Editor’s Note: When David Vardy released the essay entitled “Making Best Use of the Lower Churchill: The Muskrat Falls Development”, which he had prepared
as a brief for the Action Canada Fellowship in 2011, it constituted the first sceptical
appraisal of the many claims of the Williams Administration regarding the
project.
as a brief for the Action Canada Fellowship in 2011, it constituted the first sceptical
appraisal of the many claims of the Williams Administration regarding the
project.
It took six more years before then Fortis CEO and current Nalcor
CEO Stan Marshall got around to describing the project as a “boondoggle”. But Vardy was
there, at the starting gate, absent any but the public interest, to warn of that likely outcome and to replace hyperbole
and falsity, often issued under the guise of patriotism, with objective
analysis.
It can rightly be said that Vardy not just wrote the primer on
the Muskrat Falls project; he was the “first responder” sounding the alarm, demanding notice of Muskrat as
ill-considered, possibly injurious, public policy.
the Muskrat Falls project; he was the “first responder” sounding the alarm, demanding notice of Muskrat as
ill-considered, possibly injurious, public policy.
 |
| David A. Vardy |
It was in response to his
alarm that this Blogger, and a handful of others, began asking questions and
writing, first about government’s shift to secrecy and opacity over the
business case for the project (exemplified by its refusal to deal even-handedly
with the PUB) and later, when the main stream media (except the Telegram’s Wangersky) wouldn’t or couldn’t,
provide exposure to the entrails of an emerging – now a full-blown – debacle.
alarm that this Blogger, and a handful of others, began asking questions and
writing, first about government’s shift to secrecy and opacity over the
business case for the project (exemplified by its refusal to deal even-handedly
with the PUB) and later, when the main stream media (except the Telegram’s Wangersky) wouldn’t or couldn’t,
provide exposure to the entrails of an emerging – now a full-blown – debacle.
When David Vardy ought to have been welcomed by politicians and officials as a source of sound analysis and common sense, giving him a full
airing of his concerns – and those of others – he received only
the title “naysayer” and the opprobrium of Danny Williams and his adherents.
airing of his concerns – and those of others – he received only
the title “naysayer” and the opprobrium of Danny Williams and his adherents.
Vardy still works daily addressing questions to Nalcor and to the
Government – and to dozens of others who might assist or give clarity on some issues – writing articles for this Blog and the Telegram and appearing in
the mainstream media. He is an unrelenting “town crier” determined to raise the
profile of Muskrat issues as the project – slowly, but surely – is recognized by
the public as a serious threat to the province’s solvency and many other elements of our
social cohesion.
Government – and to dozens of others who might assist or give clarity on some issues – writing articles for this Blog and the Telegram and appearing in
the mainstream media. He is an unrelenting “town crier” determined to raise the
profile of Muskrat issues as the project – slowly, but surely – is recognized by
the public as a serious threat to the province’s solvency and many other elements of our
social cohesion.
In British Columbia, a new government is reappraising a hydro
project of its own, known as “Site C”, which it fears is also a boondoggle. It has mandated
an Inquiry to review the project and to determine if it should be continued.
project of its own, known as “Site C”, which it fears is also a boondoggle. It has mandated
an Inquiry to review the project and to determine if it should be continued.
Drawing on his analysis and experience with the Muskrat Falls
project, Vardy submitted a 48-page Paper to the British Columbia Utilities Commission entitled “Site C and Muskrat Falls Compared“. Based upon that work the Commission invited the former senior public
servant to appear in person and to make an additional – oral – presentation. Vardy summarized his far lengthier tome for this purpose – which he delivered in B.C. on Saturday,
October 14th. The verbatim text of his oral submission is available at this LINK at page1511 and his draft comments follow. – Des Sullivan
project, Vardy submitted a 48-page Paper to the British Columbia Utilities Commission entitled “Site C and Muskrat Falls Compared“. Based upon that work the Commission invited the former senior public
servant to appear in person and to make an additional – oral – presentation. Vardy summarized his far lengthier tome for this purpose – which he delivered in B.C. on Saturday,
October 14th. The verbatim text of his oral submission is available at this LINK at page1511 and his draft comments follow. – Des Sullivan
PRESENTATI ON
TO THE BCUC INQUIRY INTO THE SITE C PROJECT – Vancouver, October 14, 2017
By David Vardy
My name is David Vardy and my submission to the
Commission is a comparison of Muskrat Falls with Site C. I am an economist who
served for most of my career as a senior public servant in the government of
NL.
Commission is a comparison of Muskrat Falls with Site C. I am an economist who
served for most of my career as a senior public servant in the government of
NL.
Earlier in my career I was a member of the Economics
faculty at Queen’s University and worked in the federal departments of Finance
and Fisheries. I did my graduate training in economics at the University of
Toronto and at Princeton University.
faculty at Queen’s University and worked in the federal departments of Finance
and Fisheries. I did my graduate training in economics at the University of
Toronto and at Princeton University.
Within my home province I served as Secretary to the
Cabinet, Chair of the Public Utilities
Board, President of the Institute of Fisheries and Marine Technology and Deputy
Minister of Fisheries.
