched by Danny Williams (for his ego and Galway)and his incredible capability of persuading Kathy Dunderdale to "barge ahead" no matter what. History will treat these two blundering traitors as just that–Blundering Traitors. An inquiry is crying out to be held but it looks like Ball and Company are also under the control of DW. Without an inquiry, Williams and Dunderdale will get away with what they have inflicted on the NL population. The stupid declaration by Gerry Byrne that "we are encouraging expats and others to settle in NL" sounds so rediculous–who in the name of God is going to voluntarily settle in NL given the cost of living which is destined to get worse all because of the blundering idiots who are running this province. Je–s Ch—t we have a so called Premier who thinks that if the sun is shining we have no problems worth dealing with. I'll soon be 70 and I fear greatly for my grandchildren who have to live with what has happened.
Will someone who has the authority please step in and save what we have left and take steps to hold Williams and Dunderdale accountable.
Those who are having trouble paying the current 11.2C/KWH
will have their total inability to pay when rates double, subsidized by Government and those of us left will have to pay for that as well.
And then we hear Danny Williams still defending MF as a good project!!! AND not one word has Kathy Dunderdale uttered about what she has done.
Je–s I'm so p–sed off!
Wayne good point about people struggling to pay the current kWh rate, guess the 55% making under $30,000 weren't even considered by the elitist/Tea Party North PCs. Kennedy/PCs lied about the monthly cost of MF on our bills he said $35-40 when it was $75 based on DG2's $6.2B, lied about the Island demand forecast and lied about the assumed price of oil, low balled all cost estimated and rigged the DG process so MF was the answer regardless.
When you have PC hosts saying "NLrs can afford the rate hike" or "we can't build a project based on the lowest income earners" you know the NLM isn't going to aid in investigating MF.
Haven't heard much out of Danny Williams in months, not after his last public appearance bombed.
The little coward doesn't like it so much when he's not met with adulation.
AC, at 11 pm for today Apr 10, -1 C last nite and 8C to today, my energy cost for electric heat today is, so far, 41 cents, so not likely to go to 50 cents for 24 hrs, for 1000 sq ft.
WA
AC, I was off a little, my heat at the end of the day showed 5.13 kwh, which at 9.75 cents per kwh, is 50.0175 cents not including tax. At my previous posting it was by then about 46 cents not 41……. but, still, not much overall for a day.
From Anonymous: "History will look upon Joey as someone who did the best he could with what he had to deal with"
That's the way I see it too.
Joey wanted economic development while totally shielding Nfld from any financial risks/disasters.
Well, Joey achieved just that, and then more. CF has been built by Nfld workers, and was 100% financed without exposing Nfld to any risks/disasters/losses. And then, in 2041, 100% of a well maintained CF generation station will revert back to CFLCo – mortgage free.
Jerry NDP/PC/Liberal fiddles while NL (Rome) is set to burn fiscally, $1,000,000,000 in debt servicing costs annually that's only going to greatly increase over the next 5 years.
2021-2022 surplus with a $30 billion debt/pension liabilities is where NL is headed for – insolvency can't be that far away.
Unions loved their Dannybuck's raises yet the pension liabilities not only remain but have grown since the Atlantic Accord money flowed in.
110 provincial civil servants for every 1000 people V 81/1000 for NB, is there a correlating wage chart to the other Atlantic Provinces? 26% more public employees V NB and we probably have the lest efficient bunch, compounding NLs fiscal crises seven further.
97/1000 (2005) to 113/1000 (2012) or a 16.5% increase, all backed by one time oil revenue.
85/1000 was the ratio under the 90s Liberals, Clyde Wells did what was required and returned NL back to surpluses. Too bad every Premier since Wells are all populists and not fiscal conservatives or realists.
Actually there is a wage chart of sorts (see Stats Canada CANSIM 383-0033) and look at "Total Compensation per hour worked" -this is a total compensation for all jobs divided by the number of hours worked so shouldn't be taken as basic wage rate. These are for 2015 (most recent available)
NL-Government educational services $46.85
NL- Government health services $40.81
NL -Provincial government services $48.23
New Brunswick Gov't educational services $38.16
New Brunswick Gov't health services $36.18
New Brunswick Provincial government services $80.20
On the face of it , we pay more into Education and Health per hour but far less in core government (the $80.20 is not a typo and was $75 in 2014).
