Guest Post by PlanetNL

Labrador Interconnected System (LIS) Under Threat of Huge Rate Increases

The largest regulated zone in Labrador is the Labrador
Interconnected System (LIS) powered by Churchill Falls with transmission lines
running to Labrador West and East.  These
are all relatively old assets that have provided exceptionally economical
service and the lowest rates in North America and possibly the entire western

Government policy for this unique regulated rate zone,
however, is about to prove the old adage of having too much of a good thing
could prove to be not good for you.  Low
rates have attracted new demand that will lead to expensive new transmission
line construction resulting in major rate increases for everyone in the
LIS.  There’s also a long shadow cast by
Muskrat Falls as well.

Government has the authority to select a different course
but as demonstrated by Muskrat Falls, doing the right thing for ratepayers is probably
not on the agenda.
Photo Credit: Great Northern Data
Most of the details gathered for this post come out of
documents filed on the PUB website related to NL Hydro’s 2017 General Rate
Application (GRA).  There are hundreds of
pieces of information that have been added to the site in the past few months
and, finally, hearings commence next week.

Powered by a 525 MW reserve allocation from Churchill Falls,
the western transmission line powers Labrador City – Wabush including the Iron
Ore Company (IOC) mining operation while the eastern transmission line delivers
energy to Happy Valley and surrounding communities. 

IOC uses approximately 60% of total LIS energy for their massive
mining complex near Labrador City. 
Expansion activities at the mine since 2010 have added about 35 MW to
their requirements, now up to 245 MW. 
The remainder of Labrador West demand peaks at about 80 MW.

The exact capacity of the Labrador West transmission line
could not be found in researching for this post but it is thought to be about
400 MW.  The Labrador East transmission line
has a maximum capacity of 77 MW.  Both
lines are nearing maximum capacity.

The LIS is sustained by $20M revenue from domestic and
commercial customers and just over $4M from IOC.  NL Hydro’s energy cost from Churchill is the
same miniscule 0.2 c/KWh paid by Hydro Quebec until 2041 while the legacy
transmission infrastructure costs demand low return on capital.  Operations and maintenance costs make up a
significant part of the cost because all other costs are so low. 

On a per capita basis, the LIS zone ($24M revenue, 21,000
residents) costs 20% less to operate than the Island ratepayer zone ($700M,
500,000 residents).  Interestingly, if
the high-cost Holyrood plant could be removed (mainly fuel costs), the Island
zone would cost about the same as the LIS. 
The Island was in a pretty good situation until bad policy created
Muskrat and now it threatens the LIS.
Policy: When the Many Pay For the Needs of the Few
It’s well known among utility people that small incremental
additions to meet load growth are often many times more expensive to ratepayers
than the cost of running entire legacy systems.  There is no better example than Muskrat Falls
where a new project to replace the 470 MW Holyrood thermal plant with the 824
MW Muskrat system: total Island system capacity increases by only 15% but ratepayer
revenue requirements more than double.

New projects are known to be the love of privately held utilities
who profit from massive ratebase growth and guaranteed long-term returns.  Responsible Governments and responsible utilities,
particularly Government-owned utilities, should strive in the other direction
to try everything possible to live economically within the means of their
existing infrastructure. 

Natural Resources Minister, Siobhan Coady

If load growth can’t be avoided, then policy options are
available to assign the new costs to the new customer demand thus protecting
regular ratepayers from paying for costly assets they won’t utilize or benefit
from.  Without such care in allocation,
existing ratepayers end up subsidizing the servicing of new customer demands
through widespread rate increases.

Only Quebec and British Columbia, arguably the most progressive
Canadian provinces, have enacted what is generally known as heritage power
pools to ensure legacy assets are used efficiently and that new customer
demands receive scrutiny, and costs allocated primarily to those who need and
benefit directly from the new infrastructure. 
It’s not to say those jurisdictions do it perfectly but the policies are
legislated and the principles understood. 
Not only is such policy lacking in this province but the desire to
follow the spirit and better practices of such wisdom are completely absent.

As a result, NL Hydro says it is simply doing what it is
legislated by the Government: to satisfy all service requests without
consideration of the cost and to allocate that cost to all customers
indiscriminately.  Avoid questions of
long-term impacts, just build and then raise rates by whatever is necessary. 

Now that the Island system has been dealt with so
masterfully, the LIS is next.
West Third Transmission Line – Major Rate Impact
Several developments will soon trigger the necessity of a
third transmission line into Labrador West. 
This project was actually started and abruptly cancelled in 2014. Primarily
it was intended to supply 100-120 MW needed for the proposed Kami mine site and
secondary development related to growth in the iron ore industry.  Kami remains on hold but the owner is still
actively seeking financing to start the project.

Meanwhile, several other substantial power demands have developed.  IOC’s expansion since 2010 has added 35 MW. Wabush
Mines closed freeing up some capacity but a new operator intends to reopen it
within a year needing 50 MW, and a new data center industry has known service
requests in for another 50 MW as of mid 2017 and potentially as much again
since then.

The third transmission line would resemble the recently
completed TL267 on the Island from Bay D’Espoir to the Western Avalon.  TL267 cost $330M and the Labrador West line
will be no less.  A recent General Rate Application
(GRA) clarification revealed that TL267 adds $25M to annual required revenues from
Island ratepayers.  At that price, adding
the Lab West third transmission line will more than double LIS revenue
requirements from $24M to almost $50M.

Using simple math, LIS rates must double to pay for this one
upgrade project.  It will be a little
worse than that, however, as IOC is sure to resist paying anything for upgrades
that bring power to other customers.  IOC’s
hardball play with a soft Government would shift the total burden to LIS domestic
and commercial customers only, raising rates by 120%.  This includes Labrador East customers who get
no benefit from whatever industrial development is happening in Labrador West.
East Transmission Line Upgrade – A Sticky Situation
NL Hydro forecasts power requirements in the Happy Valley
area to nearly double in the coming decades. 
Rather than install a very costly new transmission line all the way
between Churchill Falls and Happy Valley, Hydro has developed a convenient
low-cost workaround solution tying into Muskrat Falls.  Power to Labrador East would then be
transmitted via the new $900M Churchill Falls to Muskrat Falls transmission
line, aka the Labrador Transmission Asset (LTA).

Hydro’s Capital Budget Proposal indicates only a $20M construction
cost to execute a tie-in.  This by itself
might impact LIS rates by only 5%.  The
question must be asked, however, what might the LIS owe on its usage of the
Muskrat Falls assets? 

Government legislated in 2013 that only Island ratepayers
are responsible to pay entirely for Muskrat including the LTA.  At the time this legislation was passed, no
one had foreseen the surge in Labrador power needs or the need for a tie-in to
the Muskrat project.  The basis of the original
legislation would therefore prove to be illegitimate: Government would be
compelled to recognize that the whole LIS ratepayer group must be held responsible
to pay their share.

Labrador ratepayers may have taken great comfort in their
exclusion from Muskrat costs but this connection changes everything.  Furthermore, if Island ratepayers turn out to
need zero Muskrat power due to energy use reductions resulting from massive
price increases, then LIS ratepayers would be the only group using the assets
for in-province power consumption.  As the
exclusive beneficiary, the fair price and the rate impact on the LIS may be

LIS ratepayers might also anticipate that when Island
ratepayers are overwhelmed by rate increases and the Government is scratching
for a penny everywhere, it’s simply a matter of time before they are fully
exposed to Muskrat costs.  The planned connection
to Muskrat will hasten the amendment of flawed legislation.  A resulting fully interconnected
Island-Labrador grid could reasonably lead to one single regulated zone with the
same punishing high rates for all domestic and commercial customers.
Data Centers
Two years ago, the emerging Bitcoin “mining” phenomenon
discovered cheap Labrador power.  Active
operators are only up to about 10 MW of usage so far but the known and rumoured
new builds may total 100 MW – this is a key driver of demand in both Labrador
West and East.

These operators thrive only on the spread between low-price
Labrador power and that in other competing jurisdictions.  Take that advantage away and their business
model demands they relocate to wherever power is cheapest.  That happens to be just one province away
where Hydro Quebec (HQ) is aggressively pursuing data center industries. 

Photo Credit: Great Northern Data
HQ has a massive energy surplus, ironically due in large part
to having title to nearly 5000MW of Churchill Falls power until 2041.
 HQ data center rate offers are only about 50%
higher than the LIS today.
  The HQ rates
are likely to remain long-term stable but the LIS rates teeter on the brink of
major escalation once infrastructure growth is triggered.

If low Labrador prices were theoretically sustainable,
Bitcoin mining would continue to expand in Labrador unabated.  These operators are about to eat their own
lunch.  Bitcoin demand will be a key
factor in transmission line upgrading throughout the LIS and when the cost of
those upgrades push LIS rates way above Hydro Quebec’s, these operators will
quickly decide to cut their losses and leave.
Wing Goose Bay Electric Boiler Conversion – Federal Opportunism
GRA submissions reveal that DND is contemplating converting
their oil-fired heating plant to 12.5 MW electric heating in 2020.   This demand will only be possible using the
proposed Muskrat LTA tie-in.