Cabinet, Chair of the Public Utilities
Board, President of the Institute of Fisheries and Marine Technology and Deputy
Minister of Fisheries.
My full submission of August 30, 2017 is on the BCUC
website.
website.
In both NL and BC hydroelectric power reigns supreme. In
BC 90% of capacity is hydroelectric while in NL 64% of Island supply is hydro
power and for the province as a whole hydro power is higher than 90% of the
total supply, when the giant plant at Churchill Falls is included.
BC 90% of capacity is hydroelectric while in NL 64% of Island supply is hydro
power and for the province as a whole hydro power is higher than 90% of the
total supply, when the giant plant at Churchill Falls is included.
The power capacity of BC Hydro is 10,000 MW while that of
Nalcor Energy is 7,500 MW, including Churchill Falls, which is rated at 5,428
MW. Nalcor is the majority shareholder in Churchill Falls, with Hydro Quebec
holding 34%.
Nalcor Energy is 7,500 MW, including Churchill Falls, which is rated at 5,428
MW. Nalcor is the majority shareholder in Churchill Falls, with Hydro Quebec
holding 34%.
Most of the energy produced at Churchill Falls is sold to
Quebec leaving Island capacity at about 2,000 MW which compares with 10,000 MW
in BC.
Quebec leaving Island capacity at about 2,000 MW which compares with 10,000 MW
in BC.
Unlike BC Hydro Nalcor Energy is not regulated, even
though its fully owned subsidiary, NL Hydro, is regulated by the Public
Utilities Board.
though its fully owned subsidiary, NL Hydro, is regulated by the Public
Utilities Board.
Muskrat Falls will add 824 MW and 4,900 GWh to the
provincial system. While Muskrat Falls is similar in size to Site C its impact
on the province is much greater than the impact of Site C on BC. Site C
represents 3.5% of your province’s GDP and 21% of your net debt, while Muskrat
Falls represents 42% of our GDP and 85% of our net provincial debt.
provincial system. While Muskrat Falls is similar in size to Site C its impact
on the province is much greater than the impact of Site C on BC. Site C
represents 3.5% of your province’s GDP and 21% of your net debt, while Muskrat
Falls represents 42% of our GDP and 85% of our net provincial debt.
The Muskrat Falls project includes a number of components,
additional to the generation plant itself. The generation plant accounts for
54% of the cost while transmission lines represent 46%, a much higher
transmission component than that for Site C. Also included in the project is a
sub-sea cable crossing under the iceberg infested Strait of Belle Isle. The TL
connecting the Island with Nova Scotia is known as the Maritime Link.
additional to the generation plant itself. The generation plant accounts for
54% of the cost while transmission lines represent 46%, a much higher
transmission component than that for Site C. Also included in the project is a
sub-sea cable crossing under the iceberg infested Strait of Belle Isle. The TL
connecting the Island with Nova Scotia is known as the Maritime Link.
The impact of Muskrat Falls on power rates will be
enormous, with rates doubling to 22.9 cents per KWh in 2021, the first year of
full power. My understanding is that Site C will not trigger large rate
increases when it comes on stream in November 2024.
enormous, with rates doubling to 22.9 cents per KWh in 2021, the first year of
full power. My understanding is that Site C will not trigger large rate
increases when it comes on stream in November 2024.
I will highlight some key issues that I think are
relevant, relating to the following matters:
relevant, relating to the following matters:
1. Planning time frame and intergenerational
equity;
equity;
2.
Underestimation of costs;
Underestimation of costs;
3.
Overestimation of consumer demand; and
Overestimation of consumer demand; and
4.
The business case for Muskrat Falls.
The business case for Muskrat Falls.
Planning
time frame and intergenerational equity
time frame and intergenerational equity
Nalcor selected a planning horizon of 50 years and
advanced the Muskrat Falls project as a long term solution to a perceived
energy problem. If we did have an impending energy shortage it would be
relieved by 2041 when the Churchill Falls contract with Quebec comes to an end
and we have access to its full 5,428 MW production instead of our current
access of 525 MW.
advanced the Muskrat Falls project as a long term solution to a perceived
energy problem. If we did have an impending energy shortage it would be
relieved by 2041 when the Churchill Falls contract with Quebec comes to an end
and we have access to its full 5,428 MW production instead of our current
access of 525 MW.
In presenting the Muskrat Falls project Nalcor ignored
the availability of Churchill Falls power. The time frame for the review in NL
should have ended at 2041, without adding further generation costs from 2041 to
2070.
the availability of Churchill Falls power. The time frame for the review in NL
should have ended at 2041, without adding further generation costs from 2041 to
2070.
The project required a long payback period to build any
kind of business case. Such a long time frame permits costs to be shifted into
the future through various devices. Both BC Hydro and Nalcor have used
different techniques but the result is the same, namely to reduce current rates
and increase future rates and thereby to avoid rate shock.
kind of business case. Such a long time frame permits costs to be shifted into
the future through various devices. Both BC Hydro and Nalcor have used
different techniques but the result is the same, namely to reduce current rates
and increase future rates and thereby to avoid rate shock.