Doesn't suit the idea that core government is overpaid compared to other provinces- in fact I think if you check all 10 provinces then NL was lowest paid in 2014 (10th place) but moved passed Nova Scotia to 9th in 2015.
There are people in complete agreement with what the Liberals are doing, believing they have our best interests at heart. However, this Budget proves that is not The case! They have no idea or nerve how to proceed to curb the debt. Government spending has to be reigned in and the difficult decisions have to be made. Depending on oil got the previous government into trouble and here the Liberals are doing the same thing! Destroying the economy, taxing the people to death, driving our debt up, lack of transparency with Muskrat Falls – not so much as a complete audit into that money pit, a Government that needs to be streamlined – too many members for the size of NL. Health and Education Boards have had to operate with less employees and money, Government should have to do the same. Who is really calling the shots with this Government? If people were truly given all the facts and they felt Liberals were doing what is right and fair for us, we would see a light at the end of this tunnel. All I can see is more of a mess facing us in 3 years time if we survive this Government!
"Taxing the people to death".
What is your alternative to taxation?
Increased power rates
This Government seems intent on blaming things on either the past PC government or the current civil service. Why- because they read their online consultations done in the early days of their administration and saw that the general public view the civil service (and certainly those on The Telegram's Sunshine list) and Danny Williams as the root of our budgetary problem so their current actions (or inactions as the case may be) plays well to those concepts. However after nearly 18 months in power it is well past the time for them to take accountability for their own policies.
On Friday ,Dwight Ball spoke to The Telegram of "tough decisions" and the intent to control health care costs. Tough decisions to politicians are ones that will cost them votes and there is little sign of that. For example ,
– no revisit of radiation therapy services to go into the new Corner Brook Hospital. Good to have but this is hardly keeping the lid on health care costs.
– no examination of how the province can justify having 17 campuses of College of
the North Atlantic ( one campus per 30,000 people!)
– no serious examination of other Atlantic Provinces to determine why it costs so much more to operate our Government and what can we learn. Do they contract more (New Brunswick for example essentially contracts all of its law enforcement)? Do their municipalities take more of the burden as is the case in Ontario (that province has 60% more civil servants per 1000 population than NL).
– no thought that, after trying to close libraries, giving free skiing passes at Marble Mountain might not send the right message about controlling a culture of spending
Despite the talk , I suspect Minister Bennett's challenge to counter the culture of spending may not be just the civil service but her peers around the cabinet table.
They are also setting us up for more debt that is yet to be revealed via P3s. This has gotten a surprisingly modest amount of discussion and is being kept under relatively tight wraps as demonstrated by release, following an ATIPPA request, of just 26 pages of over 300 available pages on P3 efforts at Corner Brook acute and long term care. Open government!?
The standard response is that a "value for money" evaluation has or will be done. One is more likely to win the lottery than fail a "value for money " evaluation and even the P3 industry admits these could be more stringent.
Have a Happy Easter.
Poor Richard
We set the gold standard in waste and inefficiency in government. I actually believe by reducing the number of employees by 10% would actually improve service, as long as we laid off the inept and the lazy.
Reading the budget speech I discovered that the Liberals have decided to adopt '"a smart, focussed approach" to budgeting. Moreover, they have also decided in favour of an "evidence-based approach" to evaluating projects and programs. Pretty reassuring don't you think?
Bernard, seems no one senses your sense of humour: `smart , focused approach, and evidence -based approach`! Their actions don`t match the words.
WA
Irony is often subject to misunderstanding lol.
"The elites have their claws in tight….theyre all one and the same" – The most honest assessment of the challenge facing our province. After a week of comparing fiscal forecasts for the country and other provincial budgets, I remain depressed about our future. The more things change the more they stay the same.
a. We can not afford to spend 8.2 Billion a year to operate thi province.
b. We can not afford to drive the long-term deficit upwards to $20 Billion
c. We need leadership that will address the realities of offering education, transportation and other services.
d. We need to privatize services that are not core to government.
e. We need to tame the unions and expectations.
f. We need to stop kicking the ball down the road. Yes we are saddling the next generation to debt but in reality it is completely unsustainable.
g. It would appear that despite all the criticism of the past tory government this crowd is using an un expected $500 million windfall from oil to spin their fiscal prowess.
h. We have to bite the bullet and decide what we as a population can afford and are willing to sacrifice to keep going.