The optics of this scenario are most disconcerting.  The Federal Government played a huge role in facilitating
Muskrat and demanded the Province ensure Island ratepayers pay for it.  Now they are wishing to take advantage of
cheap Labrador power which was conspicuously excluded from the Muskrat cost impact.  Yet, their action to demand this power could
play a decisive role in destroying favourable electricity economics in the LIS
Ratepayers Will Be Left Responsible For the Damage
Several high risk threats exist to blow up rates in the LIS
zone.  Unnecessary infrastructure could
be built because of the dual failure of a wilfully blind utility, who abscond
responsibility as a result of absurd Government policy while Government has
little or no concern for the costs potentially incurred by the utility.  When it comes to good energy planning,
there’s nobody in the driver’s seat.

Costly transmission infrastructure and Muskrat
interconnection rate impacts will surely kill the Bitcoin sector and any other
businesses dependent on super low rates. 
Government and the utility should have been ahead of this issue and
ready to cut it off but instead they are ready to instigate another major energy
management blunder.

The end result of massive rate hikes would be LIS ratepayers
cutting their consumption dramatically, further ensuring the redundancy of any
new infrastructure.  Declining energy
sales would cause rates to rise further. 
The LIS may be wrecked worse than the Island system – something that was
completely inconceivable a few short years ago.

It would be in the interest of all present LIS ratepayers –
including iron ore mining interests, corporate and labour alike – to pressure Government
to implement a LIS heritage pool policy framework to ensure effective and
economical utilization of this resource until 2041.  The window of opportunity is rapidly closing
– Labrador’s real leaders must act quickly.


If a Big Mac costs McDonalds $10 to produce and it is sold for $1.50, McDonalds will go out of business. They would not declare a profit!


Bill left public life shortly after the signing of the Atlantic Accord and became a member of the Court of Appeal until his retirement in 2003. During his time on the court he was involved in a number of successful appeals which overturned wrongful convictions, for which he was recognized by Innocence Canada. Bill had a special place in his heart for the underdog.

Churchill Falls Explainer (Coles Notes version)

If CFLCo is required to maximize its profit, then CFLCo should sell its electricity to the highest bidder(s) on the most advantageous terms available.


  1. It is my understanding that the limitation on power delivery to the Lake Melville area is not the transmission line per se but the transformers. These have a total nameplate capacity of 75 Mw but have regularly been operated at up to 78 Mw on the coldest winter days. This is a completely safe practice in a cold climate, but it leaves no room for demand growth if that demand can't be throttled down on cold days.

  2. Good article but have to disagree on one point. The article notes that "At the time (2013)this legislation was passed, no one had foreseen the surge in Labrador power needs or the need for a tie-in to the Muskrat project." Actually it was quite the opposite as one of the points made in promotion of Muskrat Falls ( Globe and Mail interview with Ed Martin in 2011 and in subsequent presentations) were the coming mining projects in Labrador and their need for power. In fact I suspect this may have been one of the strong drivers in going down the disastrous path of Muskrat.

    • Only speaking from memory, so won't dispute what you are saying or any of your dates, except to say, Eddie was saying all kinds of things to anyone that wanted to listen, mostly pie in the sky stuff. But again from my recollection, private citizen, DW was talking a deal with Alderon, on their board of directors I think, and decided nalcor should link up with lab west to supply cheap power to Alderon. But guess it all felt through went the demand for ore went south.

    • Nope, I disagree with you on both accounts. I knew muskrat was a dud right from the beginning, and expressed my opinion and story on this blog a few times as the average Joe or Joe blow. I agree with planetnl that the use of muskrat power for Labrador was never a reason or a consideration for building or the sanctioning of muskrat. Muskrat was built for three reasons, 1) nalcor and govt. said we needed the power and it was the least cost option. 2) nalcor planned to make money on selling power on the us of a spot market. 3) to get one up on Quebec as we had money coming out of our ears from oil money, so a heritage fund. All false of course, right from the beginning, and I am not a johnnie come lately.

  3. What a complicated web we weave, when we weave to deceive!!! Unless one has experience in power line work, it is difficult to understand or stay on top of all the lines, connections, carrying capacity, cost power rates, etc. So guess we have to say thanks to planet nl to stay on top of it for us. But for such a small population, not a whole lot of heavy industry, except for lab west, but realize we are scatter over a Hugh geographic area, it should be relative simple. Imagine distributing power for say qc , or on, with populations of 4 and 5 million, and covering a greater geographical area. That must be really challenging compared to .5 million people. And we have world class experts at nalcor to do all that, and we are in a nightmare, not knowning up from down, and on the verge of bankruptcy mainly because of electrical power. Where are our engineers, can they not make scense of the spider web of power lines, and tell govt. and nalcor to get it right. Power has become more complicated than the fishery, with no real income from power, and costing us a fortune. Yep….what tangled webs of power lines we weave….

  4. A few points:
    1. "If the Holyrood plant was removed , our power costs on the island would be about 20 percent lower".
    Following our presentation to the PUB of dramatic energy and peak demand reductions using efficient heat pump technology for space heating, I had some discussion with engineer Lorne Henderson of Nfld Power. I suggested that of our 10 cent power rates, that the capital, operating and fuel costs for Holyrood, would likely be about 20 percnt of our rates, and that without that cost, while we would not match Quebec, but would be about 8 cents retail costs. He said that 20 percent was a reasonable assumption. The implication being that efficient space heating, plus some cost effective alternate modest extra island supply, could have kept rates on the island at least stable.
    2. That the 3 line form Bay D'Espoir at a cost of 330M will need 25 M more in revenue to pay for it. As noted by UG, this line goes to Western Avalon. Most all of our load happens to be on the EASTERN Avalon. So what is this line doing for our security of supply?
    Dark NL 2013 saw Holyrood go down, and also one line feeding to the Avalon, leaving the Eastern Avalon and St John's with only 1 line feeding it. A third line feeding hydro to Eastern Avalon would give more reliability……but this 330M cost line does not do that. There is gap of some 50 miles from Western Avalon to Eastern , still with only 2 lines feeding island hydro to the East Avalon. HELLOOOOOOOO!
    So what is our 3rd line to East Avalon? It will be Muskrat DC power. This is unproven in reliability , and likely to be much less reliable than Holyrood.
    The result? With Holyrood decommissioned, and that both MF and one Avalon West to East line going down in adverse conditions…….we are back to the 2013 Dark NL situation of just 1 line feeding the East Avalon. Then they will decide to to do the 50 mile gap now existing, allowing 3 lines form the island hydro to East Avalon. I have raised this before…..and never any comment that this risk to reliability exists.
    3. Bit coin loads for Labrador……even China do not want these type of customers.
    4. DND adding 12.5 MW electric boilers to replace oil fired. This is essectially baseboad resistance heater type loads. Gnd source Heatpumps for DND could reduce this to 5 MW. The Fed should be setting an example for efficient use of power. Nlld should not permit electric boilers.
    5. "Higher rates for Labrador residents could see a dramatic curtailment of power use" …..most assuredly, as is happening on the island now.
    So, this is a repeat of the stupidity of building MF, and no proper efficiency and conservation plan, to cost effectively roll back demand. Dumb and dumber prevails. World class stupidity. Another Newfie Joke and crime put on ratepayers, this time in Labrador.
    Winston Adams

    • Yes, think that 3rd. Line to the eastern Avalon goes back a long way. Remember Danny dumersque on about that a few years ago, or at the time of darknl, saying that line had been applied for to the pub, and then with drawn at the last minute when muskrat reared it's ugly head by nalcor. Built in the last year or so understand it has something to do with long harbour, and was wondering if it was tangled up with power going to NS from bay despoir. Part of the tangled web I guess, by nalcor to confuse everyone includ themselves. And to commit treason, to give NS our cheap, realizable, paid for power, and get muskrat power from 1100 km for ourselves, at what rate, God only knows, and bankrupt us. Is that a definition of treason, or sabatage our fincincial situation. What's the penalty for treason? 6$ million pay out and luxury life in Florida. All part of when we weave to deceive…..!!!

    • Anon @ 8:16 says the transformer rated capacity is 75 MW but is often operated at 78 MW when the weather is cold.
      UG says the existing line is 78 Mw and operating at capacity. Both the line and transformers can be operated above rated capacity when it is very cold, and as these these loads are not encountered in summer, it seems not to be a serious immediate problem.
      But if the 21000 residents live in say 3000 houses, and each , with efficient heating and hot water, and max demand of 10 kw, then in winter this gives a winter peak load of 30 Mw for domestic. If another 20Mw for commercial etc, then the 78 Mw could be rolled back to 50 MW.
      This would free up 28 Mw of power, that could be either sold through HQ for Nfld profit, or to the island; the gains to help subsidize Labrador residents to convert to efficient electric heat. Ont is paying customers $20,000 per household to install gnd source HPs. A great opportunity to show some world class initiate, and also combat climate change. Seek a court injunction to stop wasteing energy, maybe a crime against humanity! But who will listen? Can FANE put in it's 2 cents worth?

  5. Why does the NL government continue with the practice of subsidizing mining corporations, giving away "cheap" energy? Extraction of natural resources in remote sites, should be self sustaining, or sit back until the industrial interests can come up with such a plan. Under NAFTA, and other Trade deals, industries must pay their way. Cut this out!