In the case of Nalcor they have chosen to backend load or
defer payment of the costs of generation assets over the 50 year period, while
adopting normal cost of service accounting for transmission costs. This means
that capital costs expensed for generation assets in the last 20 years (from
2050-2070) are enormous.
defer payment of the costs of generation assets over the 50 year period, while
adopting normal cost of service accounting for transmission costs. This means
that capital costs expensed for generation assets in the last 20 years (from
2050-2070) are enormous.
With rapid technological change large power plants may be
rendered obsolete. In 2069, Muskrat Falls may be superseded by more efficient
energy sources but ratepayers will continue to be burdened with the cost of the
project. This results from the “backend” loading of generation costs while unit
energy costs are levelized over time, in real terms. Will the same be true of
Site C where the planning horizon is 70 years? Is it fair to future generations
to impose these costs upon them?
rendered obsolete. In 2069, Muskrat Falls may be superseded by more efficient
energy sources but ratepayers will continue to be burdened with the cost of the
project. This results from the “backend” loading of generation costs while unit
energy costs are levelized over time, in real terms. Will the same be true of
Site C where the planning horizon is 70 years? Is it fair to future generations
to impose these costs upon them?
Underestimation
of cost
of cost
Underestimation of cost has been a huge problem at
Muskrat Falls. Since the Muskrat Falls project was announced in 2010 there have
been seven cost revisions. Including financing costs, but excluding the
Maritime Link, the cost estimate went from $6.2 billion when announced by
Premier Danny Williams in November 2010, to $12.72 billion in June of 2017. The
following table comes from the June 2017 report of the Oversight Committee. The
increase from $6.2 billion in 2010 to $12.72 billion was an increase of 105%,
with the largest increase announced by the new President Stan Marshall in June
of 2016 at which time he announced that there would
Muskrat Falls. Since the Muskrat Falls project was announced in 2010 there have
been seven cost revisions. Including financing costs, but excluding the
Maritime Link, the cost estimate went from $6.2 billion when announced by
Premier Danny Williams in November 2010, to $12.72 billion in June of 2017. The
following table comes from the June 2017 report of the Oversight Committee. The
increase from $6.2 billion in 2010 to $12.72 billion was an increase of 105%,
with the largest increase announced by the new President Stan Marshall in June
of 2016 at which time he announced that there would
be a slippage in the schedule by two years, delaying full
power to the second quarter of 2020. The increase amounted to $2.48 billion,
which included a variety of escalating costs including those for the
powerhouse. The delay in schedule created a major increase in financing cost
from $1.3 billion to $2.3 billion. The delay was the result of problems by a
major contractor who had been awarded the contract to build the powerhouse and
associated civil works. This large contract was awarded to an Italian firm
which had no previous experience in the Canadian north and had vastly underbid
the competition.
In December of 2016 Nalcor’s CEO announced that the contract
with Astaldi had been renegotiated, raising the contract from $1.1 billion to
$1.83 billion, an increase of 66%.
power to the second quarter of 2020. The increase amounted to $2.48 billion,
which included a variety of escalating costs including those for the
powerhouse. The delay in schedule created a major increase in financing cost
from $1.3 billion to $2.3 billion. The delay was the result of problems by a
major contractor who had been awarded the contract to build the powerhouse and
associated civil works. This large contract was awarded to an Italian firm
which had no previous experience in the Canadian north and had vastly underbid
the competition.
In December of 2016 Nalcor’s CEO announced that the contract
with Astaldi had been renegotiated, raising the contract from $1.1 billion to
$1.83 billion, an increase of 66%.
Nalcor also underestimated the operation and maintenance
costs. Their June 2017 update revealed that their earlier cost estimate had
been revised from $39 million to $109 million, growing to $143 million in 2021.
How does the operating and maintenance cost of Site C compare?
costs. Their June 2017 update revealed that their earlier cost estimate had
been revised from $39 million to $109 million, growing to $143 million in 2021.
How does the operating and maintenance cost of Site C compare?
There are many complex reasons for the cost escalation. A
former Nalcor employee has stated that cost estimates were falsified in order
to secure project sanction. The anonymous engineer said:
former Nalcor employee has stated that cost estimates were falsified in order
to secure project sanction. The anonymous engineer said:
“I could not put up with falsifying information
anymore.
anymore.
To begin with, the original cost of $6.2 billion on
which the project was approved was a complete falsification. The estimate was
deliberately kept low — below $7 billion, so as to appear favourable relative
to the cost of thermal power generation.
which the project was approved was a complete falsification. The estimate was
deliberately kept low — below $7 billion, so as to appear favourable relative
to the cost of thermal power generation.
The likely costs were known about three years ago,
but Nalcor Management kept it a secret, steadfastly denying that there were
major schedule delays and cost overruns, until it was no longer possible to
hide the true status with the election of a new Provincial Government.”
but Nalcor Management kept it a secret, steadfastly denying that there were
major schedule delays and cost overruns, until it was no longer possible to
hide the true status with the election of a new Provincial Government.”
This led to calls for a forensic audit and a public
inquiry. The provincial government will soon be appointing a public inquiry
into the escalating costs to determine the reasons. However it is likely that part
of the problem stems from the inexperience of Nalcor, a crown corporation
created in 2007, whose expertise in the electric power business resides
primarily in NL Hydro and which has had no experience in a project of this size
and complexity.