Great article Des, I have been waiting a few days to read your take on this dissapointing budget.
A great article, yet again, by UG. Is a new party part of the solution? Tradition clings to NL like headlice, making it a difficult place to start one. Our demographics challenge us as well. Seeing as debt and public pensions are crushing the province, our largest voting block won't be too keen on voting for a party that may make changes to their current or future source of income.A bumpy road lays ahead, but this young NLer will not abandon his motherland in her time crisis. Good or bad, I'll be here for her.
Des, Who is this Jerry Earles of the world?
Union Leader, Robert, who was pleased there were no job cuts.
WA
NEWS ALERT : Muskrat Mitigation
In the Telegram today and on VOCM radio, it is announced we now have a homeowner energy efficiency loans, as a result of last weeks budget.
The program is called Home Energy Loan Program (HELP) for low income residents, and the more audacious Home Energy Efficiency Loan Program, (HEELP) for those making more than 32,000.00 in income
The HEELP program is budgeted for a total of 1 million in loans for the 2017-2018 period, and at a low interest rate of prime plus 1.5 percent. Prime is generally around 2.7 percent , so the interest rate is about 4.2 percent.
Applications will be accepted starting in October, for amounts up to 10,000 dollars……. for those who qualify.
Now the math shows that this means that of the 200,000 homeowners in Nfld, 100 of them can get a loan, at a rate that is likely more than what your bank will charge, or what mortgages are. 100! …..Can you believe it. `We do it because we care about our customers wanting to save energy` say Nfld Power official Perry, as quoted by the TELEGRAM.
Coming soon is the HEEELP , the Home Energy Efficiency Earlybird loan program. This will be budgeted for 10 homes for Nfld at a reduced rated of 4.1 percent.
Reports are that even better things are in the works for Muskrat Mitigation, once they roll out the HEEEELP program , the Home Energy Efficiency Earlybird Emergency Loan Program, for a further 2 homes, one of which must be in Labrador.This is scheduled to kick in in 2019, prior to neck general election.
The catchy titles comes form the Beatles song HEEEEEEEEEEEELP….we need somebody…….HEEEEEEEEEEEEELP, Not just anybody…….., so there is the potential for more innovative additions to this program yet………stay tuned. Get cracking with the applications, as funding is limited, to allow the grand total of 100 households to take advantage of this offer.
This program will jump start heatpump installation here, with the aim to surpass Nova Scotia, which currently has about 100,000 installed. At the rate of 100 per year under this program, we could succeed after 1000 years. Now that is Muskrat MITIGATION.
The budget mentioned that measures would be focused. Indeed, we are stepping into the world of energy efficiency, in a world class manner. Can`t get more focused than HEEEEEEEEEEEEEEEEEEEEELP
Winston Adams
LOL!!Pretty good Winston.You have a good sense of humour.
Am I missing something, where is the investment in tourism and self sustaining initiatives?
Tourism is an industry that could see growth in this province if government invested in it properly. There could be increased revenues from visitors. Does not require increased power demands.
And besides keeping massive stores of storm chips, are there any significant initiatives to keep ourselves fed when the ferries cannot run for days at a time, or when the heat and lights do go out again. I mean farming, greenhouses, milksheds, maybe bottling water.
They have given mining companies money and paper companies money in the past, for little return. I'm not talking apocalypse events, just you know if Igor comes back, maybe we could survive on something other than moose and salt fish.
Just spitballing here, but is there any discussion on other ideas besides waiting for oil money?
Economies need investment yes to grow. We need some returns. There is supposed to be growth right?
One of the systemic problems in Newfoundland is that we keep looking to the Government to make the investment in tourism and self sustaining initiatives (or any industry for that matter). One of the reasons we are in this mess is that traditionally, Government investments are nothing more than subsidies that don't make long term economic sense.
Private individuals need to step up to the plate and take the risk associated with starting small businesses. We keep looking to Government for the answers and maybe it is time to change this attitude that has long persisted in Newfoundland.
We need to wean ourselves off the Government teat.
Hear, hear Mike. The last line of your comment is one that requires the courage for political leadership to just say no. We are going to live within our means. If that means we can only offer 50, 60, 70% of wages for equivalent jobs in other jurisdictions so be it. This is not intended to be a solution other than to one you will never deal with the problem unless one admits there is one.
