HYDRO CEO DEALING IN HALF-TRUTHS, LIKE NALCOR

Announcing another $256 million rise in the cost of the Muskrat Falls project – to bring the total cost to $13.37 billion from $13.11 billion – Hydro CEO Jennifer Williams told the media “We know that any change in the cost of the project is challenging for customers. They count on us, and we take that responsibility seriously.”

Williams must be kidding. The run on heat pumps in this province that followed #DARKNL remains an indicator of how much the public counts on NL Hydro. On what basis has Hydro’s public interest qualifications, or the public’s faith in them, been restored?

Reflecting the rhetorical nonsense of her predecessors, the CEO offers a quite “varnished” recent Update – rather than a detailed and forthright accounting – after telling ratepayers they are responsible for another quarter billion dollars of cost, with no end in sight.  Neither Andrew Parsons nor the Premier were anywhere to be seen.

During the short time the Muskrat Falls Oversight Committee wasn’t completely “fake”, reports could be read with the confidence that at least two credible people, Jason Muise and Dr. James Feehan, had parsed the contents for propaganda. The Committee has not reported since September 2020 and, presumably, has been scrapped.

That is the Premier’s fault, but it is reason that Ms. Williams should up her game. The public is at the mercy of the “old” Nalcor/Hydro public relations machine, again.

Hydro officials told a media technical briefing “that the updated cost will not affect electricity rates this year…that any potential rate increases could occur next summer, at the earliest.” Delayed payment of more public debt is supposed to be comforting?

Downplayed, too, are the actual costs of the delayed power supply. Hydro’s Update gives reference to $60 million per month financing costs ($720 million annually) associated with both Muskrat Falls and LIL assets, but the figure does not reflect all the costs which must include operations and management (O&M), the cost of borrowing an additional $2 billion for rate mitigation and the incremental cost of keeping Holyrood fuelled. Hydro is only telling a part of the story.

“NL Hydro is covering the increased costs internally; no additional equity is required from the province”, states Hydro officials. This gives the impression that monies earned by the Crown Corporation are not due to the employment of public capital but, for all intents and purposes, are a gift from NL Hydro. The “fiefdom”, a “runaway train”, characterizations used to describe Nalcor by Deputy Minister of Justice Todd Stanley, are as relevant as ever.

Williams recently stated that we can expect little change in the staffing of the Corporation. That decsion, too, makes it possible to give greater transparency to total Muskrat Falls costs than at any recent time.

Instead, the CEO treats us to selective statistics revealing that “570,000 barrels of oil have been displaced by the end of 2021” Isn’t that nice! Relative to what consumption figure? For what period? How much has been burned so far in 2022? How many barrels of oil have been burned due to GE’s incompetence? What portion is oil consumption for off-season operations, when Holyrood and Hardwoods are normally shut down? Aren’t those the numbers that provide real context to whether Ms. Williams is making progress?

And how is it that Hydro can tell us the number of barrels of oil displaced but can’t inform how much revenue Muskrat generated in the same period?

NL Hydro CEO Jennifer Willimas

This is really the rub, isn’t it?

On the basis that Hydro has prescribed, how would you ever know the real cost of GE’s or any other delay? As CEO, Ms. Williams has dived into a cesspool created by others. As to a solution, she exhibits willful ignorance, notwithstanding the Public Inquiry, or that, in her partial disclosure, she is adding to the stench.

Rightfully, the public should worry that Ms. Williams lacks the experience to tackle issues that plague the Crown Corporation at a high level. Her Minister having failed to do so, she could also warn the Premier that his appointment of Brendan Paddock to the Churchill River Energy Analysis Team may cause the public to perceive a conflict of interest, considering Mr. Paddick’s business interests are in alignment with a part of Hydro’s mandate. This is where “steady-hand” CEOs are supposed to separate themselves from the chaff of hangers-on and from partisanship. Telling truth to power isn’t easy; it might even shorten tenures; but it does earn CEO’s the public confidence and respect they really want.

A friend of the Premier, Paddick also happens to be a member of the World Energy GH2 consortium which the Government only recently disclosed has filed an environmental assessment application with the Department of Environment in relation to a hydrogen project in the Port au Port Peninsula area, using wind power. An All Newfoundland news story indicated last week that a member of the group suggested that their power could be used to backstop the NL Hydro deal with Emera. Hydro has never said that the Emera deal needs support. If true, the public has a right to know, including the estimated cost of any such contract. Should not a Public Tender follow?

Perhaps World Energy GH2 can tell us more of what Ms. Williams refuses to provide. Are there other potential conflicts involving Mr. Paddick and World Energy about which we have not been informed?

Not just Ms. Williams, or her boss, even the Environment Minister is a tight-lipped fellow; as to the reason, more will be said.

Exhibit taken from World Energy GH2 Environmental Assessment Registration

But back to Muskrat….

The Hydro CEO suggests that “final commissioning of the Muskrat Falls project (could be achieved) by the end of this year, provided…tests are successful.” The statement contrasts with the more consistent analysis of the Liberty Consulting Group, an engineering consultancy working for the PUB. Liberty reported in May of this year, stating:

The LIL has been failing FAT (Factory Acceptance Testing) rounds for two years – – a remarkably discouraging performance record. Experience since the start of 2022 shows no tangible measures of progress. It remains impossible to project a reasonable date for attainment of commercial operations at full design capability. There remains no material degree of confidence that attaining that state will come within 12 months and it may well be longer away.”

Meanwhile, there is no report from either Jennifer Williams or Minister Andrew Parsons on a Plan “B” or of a “drop-dead” date for GE, which any private entity would have already established.

As to whether Nalcor/Hydro has given up its right to sue GE, and if it received any consideration in return, well…no doubt that is “commercially sensitive” information – as is World Energy’s plan for how NL Hydro can help make their project more viable.

Perhaps CEO Williams is only nominally in charge; her Update seems to have the hand of Gilbert Bennett all over it.

If that is not the case, she might try and take the public interest more seriously next time.

Premier Furey is not the only one watching.

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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