With the Upper Churchill project, completed in 1974,
ahead of schedule, the project manager was Acres Canadian Bechtal, who brought
the project in on budget. Nalcor ought to have similarly engaged an experienced
project management firm, rather than taking on the lead
project management role itself.
ahead of schedule, the project manager was Acres Canadian Bechtal, who brought
the project in on budget. Nalcor ought to have similarly engaged an experienced
project management firm, rather than taking on the lead
project management role itself.
Overestimation
of Demand for Power
of Demand for Power
While costs were vastly underestimated the converse
applied to the demand estimates. In the 20 years prior to 2010 energy demand
had risen and fallen back again, largely due to the closure of two paper mills
and the downsizing of a third. This loss of industrial load was offset by
continuation of a trend toward increasing penetration of electric space heating
in the residential and commercial sectors. At the beginning of this 20 year
period consumption was about 7000 GWH and at the end it was at the same level. Nalcor
forecasted (2012) that energy consumption would reach almost 10,000 GWh by
2030. This stands in stark contrast with the June 2017 update from Nalcor which
shows energy use falling initially after interconnection and then rising slowly
to only 7200 GWh by 2030, as shown below.
applied to the demand estimates. In the 20 years prior to 2010 energy demand
had risen and fallen back again, largely due to the closure of two paper mills
and the downsizing of a third. This loss of industrial load was offset by
continuation of a trend toward increasing penetration of electric space heating
in the residential and commercial sectors. At the beginning of this 20 year
period consumption was about 7000 GWH and at the end it was at the same level. Nalcor
forecasted (2012) that energy consumption would reach almost 10,000 GWh by
2030. This stands in stark contrast with the June 2017 update from Nalcor which
shows energy use falling initially after interconnection and then rising slowly
to only 7200 GWh by 2030, as shown below.
It is questionable whether Nalcor has sufficiently
measured the impact of rising rates upon demand. Using an elasticity of demand
of -0.4 we would expect energy use to drop over time from 7,000 GWh to 4,200 if
rates double by 2021 to 22.9 cents per KWh, as forecasted by Nalcor (see chart below
from June 2017 update from Nalcor). This would wipe out demand for Muskrat
power.
measured the impact of rising rates upon demand. Using an elasticity of demand
of -0.4 we would expect energy use to drop over time from 7,000 GWh to 4,200 if
rates double by 2021 to 22.9 cents per KWh, as forecasted by Nalcor (see chart below
from June 2017 update from Nalcor). This would wipe out demand for Muskrat
power.
2011-12
Review by joint environmental panel and by PUB on Reference from NL government
Review by joint environmental panel and by PUB on Reference from NL government
The Muskrat Falls project was exempted from the
jurisdiction of the PUB but in 2011, as a result of an intervention to which I
was a party, the government made a limited reference to the Board. The
reference asked the Board to decide between Muskrat Falls and the Isolated
Island option, a combination of small on-Island hydro sites and thermal
generation. The cost estimates presented to the Board were based on 5-10% of
the engineering work and were Class 4 estimates. The demand projections were
unrealistically high, in a province which had lost 80,000 people because of the
collapse of fish stocks. The consultants to the Board were Manitoba Hydro
International (MHI) who were persuaded by Nalcor and its consultants to endorse
the project, as was the Consumer Advocate.
jurisdiction of the PUB but in 2011, as a result of an intervention to which I
was a party, the government made a limited reference to the Board. The
reference asked the Board to decide between Muskrat Falls and the Isolated
Island option, a combination of small on-Island hydro sites and thermal
generation. The cost estimates presented to the Board were based on 5-10% of
the engineering work and were Class 4 estimates. The demand projections were
unrealistically high, in a province which had lost 80,000 people because of the
collapse of fish stocks. The consultants to the Board were Manitoba Hydro
International (MHI) who were persuaded by Nalcor and its consultants to endorse
the project, as was the Consumer Advocate.
In the Board’s report to government the following quote
is made from testimony by my colleague Ron Penney and me:
is made from testimony by my colleague Ron Penney and me:
The Board concluded it could not render a recommendation
based on the incomplete information filed in the hearing.
based on the incomplete information filed in the hearing.
The PUB did not reach a conclusion and remained agnostic
on the options. The joint environmental panel on the Lower Churchill reported
in August 2011 and was equally unconvinced of the merits of the project. They
stated as follows:
on the options. The joint environmental panel on the Lower Churchill reported
in August 2011 and was equally unconvinced of the merits of the project. They
stated as follows:
Is there any similarity between the situation faced in
2012 by the NL PUB and that faced by the BCUC today?
Marc Eliesen, who was at the helm of BC Hydro from 1992 to 1994, outlined why he believes the
only financially responsible course of action is to cancel the $8.8 billion
project and remediate the Peace River site in order to minimize Site C’s
negative impact on BC Hydro customers
and taxpayers.
only financially responsible course of action is to cancel the $8.8 billion
project and remediate the Peace River site in order to minimize Site C’s
negative impact on BC Hydro customers
and taxpayers.
“There never was a business case for the start-up of construction of Site
C, and there is not a business case to support its continuation or postponement.”