Keith
I agree
No I disagree. investment is part of governments role. at all levels. thats why bombardier gets a big goverment loan.
mismanaging services and bloat are the problem. they are correct to recognize the leaner part. they are waiting to take severance packages and institute wage freezes to deal with that.
what is overlooked is that typically, when you pay more, levies, tax, whatever, you normally expect more in return. pay more get more.
the only systemic problem i have seen is private business overcharging and overbidding, and gouging government contracts at every opportunity. many family businesses, mr. crosbie, were built this way. right mr hickman?
In the private sector if a contract was let for a certain price and overruns occurred it was borne by the contractor, not the person/business for which the contract was let. But if Government accepted a bid on any contract whether it be the lowest or not, it is on the basis that if there are overruns Government will pay it, not the contractor. Cost plus contracts are and have been the normal way as far back as I can remember. It's a "wink wink nod nod" environment. That's the way it has been, is and still will be unless someone has the balls to put a stop to it. Government departments are at the whim of the politicians who will do anything to get re-elected to ensure their gold plated pension benefits–plain and simple. Make no G D wonder we're in the mess we're in.
The early pieces, of 2012, I guess, defined Uncle Gnarley as a wise old economist, who had discussion with his side kick Nav. These pieces were so well written that for a while I thought it was composed by Ray Guy. The points got across to the reader, not unlike one might learn from Socrates.
Economists come in different flavours. Some consider then tobe crystal ball gazers, yet theyuse a lot of data to make forecasts, yet can be wrong.
Our friend Bernard Lahey is an economist, and being ex-HQ must have been pretty good.
Here on the Muskrat issue, I have seen the Good , the Bad and the Ugly
Dave Vardy has been at the forefront, in warning about the boondoggle of Muskrat, well before sanction, and up to the present. He ranked conservation and efficiency as very important. Vardy the Good.
Wade Locke, was a promoter of Muskrat, when it was supposed to cost in the range of 5 to 6 billion, and once sanctioned, and costs started to climb, he said it would be uneconomic if it exceeded 8 billion. Now at 12 billion, we have Wade the BAD. Yet he still gets more media press and invites from the Board of Trade, as if he is genius. Wade Locke, prior to sanction, would not even read my presentation on the benefits of efficient heating systems to reduce energy use and peak demand.
And then we have James Feehan. He was opposed to Muskrat, suggesting that the alternative of some additional island hydro, more wind and conservation and efficiency was the way to go.
I preferred Vardy`s take, as it ranked customer efficiency and conservation very high,and island hydro and wind, his views aligned with mine, especially the benefits of heatpumps to address our winter heating load.
I have encouraged our economists to evaluate (and write on UG) the ability of heatpumps to drive down energy use and peak demand, and the consequence of the uptake of these with expected doubling of power rates. The economic term `elasticity effect` is key. For electric heat, the figure ranges from 0.2 to 1, with Vardy suggesting 0.5. Vardy has deferred to Feehan to write on this aspect. Feehan is apparently working on a paper on this. He is noncommittal, so far, to forecasting the decline of energy use and peak demand as as result of mini-split heatpump uptake. Being an engineer, but not an economist, I have considered writing on this,but would much defer to economists, being content to provide data on the technical performance of these systems, but generally they are as good as natural gas for low cost heating, so will have a big impact here.
Now, we hear that Feehan as been appointed on the Oversight Committee for Muskrat. Feehan has already written on power rate issues, and advocated for modest rate increases , to AVOID customer investing in energy efficiency, as it will further put pressure on reduced revenue for power sales, that is necessary for Muskrat. So, I doubt that Feehan will promote customer energy efficiency. Hence, James the Ugly (sorry James, not your appearance, and I guess you intentions are to make the best of a ugly situation)
So where does our economists fit into this debate, and where and why have we gone wrong. I would like to see others comment on this.One of my old textbooks was titled Engineering Economics. Perhaps I should read it again, now 50 years later.