  6. I have been reading UG for quite some time, but have never commented. After reading the latest article from PlanetNL, I can no longer stand passively by.

    I have too many characters apparently, so here is the first part.

    Well, it appears our self-destructing Government does not know when to stop. As a resident of Lab West, this latest article from PlanetNL is certainly potential bad news for all residents of Labrador on the LIS electrical system. We have long enjoyed one of the lowest electrical rates in North America (currently at $0.033kw/hr) for residential, but this is offset by generally very cold and long winters. My typical household bill at that rate exceeds $300.00 per month from Dec to Feb, and we can only turn the heat down in July and August. So, 10 months of heating, with 3 of those months needing extreme heating.
    Up to about 40 years ago everyone here had an oil fired forced air furnace and an oil fired hot water tank in their homes, and commercial businesses were no different. I don’t recall the main driver, but I suppose it was the oil embargo / energy crisis in the mid ‘70’s. Smaller cars became the rage and people started installing electric plenum heating elements in their oil furnaces to convert them to electric source. Power back then was even cheaper and electricity was subsidized even more by IOC. Wabush residents had to pay more because Wabush mines did not subsidize power – but electricity was very cheap in either case. By the early ‘80’s there was nobody left burning oil; we were all on electric heat and electric hot water tanks. Those plenum conversions were a PIA with broken relays and other failures, so by the 90’s almost everyone had converted over to standard baseboard heaters, which we are all using now. Even the schools, hospital, shopping centers and recreation centres all converted to electric back then.
    90% of the homes here are more than 40 years old, and not well insulated like a newer home. Many people have to let the water run full time in the winter too to prevent frozen lines, and many of those also have to install electric heat tracing on the water lines, particularly anyone owning a trailer type home, of which there are many. Once temps go below -20’C, you also have to plug in your vehicle if you want a reliable start the next morning (with auto-start of course). Overall, we must burn a lot of electricity here to survive the winters, and it is not optional use. At projected $0.17kw/hr rates (the low estimate by Mr. Ball) on the Island, my winter bill here would be more than $1,500.00/mo. Wow. I am not loving this idea of a common rate system for an interconnected Island-Labrador grid. Newfoundland is getting shafted by Muskrat too.
    I read a lot about heat pumps, but I am unaware of a single residential one in use here, but there might be. I will hazard a guess and say they are useless for our coldest months when temps are in the low twenties and deep thirties. Couple that with extreme snowfall amounts some weeks and it does not look like a practical solution. Sorry Winston. With low power rates they was not a lot of incentive to dial back the thermostats or install heat pumps, but the new reality that might be heading our way could be a catastrophe on the bank accounts.

  7. And my second part . . .

    I agree with PlanetNL in that IOC is not likely to concede to increasing rates. IOC and their Steelworkers Union 5795 are not on the best of terms on a good day, and the union is in a legal strike position in a few days from now. The impending strike will last about 3-4 months if history repeats itself again. And, the union really wants to keep their power subsidy. IOC does not want to pay more directly, but their continued subsidy to employees means they won’t avoid paying more, at least indirectly. If neither IOC nor their direct employees have to pay more, then the entire burden will fall on less than ½ the remaining resident and commercial businesses supporting the mines. Power goes up, then pay the employees more to pay for the power, then charge more for goods and services to pay for the raises and power increases, and suddenly – things don’t look so attractive any more. A downhill spiral. It would take the phrase “a little more in Labrador” and give it a new meaning. So, expect to see some interesting developments between IOC and the Union and Government in the coming weeks. Lab West only exists because of IOC. The new Tacora Resources will hopefully take some pressure off of IOC soon.
    Lastly, we have two operating data centers here in Lab West being used for Crytocurrency (Bitcoin, Ethereum, Litecoin, Monero, etc, etc). Both 5MW each I think. 10MW in total. They employ one employee each full time, just one, and neither of those people are residents of Lab West. Each may have multiple offshore clients. I hear of other Cryptocurrency data centers trying to move here as well for the cheap power, which is just another catastrophe waiting to happen. Many governments around the world are putting a halt to future data centers for unregulated blockchain purposes, and for good reason. Extremely inefficient energy use for a Ponzi scheme market based on speculation and dark money. What is proven is that it’s an extremely poor investment and return on our Federal, Provincial and Municipal tax revenues with only one employee per 5MW used (and even fewer with larger data centers). And our Government wants our future tax dollars to build more transmission assets for this purpose??? Perhaps they recently purchased some Bitcoin themselves.
    I am sorely disappointed in our elected officials for constantly failing the people of this province, again and again. They have no moral compass whatsoever, and are simply gravediggers for all Newfoundlanders, present and future.

    • Notice I suggest ground source source heat pump, not an air source.
      Your Gnd temp should be about 40F, 5C , steady year round, and give at least 300 percent efficiency, so use 1/3 the power.
      Winston adams

    • I believe Government considered ground source for the hospital and CONA projects in Labrador City close to 10 years ago but had to reject it out of concern for seismic effects of blasting at the mines destroying the boreholes. Plus power is/was so cheap it would never have showed any payback.

      Over in Goose don't they sit on top of nearly 1000ft of porous sand? The low heat transfer might not work well – geothermal exchange systems need thermal conductivity and sand won't do it.

      Of course, if you can put your air source heat pump downwind of a Bitcoin plant you got it made (except for the noise pollution). Just kidding.

    • My interest in ground source heat pumps perked in the 1970s following the Arab oil embargo. At MUN I read that research in the USA university showed it great saving on electricity use, using the heat of the earth , even thought is was cool earth. They used copper pipe, which was not very economic. I wondered if plastic pipe would be effective, though conductivity was much less, but long lengths might compensate.
      We had a cellar under our old house, one section had damp sand where we used to store turnips in the winter.
      I got a short piece of plastic pipe and filled it warm water, and after a set time rechecked the temperature to estimate the btu transfer rate. I concluded that with long lengths, and plastic being very cheap, it would be cost effective as a transfer medium , instead of copper. Years later it became the standard, as others had figured out the same.
      Is the sand at Goose Bay dry or damp? Moisture permits conductivity. At the Spur they need to pump out water.
      Some said minisplits would all fail on the Avalon (Nfld Power and Nfld Hydro)…Fake News.
      There are ways to find out what might or might not work. Nalcor is expert at doing what does not work. If none exist in Goose Bay, you do a pilot project of a few houses, before scaling up.

    • Agree, it is so easy to reject out of hand, be cause of what someone hears, thinks or smells, and it become the conventional wisdom. There is no substitute for patience and perseverance in conducting experiments and testing. Otherwise the believe exist that geothermal heating will not work in goose bay because too sandy and it won't work in lab west because seismic effects of blasting. Fact or fiction?????

    • For the extremes lows of Labrador , it seems gnd source is best. But also the air source I have measured in Mt Pearl a COP of 2.7 at -17C, and exceed the COP of about 2.5 at -1C , the reason being when very cold, there is little humidity and defrosts are few. and much of Lab winters do not seem as cold as it used to be, so I think many will go for air source if it provided saving 80 percent of the time, and these units cost much less. Some rate them to -25C, but I think the COP is maybe as low as 1.25 at this temperature. If good COP for 80 percent of the time, The result is less electricity sold.

    • Here is Goose Bay airport data averages for 1981-2010
      Feb min -22c, max -10 c, avg -17 C
      Mar min -14C, max -3.5 C, avg -11C

      Feb is the coldest month.
      From this, Feb nights would be worse, days not a problem, March not a problem most all nights
      Looking better for air source than I thought, with backup baseboard some nights……..but for grid peak load reduction gnd source is better, if soil conditions is suitable.

    • Graduated electricity rates could be a starting point. Determine a rate for a base quantity needed by every household and if you go above that you are charged a higher rate. Another is to encourage off peek consumption with reduced rates at certain times of the day. These two initiatives alone are enough to shave a substantial amount off our consumption.

    • What is the situation with Twin Falls now? The original UC agreement stipulated that the generating station be kept in a state of readiness in case IOC withdrew from the arrangement. The flow of water also would have to be reversed back from the Smallwood reservoir if IOC withdrew mainly because of a rise in rates. Just wondering???

    • Anom @ 07:47 Your rant about graduated electrical rates and off peak rates may have merit in other areas such as water consumption. One of the biggest expenses municipalities have is treating, pumping and delivering water to households. If consumption is reduced then this expense is also reduced proportionately. Graduated rates along with off peak consumption incentives may reduce this burden on municipalities in the water delivery system also. There is merit to conservation in every aspect of our lives.

    • Winston, how does one install a geothermal system in Labrador City area where there is frost that goes 4-6ft deep, and just 10-30 feet of old backfill on top of bedrock? The town is built on an iron ore deposit, and there is very little land around each house (small yards). A quick study on Geothermal use for houses indicates it is very expensive at about $25-40K per home in other provinces in more populated areas with contractors available to do this. Is it even feasible to consider for residential applications that far north?

    • Back in 70's, I recall a conversation with an associate, who thought that miners living and working in Labrador City were in a "fools Paradise". High wages, cheap housing, including electricity, lots of overtime. Gradually, when Mulroney took over IOC, the town ceased to be run by the Corporation, and the high life petered away. I am surprised that NL continued to subsidize electricity to the current time. I suppose it was an encouragement to up the demand at Churchill, to try and pad the Demand figures. No wonder then that NLers have arrived at a time when baseboard heating is de rigour.