C, and there is not a business case to support its continuation or postponement.”
This is similar to comments made by former Fortis CEO Stan Marshall
after he took on the role of CEO of Nalcor Energy in 2016. When asked whether
Muskrat Falls was a “boondoggle” he confirmed that it was and said that he
never supported the project because it was speculative, overbuilding capacity,
instead of increasing capacity incrementally to meet demand.
after he took on the role of CEO of Nalcor Energy in 2016. When asked whether
Muskrat Falls was a “boondoggle” he confirmed that it was and said that he
never supported the project because it was speculative, overbuilding capacity,
instead of increasing capacity incrementally to meet demand.
In my written submission to the BCUC I made 14 recommendations and I remain
committed to all of them but will conclude, for brevity, with only three.
committed to all of them but will conclude, for brevity, with only three.
1.
The BCUC must be vigilant to reflect the
interests of present and future generations. The present generation has an
obligation to protect our assets, including our environment, for future
generations. We also have an obligation to pay for the services we consume,
including electric power, and not to foist our costs upon future generations
through byzantine financial arrangements which amortize costs well beyond the
lifetime of people living today, as epitomized by the 70 year time horizon in
BC for Site C and the 50 year horizon adopted in NL for Muskrat Falls, combined
with backend loading of costs.
The BCUC must be vigilant to reflect the
interests of present and future generations. The present generation has an
obligation to protect our assets, including our environment, for future
generations. We also have an obligation to pay for the services we consume,
including electric power, and not to foist our costs upon future generations
through byzantine financial arrangements which amortize costs well beyond the
lifetime of people living today, as epitomized by the 70 year time horizon in
BC for Site C and the 50 year horizon adopted in NL for Muskrat Falls, combined
with backend loading of costs.
2.
Do not overbuild the system; build according
to your need. This is particularly appropriate in an era of rapid technological
change when we need to design a system that is adaptable to change. For NL,
Muskrat Falls was far too large for our needs and far too expensive.
Do not overbuild the system; build according
to your need. This is particularly appropriate in an era of rapid technological
change when we need to design a system that is adaptable to change. For NL,
Muskrat Falls was far too large for our needs and far too expensive.
3.
Ensure that project costs and schedules are
tightly controlled. As noted earlier the cost estimates for Muskrat Falls have
been revised seven times to date. The largest project, for the powerhouse and
other civil works, was awarded for $1.1 billion and has been renegotiated to
$1.83 billion. The original contract was not a lump sum contract. Instead it
was cost plus, the more labour used the higher the cost.
Ensure that project costs and schedules are
tightly controlled. As noted earlier the cost estimates for Muskrat Falls have
been revised seven times to date. The largest project, for the powerhouse and
other civil works, was awarded for $1.1 billion and has been renegotiated to
$1.83 billion. The original contract was not a lump sum contract. Instead it
was cost plus, the more labour used the higher the cost.
Thank you for the opportunity to make this presentation. My
full submission is on the record and I will be pleased to answer your
questions.
full submission is on the record and I will be pleased to answer your
questions.
David Vardy
St. John’s, NL
Ok, understood, but what are we going to do?
Whining, mewling and puking doesn't seem to be working; Dwight, Stan and their cronies are seemingly incapable of taking any action besides delay and obfuscation.
We are all bivering with an expectation of bankruptcy; when you can't decide between being warm or being fed sounds a lot like bankruptcy of a sort. If we wait for the next provincial election and vote some guys out and some other guys in there is still no relief or succor for the masses.
Inquiry into the nastiness will tell us lots of stuff but will it solve our two generational boondoggle? I don't think so.
The problem is now that even it is stopped dead it will still have to be paid for, by us, seemingly forever. Many speculate moving on to other pastures, but where to go? And, good luck with that. Those who can go will be the young and working; once they go, we old grey-haired will be left behind, our power demands will dwindle and the prices will continue to rise – this is also an untenable situation.
PENG2 from Nalcor believes the project should be completed but not operated, that the reservoir should not be filled. He says this is just as cheap as not to finish and incur penalities, and if we do not complete it is default and we lose ownership of the asset.
I assume he assumes the transmission line will send some Churchill falls power only our way, maybe 300 MW
Not sure this takes away our obligation for island power going to Emera. And we still have to pay off the 15 billion.
What to do seems more urgent than the Inquiry of finding out what happened and placing blame.
Completion seems fixed by decisions of Nalcor and govn.
Non operation, as suggested by PENG2 seems to indicate his concern with the North Spur, flooding downstream etc.
Could his opinion be the intend of Nalcor……
Might the assets be sold off at rock bottom price to private interests, fully paid by the public over the next 50 years.
Winston Adams
Yes, that's the 15$ dollar question!!!! And I think ball and all, should have had experts looking into our options. Like stopping the project dead in it's tracks, dissolve NALCOR, let the finincial backers come sue us, and anyone else that think they have a claim. But in our poor state, they would be barking up the wrong tree, we simply don't have it. Let them tie it up in courts for years, at their expense. This would be our survival mode, and a hell of a lot better than what we face. Yes, a Jo blow take on it, but look at the experts take, NALCOR …. You decide….