Winston Adams
Too few practicing Engineers, their managers, clients, etc. are permitted to apply Engineering Economy, Cost Engineering, Project Management principles, on projects. Remember this from your Engineering courses; Annual cost, (Revenue Requirements), for project viability, approximates 10% Capital cost. Right now, Muskrat will require annual revenue in the order of $1.1Billion. We are told that Engineering Estimates were falsified, understated in the order of $0.5 Billion. Estimates of Revenue Demand were inflated by a factor of .25? It continues to baffle why none of the professionals, (MUN faculty Engineering/Management Studies, Engineering/Project Manager, peers), have gone silent.
Correction; replace none with most
Russell, in todays Telegram, writes(title…Delayed Reaction) in praise of James Feehan, now on the Independent Review Board. Russell asks `why is it that provincial governments are incapable of saying “ We made a mistake“. They bring in independent oversight only after the project has bogged down in serious and expensive trouble. He says Feehan and the others are not subject to being in anyone`s good graces.
Russell`s piece on Apr 8 (If you build it, customers might not exist) says technology marches on, especially in the electrical business. He cites the high penetration of wind energy in Texas, solar and storage capabilities, that is transforming the industry. He say utilities in the USA are `already dealing with load deflection and load growth stagnation`
HELLOOOOOOOOOO RUSSELL.
Did you hear about the recent forecast rollback here!
And, come on mannnn….. what you say is now happening in the USA on load deflection and load growth stagnation, is not new, but started 15 years ago.
And Nova Scotia started on this path 10 years ago. They are the top in Canada for their measures…….thought Russell would know this …..being from Nova Scotia.
And Nfld…….2nd worst in the country for energy efficiency and conservation, which is key to LOAD DEFLECTION AND LOAD GROWTH STAGNATION.
It is strange that Russell, nor anyone else,at the TELEGRAM cites these facts, and especially Russell, who appears to be concerned about the environment and conservation. Can it be that Russell is subject to be swayed by advertisement revenue for his newspaper from Take Charge ads, that is everywhere, yet that program accomplishment so little for the customer.
Is Russell really independent!If he was, he should have been out front on this 4 to 5 years ago, before Muskrat got sanctioned. Pity. And I like Russell`s writing, very much so. It is what he does not write about that bothers me.
Winston Adams
It is a good time to question the whole economic philosophy behind the Muskrat venture.
How much was the pre-feasability influenced by the operation of the local Cable TV empire?
There are some operational similarities; both are essentially monopolies, granted under Provincial license. Clients, are ratepayers in the sense that they provide the revenue to offset the capital and operating costs of the business.
There are vast differences, (relatively), however in the capital requirements to build an electrical power system and a cable TV system. Compare generating plants to CTV head ends! Also, the majority of the distribution network for CATV was already built and capitalized by the Telephone companies.
Could it be that the Cable business executives, assigned to Nalcor project, overly influenced the feasibility work to point of implementation, based on false premise?
it is six years late questioning the whole economic philosophy behind the Muskrat venture.
The philosophy, supported by all the facts, is that this is a feudal oligarchy run amok. Does not the fact that regulatory oversight was shortcircuited, that the economic analysis led to 57 year amortization (unheard of in private utilities), that the engineering and contracts remain secret to this day point to undemocratic, unsubstantiated decisions by oligarchs?
Ocam's razor implies that the most obvious explanation is probably correct. If one considers further that the party in power is irrelevant in restoring any democratic oversight is it not clear that your "democracy" is a flimsy veil obfuscating feudal politics?
Ducking the reality when it walks, talks and waddles like a duck is counterproductive and in this case culture destroying.
Put 25 000 employees on the street for six months and they will save wages. Summer months are warm.
What the Jerry Earles of this world seem to need to know now is that Hobson's choice didn't come in the budget in the form of mass layoffs /firings and that they are now facing the horns of a dilemma with the choice of wage and benefit rollbacks or the dollar equivalent layoffs/firings with their attendant bump game.
This is not a dilemma for the union. If the Union accepts wage rollbacks then the Government looks like heroes to the general population for being tough and, to the Union membership, the Union executive will appear weak and will be tossed out in due course. On the other hand if the Union holds firm against cuts and the Government lays staff off or legislates wage roll backs then Dwight Ball appears high handed and dictatorial to the Union membership and the Union executive looks to be standing up for their members' rights. This is hardly a dilemma.
The end result will be the same. The will of the people will prevail. We must remain solvent. The unions should not be spending their members money on anti-government ads but should instead be saving it to help their members when the strike or lockout happens.