    • Robert:
      Are we subsidizing IOCC for power or reimbursing them for rendering their privately funded facility useless? My understanding was the TwinCo bloc was compensation and infact allowed more productive generation at Churchill, similar in the way Menihek was originally developed—maybe WA would be best to answer that as he would have been around with NL Hydro, especially when Menihek was turned over.

      For the Inquiry, I am going to hold off until I see how the process of granting standing goes later this month-but thus far, I would say I am pleased to date. I would still say that Berger and LeBlanc have a unique community of interest in the issues that will be examined, but also that we wont get the same volume of a deliverable nor we get only 50-500 pages.


    • To PENG2

      After having read the historical backgrounder of the HQ/NF courts decision on contracting good faith (I know, I have no life to read that stuff), it was also my understanding.

      The TwinCo bloc was a an equivalent compensation to the loss of shutting it down (as it indeed allowed an overall more productive generation via UC).

    • Bernard made an excellent paper on this about a year ago. I recommend you to read that one first.

      From my reading of the courts decisions; in the 60s and 70s, UC was a very risky proposition, with minimal profit margins to be expected if any.

      Electricity prices were low, and were in a decreasing trend.
      Carrying such a big amount of power over such a distance was a technical challenge (also in terms of reliability, power losses and costs).

      Anyways,I kind of covered all this here in this blog, in the last year or two. But I'll re-read those backgrounders and see if I can find something relevant that we never discussed.

    • Thanks for your brief. And as you point out, hydro prices were low and trending lower at the time. And guess that was one of our biggest mistakes, nl, there was no escalation clause in hydro prices rising, so when hydro rates went up, we were stuck with the low rates of the times.

    • "there was no escalation clause in hydro prices rising"

      Exactly, there were none, and purposely so. (Court said it was a "known unknown")

      If electricity prices kept decreasing (as it was expected then), an inflation/deflation clause would have caused HQ payments to decrease accordingly. CFLco could just not afford that risk while repaying the project "mortgage".

      So HQ took that additional risk (electricity price fluctuations) on top of all the other commitments.

      Let's say BRINCO would have insisted on a one way escalation clause (w/o deflation allocation), HQ would probably have gone to its next project waiting in the pipeline – JB (James Bay).

      Having built JB earlier (instead of UC), construction costs would been way less (escaping totally the steep late 70s/early 80s inflation years).

      JB would have been then a similar bargain hydro source as UC, EXCEPT FOR EVER (not until 2041…).

      Actually, I consider UC as a huge error to HQ.

      Should have built James Bay earlier. Would have saved a bundle of $, would save handling a useless/complex CFLco contract, Would have saved having to go to court multiple times, and finally would have escaped being portrayed as evil/robbers/ rapists…

      Just my humble quebecois opinion…

    • Yes, guess you are right. And as you say, if Brinco had insisted on the esciilation clause, HQ would have baulked and went to Jb . Guess Brinco would have eventually found the financing to complete the project, but then there was the issue of the power lines to the US. Maybe going the maratime route would have made much more scense, then, maybe, as the power being shipped was over 4000 MW and not the 800mw of muskrat. Plus over time, the LC could have been added. But that's history and in hindsight, and lots of water and electrons under the bridge since then.

    • Financing would have been conditional to a guaranteed / firm long term electricity contract.

      The next most capable customer (to sign such a contract) would have been Consolidated-Edison. And based on the best prices they were willing to pay then (delivered at the NY state line), it did not make sense, even for HQ.

      Just a side note: the "anglo Saxon" route was definitely not the cheapest route for Nalcor; well it was an even worst $ proposition in the 70s. I don't see who would have financed such a route. (And again, who would have signed a long term sale contract, whatever the route used?).

      I believe we are very lucky we got UC built at that time. The next opportunity would have been years later (after JB?), but at many times the construction costs – so not a bargain anymore.

    • Ok, guess you have the info in front of you whereas I am just responding from memory, and with not all the facts. But you make it sound like that the UC could never be built without HQ and their financing. I think the cost to build at the time was 1$ billion, not sure if that included the transmission line too. But the only ace in the hole that HQ had was the transmission route, and that's a given. As for the remaining financing, guess it would not be more than another 0.5$ billion. The Feds gave 8$ billion loan guarantee for muskrat, so maybe half billion for the UC, of course there would have been holy war to pay, lol, if the Feds did that. And not sure what a billion is in today's money. As for the technology available to do the maratime route, can't see why not, it was just underwater and overland, the distance is the same as today. As for contracts, muskrat was built with no contracts. And as I mentioned the gull island, LC would have been added, same route, and should have been viaiable. But what do I know, I am no expert and have not studied the information available. But thanks for the discussion.

    • FYI, the cost of the transmission line was about 560 millions in 1969. There was no way for CFLCo / Brinco to do different or better than with HQ, even if Quebec had permitted a power corridor. Before signing the contract, HQ offered Con-Ed only a fraction of the total power at 4 mills and they declined. It is non-sense to think that CFLCo could have sold more power, at a higher price and for longer.
      Upper Churchill was a project too big for Newfoundland and too big for Brinco. That's why they had to transfer all the risks to HQ : Force Majeure, cost overrun, changes in the US – CAN exchange rate for such an amount of debt to be paid back, … Risk and benefits go together. CFLCo did not lost everything. Should the price for power drop, they would be safe. If it increases, that increases the value of the power plant, so they have their part of the return. Muskrat Falls was designed as nothing else than the opposite of Churchill Falls with the assumption that doing the opposite would produce the opposed result for the cash flow. Unfortunately, Muskrat Falls also was too big for Newfoundland. Newfoundland asked for participation from Emera to compensate and for Federal loans but kept the risks.
      I have a hard time understanding people from Newfoundland… Quebec protected you by taking the risks and allowed you to build a gigantic project. It would either turn in a loss for Quebec if price dropped, or a win to you if prices increase because the asset would have max value and HQ would have lost that same kind of opportunity for its own projects. Still, you are unhappy with that and go up to Supreme Court saying that you are entitle to everything : no risk, a gigantic power plant at no cost and huge cash flow. Newfoundland is about to be Detroit City version 2.0. When the city of Detroit lost all its industries, people with enough money left, leaving behind only the ones too poor to leave. These people can not sustain anything and Detroit ended up a war zone. Newfoundland will soon turn into a war zone itself… Still, best wishes to you and good luck,

    • Wow!!!! That's laying it on the line. Won't disagree with yo much on the muskrat end of it, as I watch that myself and knew it was a dud right from the start. But DW et al, wanted to get one up on Quebec, which was a stupid play or thought too, so could see that was dumed to fail. But now that you have stated how we could not handle, UC and the cost, give me the gross and net monetary benefits that has acrewed to HQ and to NL since 1970. Like your term of war zone, lol.

    • Hi anon: 1753, where did you go??? You can't jump into a conversation, have your say, and then disappear without commenting on the questions raised. But maybe you are busy, or maybe Ex-Military Engr may like to comment again.

    • Hi again,
      Indeed, I was busy 🙂
      As for the benefits each parties received from the Power Contract, HQ received about 27B so far. CFLCo got around 2B plus a power plant estimated at around 20B. Overall, so far, both parties received similar values.
      From now until the end of the contract, HQ will receive by far the biggest share of the value, just in the same way CFLCo will after the contract.
      So for the first 40 years, the value ended up shared about 50-50.
      For the second 40 years, the value will also end up shared around 50-50.
      But remember that HQ took all the risks and as such, it would be normal to receive a bigger part of the benefit.
      So either consider it around 50-50 for as along as 80 years, or consider it about 70% HQ – 30% CFLCo for 65 years when HQ took much more than 70% of the risks.
      As for the main subject of the article, the increased cost for Labrador, I think Newfoundland is now too deep in it and the only way is for everyone to end up part of it, including Labrador. In all cases, if Newfoundland does not do it by itself, it will be required before external support can be provided.

    • Thanks for your reply. Not sure if you meant you were busy, looking up contracts, or otherwise. My computer is an old slow clunker, so admit I didn't look up anything, so will go with your numbers but I will try and understand them, and maybe look at it a bit differently. Also realize any contract is much more complicated than what we are doing, but this is ok for the purpose of our discussion.
      So the currant contract is for 65 years, and if we can consider that first and then maybe you can project beyond 2041. So from 1975 to 2040 approx. so you used 40 years, from 1975 – 2015, and HQ gets 27B and CFLCo 2B, let's leave the plant value out for now, but guess presently owned by HQ, and assuming transfers to CFLCo in 2041. So at present we see the 27B vs. 2B as unfair, that's more than 13 times in monetary value. If we consider the next 25 years, from 2015 – 2041 then the monetary value is 17B for HQ and 1.3B for CFLCo. So after 65 years end of current contract monetary value is HQ 44B and CFLCo 3.3B, so HQ has the lions share. Now if the plant then reverts to CFLCo @ 20B we have 44B for HQ and 23.3B for CFLCo, and as you said HQ assumed most of the risk, but if the plant was built for 1B plus the power line then the monetary risk was not astrominical, but rather modest. Then if you look at a new contract in 2041 then CFLCo should do much better, but only when the contract is negotiated would we have any idea, as HQ still has it's ace in the hole, the transmission route, so guess that would be a big chunk for that, unless CFLCo wanted to go the maratime route, and for sure the more costly, so guess the same Quebec route would be negotiated. So maybe over time we would Catch up monetary until we are 50-50. Of course I stand to be corrected on my figures, that are based on yours, or my interpretation of the figures. A good discussion, but as I said, guess the real contract is more complicated than our discussion. Still wondering about the war zone, lol.