From one Joe Blow to another,
The financial backer of the project is the Government of Canada. As in the case of the nationalization of Abitibi’s water rights the federal government would be obliged to make good on the debt. Also, whereas we can refuse to repay our debts we would find it difficult to borrow money in the future. Just sayin.
Lol, joe. With a combined debt of 30$ billion, do you not think we will find it difficult to borrow money in the future, and at what rate. Yes, I say let the Feds assume the loan, Harper gave us the loan in bad faith anyway, read the agreement, we have to be at deaths door before the Feds start paying. So as a joe, I don't know all the finincial raminifaction, and that's why I said ball should have legal and finically begals working on it now. It's not a matter of what's best, it's a matter of finically, and social survival, even a rat will fight back when cornered . And cornered we are. So the 15$ dollar question is now what to do.
I actually agree with you Mr Blow – when you guarantee debt, you take on certain responsibilities – the Feds ignored their own experts and didnt raise a finger when NL decided to ignore the PUB – and Harper is only responsible for part of it – our friend Trudeau guaranteed another $3B that was borrowed as recently as this past spring when the extent of the boondoggle was already clear –
Winston:
Our obligation to Emera is set—they will get power from our island grid via Granite Canal unless we were to default at which time they along with the feds would take ownership of the works, I don’t believe MF being idle would trigger a default. Will that leave the island in a power deficit requiring power imports? Another option might to the leave the Maritime Link cold and NL purchase power on the market for Emera—again not very palatable but would fulfill our obligation.
To say complete and not operate is my opinion is a bit strong—-I do believe cheapest option is to complete based on work status and contracting language. Analyzing operating vs complete/idle costing is not my area of practice but complete and idle would seem to be a better option than default or operate at a loss based on what my experience tells me. I haven’t heard it mentioned by anyone else and obviously wouldn’t raise as a possibility unless in the right conservation.
FYI’s:
1) the weekend outage/backup gen operation in HVGB was to bring online the new 315 AC line from Churchill to Goose.
2) As I said a couple months ago, the Spur remediation is now ‘complete’ as reported on VOCM this afternoon
I agree when you say—we all know who, what and why this happened. I am not sure attempts to exact a pound of flesh are worth the effort at this point—we need to understand the future impacts.
PENG2
PENG2, Who, (what professional?), certified completion of the Spur remediation?
How dams, are exempt from environmental assessment in BC. Is the Spur exempt?
https://thetyee.ca/News/2017/10/16/Unregulated-Dams-At-Risk/
PENG2…….MF……. a nightmare, as to the impact on this province, unless some near miracle solution found.
If MF is idled, and we get 300 MW transmission (what is the capacity of the 315KV line, and max available to the island from the UC……..
I look forward to Soldiers Pond getting power….when is that expected to be commissioned…….and see operation and hope for the best as to few outages with salt , wind and ice on the GNP
You mentioned discussion of GIC issues for Bottom Brook and NS, I assume, ………so if implemented may solve that issue for their DC link to NS……..but I assume the same issue for the Labrador link……and if not addressed there, it suggests for possible GIC issue, power to NS would be more reliable than our DC infeed from MF………if you can comment.
You mentioned the Mud Lake flood consultant as a consultant with the synchronous condenser at Soldiers Pond, but it appears to me that they were probable consultants on water flow at MF prior to the flood in May 2017…….would you know….
Winston
This comment has been removed by the author.
David,
I have not yet gone through your full brief but I will.
The question I posed to your last post bears repeating. Your "democracy" is dysfunctional. It has been macerated by a succession of bullying, feudal leaders provincially and self serving federal politicians.
When democratic checks and balances are undermined, like happened at MF, analysis by informed bureaucrats is not enough. Inaction in the early 90's resulted in mass outmigration. Analysis without confronting the "democratic deficit" and the villains will result in cultural as well as fiscal decline.
Will you take the scary step of challenging the naked emperors? The first step is the hardest but it will free your being from impotence in the face of evil.
First past the post elections, leading to majority governments by minority of popular vote, usually results in the dysfunctional democracy you say Bruno. History will repeat "Boondoggles" without some form of proportional representation. Dissent is a strong friend of democracy. Progressives should keep an eye on BC and its struggles with PR and the Sight C. Once again, I say thank you to David Vardy for your contribution to a more progressive, democratic, reform-minded administration.
Robert I heartily agree that PR would help aid the democratic deficit. It would let voters vote their conscience and lead to consensus decisionmaking.
A couple of things though. Was not a previous attempt at PR reform defeated in BC by a muddy question posed by status quo politicians? It will take more than the will of the electorate to implement. Trudeau, the junior, dropped his promise that this would be the last election under the first past the post system like a hot potato, using a faux, muddy, online "consultation" that did not ask the question directly. Political obstacles remain federally and provincially to PR implementation.
Secondly NL is a special case. The feudal grip in NL is pervasive throughout the treasury, the civil service, the media, the AG, CA, PUB, compromised legal system, etc. This is smothering for a small population where "naysayers" can and are humiliated, demeaned, vilified and face SLAPP suits for questioning the emperor.
It will take brave, informed and dedicated people to challenge the root cause of the rot across the board.
