POWER PLANT A CENTERPIECE OF CORRUPT GOVERNANCE

“The Provincial Government, through NLH (Hydro),
has investigated the long-term options to address Holyrood emissions and
decided to replace Holyrood generation with electricity from the Lower
Churchill through a transmission link to the Island”.

Thus ran the 2007 energy plan
of the Danny Williams Administration.

The die was cast for energy
policy in NL. It meant Gull Island, Muskrat Falls or bust!

In that pursuit for more than a
decade, deception, half-truths, outright lies and delusion all played a role in
the sanction and construction of Muskrat Falls. Integral to the decision, was
the disparagement of the Holyrood Thermal Generating Station (HTGS).

Maligned as the industry
equivalent of a ‘dirty bag of bolts’, it recently achieved the human status of
Lazarus, raised from the dead. The conclusion of Hatch Consultants and NL
Hydro’s “Condition
and Life Extension Study”
 is this: “the Holyrood TGS is generally
in good operating condition.” Hatch informs: “…there are also some power plants
in North America with units which are still in service, primarily on a standby
intermittent operation basis, after close to 70 years in service.” Who knew!

It is hard to think of another
example that so forcefully reminds us that an alert, informed, and objective
public is the only safeguard against short-sighted, costly, self-aggrandizing,
and politically inspired public policy.

Hatch, of course, was not
expected to recount Nalcor’s false narrative; nor would a consultant in the pay of Nalcor be expected to remind them of their deception over the
power plant. Yet, NL has well over $13 billion sunk into the Muskrat Falls
fiasco and nothing to show for the financial misery it represents.

So far, the public has been
spared the worse effects of the fallout. Like the public debt, ruinous
decisions are deemed inconsequential; rather than resolved, the pain is deferred.

The fear is that the deferral
gives bad public policy decisions a degree of impunity; the leadership is not
held to account in a timely fashion.

While that is a subject for
another blog post, it is worth thinking about the extreme level of deceit to
which the NL public was subjected and for which, from a public policy
perspective, no change has occurred. Politics, assisted by legacy driven politicians, compliant consultants and weak public servants, has the capacity to put ‘lipstick on a pig’ (Muskrat Falls) or malign the imperfect and less gratifying (Holyrood TGS), as the case may be.

In the case of the latter, this was done by ‘talking up’ the “aging” – meaning unreliable and needing replacement – thermal (“dirty”) peaking plant. Cited as the 42nd worst polluter in Canada because it used a low-grade bunker “C” oil, the problem was substantially remedied when NL Hydro saw fit. How? It simply used a higher-grade oil!

Nalcor was fond of exaggerating the Plant’s GHG emissions, frequently reporting  how much “Bunker “C” fuel it used in full operating mode, though few people understood that this occurred for 2-3 days or less each winter, some years not at all.

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Dispelling Lies and Half-Truths about Holyrood Power and Raising Questions about the next Black-Out by PlanetNL

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Fuel substitution also eliminated the need for expensive “scrubbers and precipitators”, though a perceived concern for the environment manifested even as Nalcor openly dismissed using conservation and demand management (CDM) strategies to resolve the Island’s winter peaking problem that gave rise to the Plant’s construction. 

Scaling up the deception, Nalcor added the capital cost estimate of $602 million for the pollution control equipment plus “resulting energy losses of three to five percent” to boost the difference in the “Cumulative Present Worth” used to give advantage to the “Interconnected” option – Muskrat Falls – over the “Isolated Island” option.

The quest for legacy not only inspired the disparagement of the Holyrood plant, but it also killed the opportunity to outfit the facility with new kit – more efficient, low carbon emitting turbines using variable fuel types and a faster start-up time frame, where the time of operation could be offset with conservation programs and renewables, like wind and small-scale hydro projects.

 Muskrat Falls was more politically grand; even the environmental zealots couldn’t see through the smog of deceit, as if good economics was incompatible with good public policy, including that related to the environment.

Problem was, if people began to buy into less capital intensive and other environmentally friendly ideas, as Muskrat was perceived, the justification for the megaproject dissipated. Absent the main source of revenue (fuel savings) to pay the (understated) project cost estimate, Muskrat had no prospect of being developed. Therefore, Holyrood had to be demonized as an “aging, polluting and unreliable” Plant, an easy image for an uninformed public to buy into.