    • Not sure anon: 1:22 if we have concluded our conversation, but under that assumption, was wondering if Bernard, or David Vardy would care to comment on the UC contract. Just wondering if we were in the ballpark, or way outside, of course just speaking for myself, not anon: 1:22, as I am no expert on the contract, or admit not really familiar with it. But may be a good time to have comments by our learned friends just mentioned, or others that may have considerable interest or knowledge in the UC contract, and how it's viewed generally.

    • Hi again,
      Well, if you do not consider the value of the power plant, you discard the very goal for which you entered in the contract. The only way to do that and do a comparison is by discarding also the main benefit for HQ.
      You said that the risk was not that big. Here, your numbers need a serious adjustment… A total risk of 1.5 billion (building cost) in 1969 is well over 10 Billions today. You must also add to this the minimum amount of money HQ had to pay according to the contract, which is aroung 6 billions. Because of the front-end loading technic used by the contract, most of these 6 billions were at the beginning, so the amount must be adjusted. Overall, if you want to have a picture in today's money, we are talking a solid 30 billions or even more. Should nuclear power has transformed in the too-cheap-to-meter energy source many expected, that 30 billions would be an almost complete lost. That means a hole about 150% bigger than the one from Muskrat Falls. If 250% of Muskrat Falls is a modest risk, Muskrat Falls itself is no risk at all…
      Another way to analyze the risk is this : should that risk have been that low, then CFLCo should have had no problem finding money to borrow and would not have needed so many protections from HQ to re-assure the lenders. The lenders required that protection because everybody considered that project as a gigantic risk.
      At the end of the contract, HQ will not have more than 70% of the value while assuming much more than 70% of the risks. As such, the contract was unbalanced, but in favor of CFLCo and not HQ. The deal was for CFLCo to get the power plant built and keep ownership of it, while receiving a minimal return on a risk-free transaction. The counterpart for this was HQ would not loose the kind of revenue it would have received should we have build our own projects instead of yours while accepting the same risks we would have doing our projects versus yours. Newfoundland can not have it all : no risks, the power plant and the cash flow. For the risks, it is over. They were assumed and do not exist anymore. Should you wish to transform part of the value of the asset in cash, it is possible by selling it or part of it. But it is non-sense to complain about not having it all for you : No risk, ownership of the plant and the return in money, all of that before the end of the contract.

    • And about War Zones… The kind of devastation and chaos that you now have in Detroit (they start recovering from it but are really not done!) is the kind you will see in a war zone. That's why I compared Detroit to a war zone and, sadly, expect the same will happen in Newfoundland.

    • Hoops anon: 12:21, sorry, didn't realize you were back. So just a couple of points. I did not ignor the plant value that you assigned@ 20B, just added it at the end of contract, in 2041. I did check on Google for comparison of 1970 US dollar with 2018, and it says $6.54, but as you said most was front end, then think it would be less than 10B in today's dollar. But will leave that as it may, as I am not a finincial expert either. As for your other comments will leave them for other readers. Except for war zone comment, as I find that rather extreme. Think Detroit, was heavy industry, and now considered part of the rust belt of the USA, for vary different reasons. So I still think that analogy rather humerous. But thanks again for the enlightening conversation.

    • Hi again,
      Yes, the 1.5 B 1969 is about 10B 2018. That is for building cost. The amount to pay for the power totals about 6B, front-end. About 4 times more than building cost, so would total another 40B should it have been all paid upfront, for a total of 50B. Considering it was not all upfront, I just cut it in two and rounded to 20B, so 10B building it + 20B for the power itself totals the 30B I mentioned.
      In all cases, thanks for the discussion and may the best be for you and Newfoundland,

    • Wow, we have a third Québécois contributing in this board; bienvenue à bord!

      I'll quote anom (at 17:53) here, about the 1969 contract (which was totally risk free to CFLCo):

      "It would either turn in a loss for Quebec if price dropped, or a win to CFLCo if prices increase – because the asset would a have max value and HQ would have lost that same kind of opportunity for its own projects"

      That summarize extremely well the reality.

      If electricity market went down, HQ was still on the hook to pay the contracted price no matter what (and pay for the whole agreed qtty, nothing less).

      Or if prices went up, the UC assets value increase and CFLCo get to grab all of it (while HQ loses that same gain opportunity had JB been built earlier instead)

      It's just so obvious.

    • "the cost of the transmission line was about 560 millions in 1969"

      Might be higher than $560M too. A few years afterward, HQ had to move a portion of those 3 X 735kv lines due to a zone that was prone to frequent icing accumulation events.

    • Thanks Ex-Mil,
      Just in case some people may think Quebec is complaining about UC, lets add that HQ was going in hydro-electricity no matter what. As such, HQ would have been exposed to a drop in price in all cases. UC would have helped HQ in that case because the drop would be temporary (despite very long) and from a lower price per Kwh because CFLCo managed to offer the required price tag lower than the one HQ could produce itself.
      Should the price increases, HQ was not loosing any piece of it for 65 year, which is a significant part of a power plant lifetime, and would also add the small difference between the contract price and what would have been its own production cost. That would also be on a project of a higher capacity than the one in progress around Manic – Outardes.
      That is what is called a win – win situation.
      Often, people can not understand how two parties can win. They think that there MUST be a looser. The other partie being a winner, they consider themselves as the looser. Unfortunately, the very purpose of a transaction is to create a win – win situation. For those who such a thing does not exist, transactions are impossible and there is only fraud and similar.

    • @Heracles: You described very well the other side of the coin.

      That contract was indeed set up to be a win – win for all parties, and it did achieve that aim.

      HQ got 65 years of Hydro at prices (marginally?) cheaper than its next project, while CFLCo was able to build & operate "risk free" UC, all paid for by HQ. (And it gets even better after 2041…)


      I guess the biggest "win" was for CFLCo, as it got to spend all this money before the hyper construction inflation of late 70s / early 80s.

      Any "permanent" infrastructure built before those years are incredible bargains today. (Beauharnois, Manicouagan, Outarde etc). James Bay could have been such a bargain too…  

      Construction inflation was much higher than the overall inflation.

    • Ex-Military: You need to look at what NL paid for BRINCO shares back in 1973-74? and the accumulated cost of holding that investment with neglible return due to the structure of the UC contract. Only the Winter Availibity scheme – chiefly cooked up to prevent CFLco from going bankrupt – kept the project afloat and HQ allowed to take over the management. You need to be careful with little knowledge of a huge project, its history and how it was structured financially.

    • To Anon 08:49

      I recognize I have insufficient knowledge of this huge project, that probably possesses considerable "behind the scene" dealings.

      Most of my knowledge comes mostly from reading the historical backgrounders of two court decisions. (Easier to read than expected, but still hundreds of pages)

      By exemple, I was not aware of how little NL paid for the Brinco shares in 73-74. Thanks for the hints. (Reflection of still low electricity market prices and the razor thin operating profit?)

      From those backgrounders, I indeed learned that CFLCo's thin operating profit was turning into a deficit in the latter years.

      So, exactly as you say, with that "winter avaibility scheme" HQ got to litterally control UC production. (Thus dictating the water flow to MF…) In exchange, CFLCo got from HQ the added revenues to stay afloat.

      Anon, please keep posting, I really appreciate reading your comments. (Can you adopt a name, so we can trace you faster…)

    • Just found the info: in 1972, NL expropriated Brinco and obtained the 56.9% CFLCo shares (that Brinco had) for $160M. (NL already had 8.9%, so got a total of 65.8%)

      Also, more details on that "Guaranteed Winter Availability Contract" (GWAC); HQ got to purchase an additional 680 MW from UC. It also got to dictate UC production "schedule", enabling a better use of UC during winter demand peaks.

      From what I understand, this extra 680 MW comes from UC superior yearly output versus what was expected (and embedded in the original contract).

    • The thinking of the day was that it was prudent to follow Rene Levesque and Eric Kearns towards nationalizing power companies would be the way to attract NY Bankers to bankroll public sector mega projects. Remember, when Kearns went to NY, the story goes that the Bankers were prepared to fund further development of Northern Quebec rivers. It was the Churchill deal which had caught the Bankers attention of debt financing the HQ Empire.

    • Thanks Robert for this valuable intake, it definitely makes sense.

      I'm sure HQ (and Brinco's shareholders) would have liked the opportunity to acquire Brinco, even at double those minuscule $160M NL paid then…

    • Regrettably, as Bernard has stated, since the 70's,the politics deteriorated between Quebec and NL, and rapprochement(?), failed to take hold. Had cooler heads prevailed, in particular, in NL, the whole Boondoggle might have been avoided. Geopolitically, Quebec has the upper hand, as the most practical supply route for Labrador resources, is through that province to North American markets, unless, using the Alberta philosophy, shipping to tidewater ports to European markets, is developed. I enjoy your considered analysis.