Someone like David Vardy who has the knowledge, experience, and facts at his disposal would be ideal. Does he who knows the emperor has no clothes have the courage to step outside their comfort zone and save NL from inequitable social upheaval? 1992 was a case study. Will anyone rise to the occasion and unseat the emperor? Or will being prescient but ineffective rule the day once again? It has been my experience that being visionary without being effective in bringing about change is dissatisfying.
True. The old line parties are terrified that PR is a threat to their control of their base. Last evening, the pretentious Liberal/Tory party held their leadership debate. Defeating the NDP/GR coalition on the coming PR referendum was a voiced issue. They did it once. Can they do it again? There must be a nucleus of progressives in NL in 2017 who get the need for such reform, and are prepared to step forward, to at least prepare the agenda for your next election. Without a will to change, I fear other Muskrats are the future!
Unquestionably, Mr. Vardy is one of only a very few people in this province able to speak with authority on this Muskrat Falls fiasco.
His contributions and his ability to speak to the diverse and complex issues surrounding this fiasco are unequaled.
A minor point, however, as to the first use of the term 'boondoggle'.
One of my earlier Telegram articles (published in September 2011), was titled "Muskrat Falls: boon or boondoggle".
I figured maybe Pam at the Telegram first used the word boondoggle, she having cites past references. Maybe I (maybe not) first used the word fiasco, as Maurice now uses, we having moved beyond boondoggle ……as boondoggle seems fixable, whereas fiasco may not. But that is brownie points.
Bob Wakeham cites his references to his grandfather Joe Judge cooking muskrat and the bad odour….too bad Bob offered little more……….not a Ray Guy, we all know.
On reading of Daniel Boone, the American folk hero, who lived a century before Davie Crocket, I wondered……would Daniel Boondoggle stick for Danny Williams……Honourable Daniel Boondoggle, and a cast bronze statue at some suitable place…..at the completed generation plant, that is not to operate, maybe.
Maurice`s contribution on the North Spur technical analysis, acknowledged by Mr Gordon is significant I suggest, and reflects his early interest in engineering.
When I made a presentation at the PUB, in 2012, on likely energy and demand decline from efficient heating, Dave Vardy introduced himself, and said it was a good presentation. His name rang a bell, but only later did I learn of his background as very knowledgeable in many of the various fields that make up Muskrat, and a professional.
He, alone, that day at the PUB, saw value in technology reducing energy use going forward,(contrary to Nalcor and Manitoba International Consultants) and it`s future effect on elasticity for electricity as a commodity…that is now taking effect.
Vardy`s service to our province on this issue is outstanding. His expertise is now enlightening the west coast of Canada.
Winston Adams
Might it be, in the future, on the top of Spirit Mountain, that such a statue , of Daniel, with outstretched hand, pointing south, across the Grand River, toward the abandoned plant, with a plaque saying `Look, your legacy fund project`. Maybe a smaller one of Gil Bennett, saying ` And more rock quarried that the pyramid of Egypt`, and of Ed Martin`s plaque saying ` By world class Nalcor, under my leadership`
WA
WA, The Daniel statue should have both arms outstretched across the Grand River, 150 meters high like the statue above Rio de Janeiro.
The only way we can survive this crisis is for the Government to break up Nalcor. Totally separate Hydro assets, including CF, and oil. When this is done, mothball Muscrat Falls dam project. This would allow the PUB to do their job and keep power at the least cost. When NL Hydro sends it’s recall power to Soldiers Pond , the blended power should be about seven cents a kwh. With this low rate the government can tax it up to four cents a kwh. This tax should be used for debt reduction or interest payments on the debt.
Gerry Goodman
When progress is made in the conversion to renewables, look to municipal government to come up with solutions.
http://www.cbc.ca/news/canada/new-brunswick/perth-andover-wind-farms-1.4356212
How about it Mt. Pearl, CBS, Boavista, Marystown, Stephenville?
David I have read your brief to the BCUC and it is a complete chronology of the MF debacle. Your conclusions come to the edge of the abyss documenting a lack of public engagement and the institutional failure to respond, the departure from normal cost accounting and the shifting of costs to future generations, and transparency and accountability in crown corporations.
What you avoid yet again is stating as plainly that the dark political forces combined with a corporate plan, honed on the third world, undermined democratic function. The same corporate miscreants sculpted the disembowling of regulatory protection for ratepayers, arranged take or pay contracts that left rate/taxpayers responsible for the cost overruns and poor engineering, massively overdesigned for the need both at MF and Site C just as they were fond of doing in the third world with compromised politicians.
Why after documenting why the PPA between NL Hydro and Nalcor circumvents democratic oversight do you meekly call this arrangement "most unusual"? It was by the design of the NL government and SNC Lavalin that this "unusual" event transpired. You rightly state the institutions did not push back effectively and yet you cannot even now tell it like it is.
It is ironic that the only mention of SNC Lavalin is in reference to the 2013 risk analysis. Although useful given the paucity of information coming from Nalcor, the risk assessment merely inoculated SNC Lavalin from future legal entanglement. You never mention the fact that they are the principle architects of the regulatory and civil disengagement in both NL and BC . The fact that these same corporate strategies have led to fraud convictions abroad and the resignation of the executives and charges of bribery in Canada for some SNC employees is never mentioned. How odd! Would not these "coincidences" have been useful to the BCUC?