The deceit imposed on Holyrood began early. Soon after the 2007 Energy Plan was announced, Nalcor began to physically downgrade the Holyrood Thermal Plant. It did this by deferring maintenance, and treating other thermal assets, like Hardwoods, with the same incompetence and neglect.  The result, as some may remember, was the week-long event in 2014 known as #DARKNL.

The PUB employed the Liberty Consulting Group to assess the reason for the outages. This is what Liberty investigation turned up in 2014: failures in the “operation of key transmission equipment”, including a failure to replace transformers and maintain major circuit breakers. “Liberty found that Hydro’s shortage of generation capacity was exacerbated by a failure to complete planned outage work needed to ensure the availability of its full range of generating facilities as the winter season began.” 

Continued the Liberty Group, the situation “raises questions about Hydro’s operation” that it “did not complete recommended maintenance activities on the equipment that failed…”

The PUB later conducted a “prudence” review of their antics, and refused them the right to levy some of the deferred maintenance cost onto ratepayers.

Of course, the importance of the Holyrood Generating Station goes beyond its symbolism for a public made out to be fools. More than ever, it has a fundamental place in NL’s energy paradigm.

Faced with persistent uncertainty that the LIL will fully function
any time soon, it is worth reminding of the loss of the transmission line for a period of seven weeks
last winter and of the warnings of the Haldar Report that an extended blackout could
occur on average once every six years. Then there is the knowledge that the LIL was not
built to minimum Canadian utility standards. Still, Nalcor wanted to shut Holyrood down. 

What is left to understand, except for the that Hydro was administered by fools who were appointed and anointed by elected politicians? 

Unless, of course, you want to add the mere fact that “back-up” power is still a matter of debate in spite of those circumstances. You do have to wonder how this place can be so benignly indifferent to catastrophic risk. 

The Hatch Report brings us full circle. The PUB kept a watchful eye on Hydro since #DarkNL; Liberty audited every improvement that the PUB ordered.  Likely as a direct result, “Hatch concluded that the Holyrood TGS is generally in good
operating condition….that the Holyrood TGS presents a
technically viable option in full generation mode or as a standby generating
resource under various recall scenarios in the near term and with the
significant investments estimated.” (pp.2 and 4)

The “significant” investments
to which Hatch refers includes capital and operating costs to run the Holyrood
Plant on a net annualized basis
of roughly $65M per year, the cost dependent on how quickly residents of the Avalon Peninsula
want their light and heat to return after the LIL fails: 4 vs 24-30 hours.
(P.11) 

Hatch’s acceptance of a 4 hour duration
for a blackout, let alone 24-30 hours, confirms that
NL Hydro still in the grip of those “offshore oil “engineers, the same ones advising Hatch. They
ought to have been replaced with “real” utility professionals of the kind that
CEO Ed Martin sent packing. The Liberty Consulting Group would not have trucked
with such nonsense.

NL Hydro, like its embodiment Nalcor,
has been paying ‘footsie’ with the public and with the PUB on the issue of
“backup” power for Muskrat Falls for a long time. The Crown
Corporation has delayed reports, influenced the conclusions of consultants, and
helped write their scripts, in pursuit of either toning them down or making
sure that they conform to the requirements of their political agenda. 

Turnover in the executive ranks, and at
the political level, brings no change to either the agenda or to the values
that guide this Crown Corporation.

The Government has even given impunity
to Vice-President Gilbert Bennett who has presided over the operations of Hydro
as well as the conception and execution of the Muskrat Falls project. 

That CEO
Jennifer Wiiliams puts up with this arrangement is a worrisome commentary on
her leadership, especially when the public – and Hydro personnel – need
evidence that Hydro has returned to a singular electricity security and supply
mandate. 

Of course, the Premier and the Minister
of Energy are ultimately responsible. 

Deference aside, the viability of
Holyrood as a valuable and viable component in our energy supply and security
strategy has been re-established whether GNL wants to recognize the fact.

If the PUB has any fangs, it will use
them and hold Hydro accountable; otherwise, the PUB, too, becomes a part of the
public policy failure that has set this province back decades.

There is one other inescapable fact that underlies the Hatch Report. 

It is that that we didn’t need the Muskrat Falls project in the first place.

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

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