    • Hi guys,

      Ex-mil and anon: 08:49, HQ always had the control of the reservoir from day 1. They did not received that from the GWAC. Also, know that article 12 of the Power Contract said that HQ was responsible to pay for CFLCo debt and in exchance, would have receive shares of CFLCo. Without the GWAC, HQ would have ended up the complete and full owner of CFLCo.
      HQ chose not to do that and offered the GWAC, which is basically pure charity. HQ does not really receive much from it but pay about twice the price the Power Contract planned. It is the same for the Twinco block : that block should now be part of HQ's rights. The Twinco Block was reserved up to 2014 (if I remember properly). Instead of buying that power also at the contract's price, HQ released the block and gave it to CFLCo.
      Another point is that Quebec recommended Newfoundland to nationalize Brinco even before the Power Contract was signed. Smallwood refused to do so.
      SInce that, HQ tried many times to help Newfoundland but Newfoundland always refused everything other than a full re-opening of the contract. To re-open a contract is a terrible thing for one's credibility and that's why HQ can not do it. HQ offered a ton of ways to sustain CFLCo and re-balance the cash flow, but Newfoundland always refused until the GWAC where they were down to accept the support or die. Should they have accepted to collaborate with HQ, both Muskrat Falls and Gull Island would have been built long time ago and in a way that would not have bankrupted Newfoundland.

    • Hello Heracles,

      I can confirm about the TwinCo block, the requirement expired on Dec 31, 2014.

      Actually, I read about it yesterday, but I tought it was an error. (Source: page 4 of the Report "UC, can we wait until 2041", Nov 2012 – on the Nalcor site).

      About the GWAC, I knew that HQ controlled the reservoir since day 1, but I thought (pls correct if I'm wrong) it gave HQ even more controls, like CFLCo had to be ready to produce X more power with only X minutes prior warning etc.

      Wow, thanks for providing us all those new context elements, it's really interesting.

    • Technically, GWAC is about CFLCo taking extra care to be sure they will be able to provide max power during winter time. That includes keeping extra spare parts and things like that. But at the end, it does not change much because we were already taking maximum power during winter time because that is the moment where power has its maximum value and when we need a maximum of it.

  8. Anyone here know the legalities if these Bitcoin places get connected and a future government refuses to build more transmission capacity? Or disconnects existing Bitcoin plants? Or creates a new higher cost rate class to try and recover the costs? Could Hydro be successfully sued for breach of contract and lost profits? Seems like we're in very dangerous territory. Best to act asap.

    Ball, Coady, are you listening? Are government officials looking at this? Or must we wait until you are replaced in 2020 by which time the damage will be done? This one is totally on the Liberals.

  9. Cryptocoin mining is scalable. You could purchase an ASIC rig that generates a thousand watts in heat and then use a few of them to heat your home. You could sell hashing power or generate coins with them to immediately sell and make a small profit or keep the currency as a speculative investment. Alternatively, a data center could be built right in the middle of town with a cooling system that generates district heat for subdivisions. The concept would be that using cheap electricity must benefit the province by resulting in significant employment, corporate taxes or useful byproducts such as heat or food. The idea of a one-man data center consuming many megawatts using publicly subsidized infrastructure is abusive.

  10. Peng2, Cat got your tongue?
    No comment from you on Robert Holmes comment Berger vs Leblanc?
    And timid on any comment as to WA's thoughts on spill gate control to prevent flooding! Thought you would have insight into that issue, from your own knowledge or from Nalcor's plans?

    • Anony @ 15:48:

      WAs concept is sound in keeping some backstream storage available for modulation.

      What I see as the unknown is the Churchill itself-there is limited data recording, a new hydro facility and a causeway installed in the past 10yrs. Looking at the reach downstream from Muskrat there are noticeable changes in sand depositions and the flow regime-all these impact outlet flow control.


    • So, Peng2, if you and WA is correct, then leaving the upstream elevation at 21.5 m last spring during the thaw was wrong, and seems to have been a plan endorsed by Gil Bennett?
      And likely Nalcor would not repeat that mistake this year? Do you know?

  11. One thing not mentioned in this article and elsewhere is the revenue generated by data center operations. That specific type of customer requires a high power load around-the-clock and thus creates more revenue for the utility.

    The article suggests that the "LIS is sustained by $20M revenue from domestic and commercial customers and just over $4M from IOC" which makes $24M/year revenue.

    Power applications from data centers are now beyond 100 MW across the region and to ignore the opportunity because it costs money up front is simply a pre-planned failure. At the line's capacity of over 200 MW, high load customers could generate over $30M per year – enough to cover the cost and then some. At worst it could be break even.

    • PlanetNL here:

      The practical length of a post is 1500-2000 words and this post dared to go way longer so lots of issues couldn't be addressed in detail.

      Firstly, the Bitcoin sector is yet to prove they are for real and will last and it has negligible employment and secondary economic benefits. News is developing quickly in Quebec where they view it a poor use of electricity and they are talking about charging bitcoin operators a premium and not giving their lowest rate class. Price might be about 5 c/kwh.

      If NL Hydro charges the same 5 c/kwh to all bitcoin operators then maybe go ahead and build them a 200MW transmission line. Revenue might be $80M vs $30M costs for a profit of $50M – I like that. But get a $350M loan guarantee in case they're all out of business soon. Don't expect a lineup of bitcoiners rushing to take that offer. Anything less and the risk is on ratepayers to inherit and pay for useless assets after bitcoin fades away or packs off to another cheaper place to operate.

      If the small amount of existing spare Lab West capacity is used for bitcoin it will generate some marginal income at no cost, maybe a few million. But is it sustainable – is bitcoin here to stay? There's immense risk here for the LIS ratepayers if and when the bitcoin bubble bursts. This is a very unpredictable situation.

      Oh – by the way island ratepayers should be keenly aware that accommodating bitcoin growth in Labrador means less spare recall power that is supposed to flow to the island in the next couple of winters to reduce Holyrood oil burning. Each kwh used by new bitcoin capacity will earn 1.8 cents while island ratepayers pay 14 cents to burn oil when denied that energy. Looks like the island ratepayer is indirectly subsidizing the Labrador bitcoin industry by 12 c/kwh. Stan was all pumped that we'd get that little break with some energy coming down the LIL but now it seems we're eager to give that up. Awesome policy managers we have in GNL and Hydro.

      To the argument that say $6M might be earned in Labrador, the price is $36M lost on the Island, denying NL Hydro as whole $30M in potential savings. Stan tells us to look at the big picture remember – well, here it us.

      The GNL/Hydro desire to rush in and accommodate bitcoin is simply complete insanity.

    • This post is the closest yet advocating for "Efficiency NL", to copy Efficiency NS, Efficiency Vermont etc, etc. ……saying "Responsible Governments and utilities should strive in the other direction to try everything possible to live economically within the means of their existing infrastructure"
      Reduction in peak demand and energy use achieved by customer efficiency programs is what responsible governments and utilities do. But this was not part of the Isolated Island Option, and still avoided here……….not even being considered as a prudent policy. We have the farce Take Charge program promoted by the scallywags.
      Also this post says " If load growth can't be avoided then policy options are available to new customers demand that protect ratepayers from paying for costly assets they won't utilize or benefit from"
      At 12.7 billion, and allowing for the average MF power that can be delivered to Soldier's Pond, (about 520MW), this is costing $12,695.oo per kw.
      Some new houses in Logy Bay area near me has a connected load of 35 kw alone for heat ( a cost of 444,000.00 if all supplied from MF)
      One every large house has 75 kw connection, so nearly a million dollars to serve that house with MF power. These are rich people being subsidized by the average Joe. And there is so consideration for charging them extra for such wastefulness, while the poor will go cold in winter. Part of the Big Picture not mentioned by Stan.
      Winston Adams

    • This post says MF increases our capacity by a mere 15 percent. Our island capacity is about 1950 Mw which included 470 net for Holyrood.
      For MF at 824 Mw ( about 758 MW delivered to Soldiers pond, after transmission losses, and Holyrood shut down , then this adds about 15 percent,…. say 288 MW.
      Yet MF, on average can deliver only about 520 MW, so deducting the 470 when Holyrood is shut down, it adds only 61 MW to our capacity. That is only about 3 percent additional, not 15 percent
      MF can deliver more on a short basis, maximum , I believe for about 3 days, where you can make the case for 15 percent added capacity, but on average only 3 percent. $12.7 billion for 3 percent added capacity!!!!!!! Tell me it ain't so. Is this part of the Big Picture?
      Winston Adams
      Winston Adams

    • WA:

      Is you math right? I was putting MF at 80% efficiency of 824MW capacity at the plant, before deducting line loses etc.

      When I subtract line loses and the Emera bloc, I see taking Holyrood out and bring MF online as being a loss-maybe MF can give 400-450MW at most to provincial grid.