David to effect change you must wade into the muck at least up your armpits if you want to be effective. Let me warn you it will be malodorous and you may get up to your neck before long when the emperor begins fulminating. Documenting the problems with the democratic deficit without connecting the dots to feudal tyranny by provincial leaders conspiring with corrupt business practices will never lead to change. It will guarantee NL falls into the abyss.
A couple of minor questions David. Was 57 years, not 50, the length of the MF amortization? The other ridiculous assumption used to justify MF was the cost of oil, the only declared alternative, climbing steadily from $120 bbl to $260!! by 2070 or so. Was a similar distortion in the cost of alternatives employed in BC?
Vardy says Nfld Power (prior to sanction) was in a key position to advise on growth of consumer demand for electricity.
He also says to the BC panel: seek input on energy efficiency …..the utilities are not the best source of advice on how to avoid using power. For space heating simple solution were available.
This explains why we have no Efficiency NL, like Efficiency NS.
Fortis, through Nfld Power and Nfld Hydro are joined at the hip through Take Charge, to execute the second worse efficiency and conservation plan in Canada………..and continue to do this unchallenged, a rip off of the ratepayers and much misinformation.
Any inquiry here must evaluate Fortis`s role is staying silent…….Stan Marshall said too little, too late…….to this day.
Winston Adams
RE: Capital Cost increase from $6.2B to $12.7 B
Mr. Vardy, I believe you downplay it using those numbers. The initial $6.2 B included the link to Nova Scotia. The NL part that is now $12.7 was only $5 Billion and that was supposed to include a 15% contingency so it was $4.4 B plus $600 M contingency. I don't think there is much contingency in the new estimate of $12.7 B.
It is true that the estimate was $6.2 B at sanction and that was the basis for the initial loan guarantee. However, that was only a bunch of mindless politicians.
Those initial numbers were the basis for the famous $2 B advantage over 40 years. Recall Wade Locke's presentation and his answer when someone pressed him on possible overruns.
If we use the $4.4 B which was the actual cost estimate in 2010 and 2011 ($5 B was the budget including 15% contingency) and compare to the current $12.7 B, the increase is 288%. Interest during construction should have been included from the start but that is what we have been dealing with as far as low balling is concerned.
This project appears to have never been about providing power to NL but only about making a lot of money for some people that were already rich
Anonymous
My $6.2 B does not include the Maritime Link. See http://www.pub.nl.ca/applications/MuskratFalls2011/files/exhibits/abridged/CE-51(R1)-Public.pdf Table 6 for the $5 B total cost without AFUDC, which brings it to $6.2 B. Table 6 shows the contingency and escalation reserves. I have used the DG2 numbers as my base rather than the sanction numbers. The DG2 estimates were those presented to the PUB and for which we have the most complete set of data. That is why in my presentation to the BCUC I cited seven increases amounting to 105%.
David Vardy
Vardy's essay of Aug 31 , 2011 makes a wonderful starting point for an Inquiry, on the basis that if Vardy could see and document the expected folly and boondoogle in 2011, why has it taken to 2017 to get an Inquiry going.
Vardy, I can see, deserves the honourable title of "Father of the Naysayers", having comprehensively outlined so much that would likely go wrong, in 2011. That should have given pause to folly of this project. His knowledge on energy issues, especially for Nfld, is well documented in that essay.
If they now read this, it should cause shivers among Nfld engineers, Nalcor, Nfld Hydro, Fortis, Nfld Power, MUN, APENG, Board of Trade , and government MHAs of all stripes, and other economists.
Do I see a small halo above his head……….
I recommend readers of this blog to read that essay, as Vardy put forward the big picture, with the risks of 'rolling the dice" on Muskrat plainly stated. Then roll your eyes to ask how we ended up here.
Winston Adams
Well stated Winston, and as you point out why could the NALCOR world class experts not see this, or even a hint of what Vardy saw, and taken their responsibilities seriously instead of their own gullable self interest. Yes, if justice were to be done some of these scallywags should be serving time. But we all know justice will not be done because we don't have a local commissioner with the balls to administer justice to the high and mighty of this province.
PENG2, please report; What is the current forecast to complete? What contingency is included in this forecast for changes, allowance for changes, dispute settlement? Who certified the completion of Spur remediation?
Thank you
These forms are a bit mute considering the fact they are ten years too late.
It may be 10 years too late to prevent the project, but not too late to set the stage for several well known sociopaths to go to jail.
Not "mute"… "MOOT"
PENG2
Would you look at the latest picture on the blog Vision 2041, showing the `completed ` North spur`stabilization……with notes and questions whether it is safe.
I had thought that maybe if that downstream steep slope in the river had been filled with a low grade slope downstream of the Spur, being a major civil work of .5 billion dollars or or more, that maybe it might take the pressure and not fail. You being a civil engineer, and unsatisfied with the present works there…….can you comment…….. or perhaps a safe design is not at all possible.
If the project is completed and not operated,as you suggest, for safety reasons, further stabilization in the future might be considered I assume.
Winston Adams