    • I assumed 824 was the name plate rating of generators.
      Water turbines may typically be 80 percent efficient……is that what you went on?
      Based on questionable water flow if no agreement with HQ, then maybe capacity at times may be only about 220MW ( Grand River Keepers study), if memory serves.
      I assume about 8 percent transmission loss at high power and 6 for lower power transmission.
      Regardless, SAD, as Trump would tweet. My figure is sad, yours sadder, and Grand River saddest. Nalcor will argue about 758Mw peak delivered is what counts, as it matches heat load for timing.This questionable as high output is available for a very short time. And whether much increased water flow in winter for more capacity would create havoc on the river downstream in winter? Slush last week on the river downstream, without opening gates I assume, bogging skidoos.

  12. FYI Sampling studies show the DEEP SAND in the Happy Valley – Goose Bay area has a 8ft. constant temperature of around +5C. The relative humidity at that depth is over 95% and the ground water level on the Grand River delta ranges from 6 ft. to 20 ft. … somewhat seasonally variable.

    • A test installation could be very informative. DND should convert one of their many buildings ASAP to evaluate performance. If successful then they have a legit environmentally progressive alternative to their proposed conversion of the oil-fired boilers.

      If the bitcoin surge can be slowed a little (I'm not against them, just the public ratepayer risk that their disruptive high energy demands can create in a small market), then upgrades on the Labrador east transmission could be deferred.

      It's so damn logical which means the usual political powers can be expected to do the exact opposite. The local public there really needs to get on the case of their MHAs, MP, and the municipal council who are all probably only thinking about the short term economic growth and not the long term risk. The public and politicians there really need to consider the drastic long-term game-changer of connecting to Muskrat. If the tie-in proceeds, the future unified Island-LIS rate concept is given a substantive justification.


    • Horz piping for gnd source is less expensive that vertical. Some sites give the cost per ton of capacity (a ton , a meaningless term for heating, as a term for cooling ( when they cut blocks of ice , sold by the ton, stored in sawdust, for cooling in summer) , which means 12,000 Btu , which converts to 3.5 kw of heat capacity. A TON has nothing to do with the weight or heating capacity of a HP.
      I would think for horz trenching, it would need to be at least 10 or 12 feet deep, as the heating process in winter lowers the gnd temperature further, and best to avoid 32 F at the pipe grade, which would cause the gnd to freeze, lowering the heat transfer rate.
      Can FANE advocate for a pilot installation of several houses. DND would have a engineering assessment, and should proceed in that direction. Goose Bay mayor etc should be vocal on this.
      Meanwhile Goose area has warm/hot summers…..and air source can meet most heat load and also AC for summer…… for a car…AC, once you have , you will not want to go back, and gives needed more summer revenue to the power company.
      Has Wade Locke joined FANE? Yet?

    • PlanetNL, the Goose Bay airport complex was a gift to the Canadian people, following the decommissioning by the USAF in the 1970's. All the infrastructure for District Energy had been successfully run since WWII. DOT and Local Gov. let the system go, in favour of "cheap power. How many times do we shoot ourselves in the foot over a simple concept, perfected by the Romans, hot water heating? Of course current technology has been advanced, but if there are no "lights on and nobody home" with respect to converting from baseboard heating, fossil fuelled systems, you get what you voted and paid for.

  13. While serious minds on this Blog consider the prospects of post Muskrat and Churchill Falls, your government of the day comes up with a diversion;

    How close to sanction is this idiocy! I remember the Liberal member of another day, (Neary), facetiously addressing the Strait Tunnel idea, and how many jobs could be created if NLers were given picks and shovels. People, wake up your government has lost its way!

    • Using examples from Norway and China to argue for a tunnel to nowhere is the heights of idiocy.

      Tunnels and bridges in countries like Norway and China are used by hundreds of thousands, indeed, perhaps millions of of travelers yearly.

      Those who would propose to build an under-sea tunnel from one remote region with a few hundred thousand inhabitants… to an even more remote region with less than 30,000 inhabitants… need to have their heads examined.

    • Lol, think Steve may have been talking a bout a tunnel across the tickle to bell island. As for a tunnel across the belle isle strait, some compare it to the Pei bridge link to NB. Didn't cost govt anything in the long run, built and paid for by private industry, in the form of a toll. And think off all the savings to operate ferries forever. If a proper study were done, and private industry wanted to build it, I say go for it, reasonable toll to pay for it, if a study can show that. Cuts down on ferry cost forever. But two ways to look at it, as paddy would say, from a townies prospective, linking Labrador to Newfoundland. But otherwise we would say, linking newfound to the mainland. Would not have to wait for freight or people storm bound, or ice bound, just drive when you want. Trucks driving to Montreal wher more than 50 percent of our freight is shipped from now. No doubt the Feds and Quebec would up grade highway 138 to normal standards. So not so much about the number of people, but the cost to operate ferries forever and a day compared to a fixed link. But don't believe in government paying for it.

    • The NL construction industry has been promoting this failed Mega Project for years. Just another grab by the subsidized construction industry and workers in NL who are promoting themselves as the new saviors of Newfoundland. Politicians are lashing onto this to divert attention away from the failed Muskrat project and to give people false hope. It isn't feasible and never will be.

  14. Anom @ 18:06: What is the difference between a rate payer (ie. user of the system) and a taxpayer (ie user of the system?)? Either way we are going to pay for it through taxes or the price of goods. This is the whole problem with many of these projects. If Private industry wants a tunnel under the Straights then they are welcome to build it but don't expect NL'ers to pay through the teeth for it in the price of goods and/or taxes. Let it compete with and alongside the ferry system and the best option will prevail through the free market system.

    • Agree totally with you, let it compete with the ferry system etc. And I am the last person in the world to be associated with the NL construction system. I am talking nation building, with your thinking, the railway would never be built across the Rockies, or there would be no roads around NL island, we would still be serviced by the old CNR boats, or the trap skiff, to get our mail on fogo island or in trapassey, or hundreds of other communities around the province. I don't know if a fixed link to the mainland is feasible at this time, maybe not for another 50 years, but let's find out, and if it is similar to confederation bridge in Pei, then do it, if not w have to wait for the time if and when it becomes feasible. But don't be afraid to think outside the box. The toll on the confederation is less than what the ferry cost would be. And for sure it would be cheaper than taking your car on the p. A. Basque ferry.

    • PLEASE!!! When politicians talk of a Mega project it is buyer beware. Political powers of all stripes are getting desperate for ideas since hydro development has become a disaster, offshore oil fields are pretty much all developed and drying up fast and the civil service is in dire need of serious downsizing. If private interests want to build it the all means go ahead and build it and WE will decide which system is best when all is said and done.
      With regards to your rant about nation building, you left out the little part of our history regarding the disastrous NL Railroad that serviced no one and bankrupted this province (then nation) several times. This is a perfect example of an idea who's time never came simply because it was built in the interior where guess what? No one lived and was done so the Reids could secure timber and mining rights. The CNR boats actually serviced more people than the railroad ever did.

    • Right on bring back the CNR boats, and trap skiffs to deliver, shut down the roads, we did get roads for rails in John Crosby days, so the railroad must have had some value to Ottawa, but some NL's screamed blue murder when the railway went. To discuss Reid's way back then, is a whole new discussion in our history, and just because it was beyond our capacity to build and make a profit, but it did serve the people of the time. Twilingate and new world islands were once only accessible by boat until they were linked by the causeways in the 70's.

    • Anon @ 11;16……to say Reid's railway is a whole new discussion in our history……new to who?
      When we went bankrupt in 1934, the bult of our debt was due to the railway and the Nfld regiment cost during WW1
      Is our history not taught, or some chose to forget, and inclined to make more blunders?

    • No, I agree with you totally, and would never consider forgetting our history, and have referred several times on this blog to 1934, as a reminder to going bankrupt again mainly because of muskrat. But that does not mean we become stuck in the mud because of muskrat, we must continue to grow and move forward, and if a link to the mainland can move us forward then we should investigate. Yes, WW1 and the railway helped us get in the mess in the 30's, but it was also war, that helped us get out of the mess, when the Americans came in the second Great War, injected prosperity into the economy, by building, at least five military bases in our province. That brought jobs and real cash to the workers pockets, a big departure from our tradition fishery. Imagine saying no to the Americans at that time, we want no part of war it bankrupted us once, so never again do we want any part. Of course we couldn't say that as the Brits were in charge of us, but we welcomed the Americans as we should have and our newfound prosperity. My point was don't go back in history to point out one failed so that we will never consider another, that is not tried and proven. So yes, our highway was one the ocean, and where possible we should continue to move forward, with roads, causeways, or tunnels, and airports, and not forward to our past. Maybe we will always remain an island, no permanent link to the mainland, if it is not economical then we should remain an island, and the ocean will remain our highway, or the airlines. I get a kick out of guys like paddy, that always talks townie, and basically well if you can find Portugal cove road, it gets you to the airport, and what do we need a tunnel for. Better stop there, lol.

    • Anon 13:15. Your sense of history I concur. With respect to building infrastructure projects to mitigate poverty, a considerable amount of analysis has been done. The preferred supply chain routes to the Avalon, (demand central), most probably should be updated. The total costs of PAB ferry and the truck route overland vs a container port say on the East side of Placentia Bay. I would venture that a 100yr annual savings would favour the latter scheme. What are your thoughts?

    • Probably no clear answer Robert. Just a few short years ago, corner Brook was cut from the St. John's – Montreal route, because it was more economical to have the freight come to St. John's were most was bound anyway, and then by road back to CB. So if cargo is loaded at Montreal, may as well continue to St. John's, no point ending the run at placentia bay, Almost 100 percent of cargo would then continue to destination by road. As for Halifax, or Sydney especially it is in the terms of confederation to provide a service to PA Basque, so would be difficult to change that. But if a tunnel were the preferred route by truckers or the driving public then PA Basgue might die a natural death, but doubt that very much too. And yes we should have several entry-departure points to the province if economically, including airports, think at least four on the island now. Never amazes how both stephenville and deer lake continue to compete.

    • My guess is that tunnel will never be viable commercially.

      The Montreal to North Sydney route is about 1500kms, all TCH now; compare that to Montreal to Blanc Sablon which is 1800kms of rural road with no chance of upgrade because of location(not to mention 400-500kms left to connect/build). Adding to that, there is a rail connection to Lab City from Sept-Isles for heavy loads-and also add in that the distance down the GNP to Deer Lake is about the same at PAB to Deer Lake there is no way to make a commercial case for the tunnel route.

      It doesn't and won't make any sense for commercial traffic to drive the north shore. We should be considering moving year round ferry service to either Placentia Bay(best option) or at very least Corner Brook.


    • Liberty uses the word PRUDENT (meaning wise) or IMPRUDENT( meaning stupid) a lot. Vardy points out how stupid MF was and proper analysis should have showed this, and the public should have been be so informed. Did our media fail us, and if so, why?
      In the 1960s , when construction work was slow, a neighbour,Melrose Lynch, a labourer,(sometimes carpenter) would say, with a smile, " what we need is a good war, Eh"? He had seen the prosperity of WW2.
      WW1 also brought profits to sectors for a while and sky high fish prices. WW2 was great for the economy. You seem to make a moral case for war to boost the economy?
      You say we should not hesitate to plow ahead with mega projects that is not tried and proven, based on some past fiascoes. Sprung was not tried and proven for our climate. MF was not tried and proven.And how many of Joey's blunders were not tried and proven. Such blunders are due to false assumptions, many known to be false, and deception etc.
      That prudent analysis be done is paramount. When something is not tried and proven for that location or environment, then it can be very risky and imprudent.
      Which MHAs, or Nflders understand the meaning of PRUDENT?
      The common Joe needs to hold government accountable to be prudent. Maybe a part of our culture that needs improvement?
      Ches Crosbie thinks a HONESTY ACT will fix things.
      Now who was it said that "a statesman is one who can cleverly lie"? So, if you can't trust a statesman,which of our MHAs can we trust, and what loopholes will Ches have in his Honesty Act?
      That such an Act can make a politician honest or more honest, is that not a lie being fed to the public? Lets see the wording, Ches's draft, that we might assess it.
      "All men are liars", so said Jesus. Is that true? I think so. And I guess that includes me, and includes Ches.
      But lying is relative, Trump is cited as one of the biggest liars.
      I grew up near Upper Island Cove, known for witty people.
      Many, when telling something hard to believe, would say " If you don't believe me, ask Harold Orsborne". Harold was a undertaker, a so called TV repair man ( he could replace tubes),and showed the first movies in our area. He also had the 3 rd degree in the Masonic Lodge. Surely his lodge standing would indicate truthfulness? Yet he was known to hardly ever tell the truth. Hence the joke, of asking Harold Orsborne to verify a matter of doubt!
      Did Ed Martin tell the truth? Maybe we should ask Ches?


    • PENG2 , it is estimated that 1 billion cold put a road right to Nain, and tie ins to the most all the coastal towns.
      Imagine what 13 billion could do……some wind generators assisting the diesel plants on the coast, and hundreds of other useful projects.
      The Yanks pushed roads into Alaska in the 1940s, when constuction equipment was antique as to present standards.

      Oh, what 13 billion could have done.

    • PENG2, good and timely discussion; Sydney deep harbour is soon to replace Hfx as the primary container port, connecting westward via rail to North American network. A competent transport study would probable stumble on the Sydney to Placentia Bay routing to handle Eastern NL distribution. St. John's is already too congested to build enlarged container handling. Proximity of Argentia, say to TCH would beat back the St. John's harbour lobby, and decentralize the Avalon supply route. You should get your good Engineering juices re directed after Muskrat, towards a more meaningful career shift.

    • Agree peng2, the distance by TCH from Montreal to Sydney is 1500 km, but if your destination is St. John's and you will be cooling your heels in Sydney for 24 or 48 hours because of a weather or ice bound ferry, think you would rather be headed for the tunnel, non stop. I get a kick out of marine atlantic that say not to worry about weather delay of a couple of days, we have the capacity to make it up in a good 24 hours, except the so called fresh fruit you get at Costco, you have to toss it out, and pay double for the next strawberry you buy. Get it there…never on time…regardless of the state…our motto.. I am not saying the tunnel is the answer, just saying don't diss miss it out of hand….do the proper study…that includes all aspects …of door to door.

    • And no Winston, I don't believe in war, nor do I believe in imprudence. But do believe there are some things we (local) don't have any control over like war and weather. But I do believe in reality, apple pie and motherhood. So we have to take things and reality, as the good, the bad and the ugly. And hopefully we can learn from that, and make the best decisions. But can't always live by, "well that's the way we always did it," because there might be a better way, so it can't be all tried and proven, otherwise we would still all be in the Stone Age. Would try and imate Bruno , contreversally, but guess not my character, as I am by nature a very prudent person, but can also think outside the box, but not necessarily acting outside.

    • Guess there are degrees of prudence. People can have influence over war and weather (or more so climate), and in many ways we do live in the Stone Age.
      1. Liberty cited Nalcor some 70 times as to imprudence. Can we yet say they are prudent?
      2. Germans voted for Hitler and Americans for Trump. Imagine if they did not.
      3. Climate change is affecting our weather big time, unless you are a denier. Where is our Nlfd policy on the carbon tax, and scaling back oil production. Statoil is going green and also changing their name to Equinor the nor for Norway.
      4. Reality? Like quantum physics?
      5. Apple pie? Do the apples have toxins on the shin? My grapes from Cline is sprayed with sulphur dioxide, and bad for people with ashama, and when washed, a black residue is in the bottom of the dish. The label does not say to wash. Strawberries seem worse for what comes off. Strawberry pie anyone?
      Is the apple crust loaded with trans fats? Be selective on your pies.
      6 Motherhood? England refers to the Motherland, Germany to the Fatherland. Can we discuss Manhood, as well as motherhood?
      Ah, Bruno……..I really miss him, thought he slung arrows at me. Did he die? Does anyone care?
      Bruno being Bruno, maybe he is just vexed. I think UG knows but not saying.

    • Winston, what is your gas at pump today? $1.55/l in BC. Part of which is carbon tax. Just like Vardy's rationale on higher power costs will drive alternatives to baseboard heating, a bump in gasoline/diesel fuel price would have more commuters from Conception bay take the bus. Where is your "prudent" government policy on Low carbon? Does the new MUN Science Bldg not have ground/seawater heating and cooling? Are there any Mechanical Engineers in practice in NL? I realize all the Electricals and Civils now work for NALCOR. Just trying to use a little Bruno bait to keep you awake.

    • Robert, I can sometimes do with more sleep than try to stay awake. I have 3 close relatives, one just 12 years old, come down with cancer this past few months, and no history of cancer in the family.
      Challenging times, and and ups and downs, and seeing first hand why we spend so much on health care and generally worse results than other provinces.
      A book Anti Cancer was an eye opener as to toxins in food and issue of poor nutrition which is not a part of cancer treatment here, not even for children.
      This issue is reflected in my comments on apple pie.
      Muskrat and UG, is at present a distraction for me, in that it partly takes my mind away from those health care issues, for a while.
      And we older residents seem to get second rate service, as if our life is of little value. We are not the "respected and valued elders" as to health care.
      Gas, I use so little ,and with a Prius hybrid, I would guess about 1.25 a litre.
      As to the MUN Science building…..I can only smile that you raise that, and I will address that a little later…… time to visit the hospital.
      As tumors reduced a more than 50 percent after chemo, a rare event, and I think the value of nutrition, toxin avoidance,and exercise, recommended by Anti Cancer may very well have played an important part. When unusual good results happen, I do not put it to chance.
      I am staying positive, and try "to keep my stick on the ice".
      Always appreciate your views.

    • I thought CIAC is normally quite dpwnstream and close to the customer's building. Typically it's a few poles and step down transformers. These things do not go the PUB.

      Upgrades to generation and high voltage transmission are major capital projects regulated by the PUB. Costs are assessed to the entire rate zone affected. The only exception seems to be industrial customers who access high voltage transmission.

      Medium voltage commercial customers like bitcoin warehouses are not industrial customers. They are in medium voltage distribution areas same as other businesses. I presume this is the distinction you're looking for.

    • Thanks Anon, you may be right that CIAC would have no bearing on a capital upgrade such as this one. I wasn't sure, hence the question.

      CIAC payments must be approved by the PUB though, looking at their website I see three there already this year that have been approved.