10 July 2011

Strangling energy innovation

The Telegram editorialists are finally putting it all together, at least when it comes to the provincial government’s energy company, the Muskrat Falls project and taxpayers:

It looks a lot like the province would prefer all its eggs in one basket. Or, more to the point, the province not only wants to run an energy warehouse, but actually wants to own it all as well. In its own way, that handcuffs consumers in this province. Because one company will decide the most effective way to produce and supply our power. We’ll just pay for it.

Monopoly control is exactly the premise of the Conservative’s energy plan released just before the last provincial election.  Very few people read it and there’s never been much debate about it. But make no mistake:  the heart of the plan is about strangling any alternative to whatever Nalcor wants to do.

It’s about absolute control.

And it’s about talking about wind energy while deliberately preventing any wind energy development outside of some very small token projects.

The reason is simple:  wind, small hydro and conservation would basically make the Muskrat Falls megadebt project utterly irrelevant.

The Telegram editorial notes that the Nova Scotia energy regulator just set a rate for private wind generating projects selling power into the provincial grid.  The rate is 13.9 cents per kilowatt hour.  As the Telegram reminds everyone, that’s below the 14.3 cents Muskrat Falls is forecast to cost;  and that’s if  - by some extraordinary miracle - the thing doesn’t go over budget.

Who pays the extra cost?

Why the people of Newfoundland and Labrador, of course. 

Full freight, plus profit.  Emera gets a share of the transmission cash inside the province as well.

Meanwhile, Nova Scotians will get a giant chunk of Muskrat Falls power for free;  if you want to take the $1.2 billion Emera will spend on a transmission line as payment for the power (it really isn’t), then the price they would pay comes out to be something like 3.5 cents per kilowatt hour.  If Emera wants more power than the stuff they get for free, they will pay about 9.5 cents per kilowatt hour for the extras.

Pretty sweet.

Well, except if you live in Newfoundland and Labrador.

- srbp -


Mark said...

When did the cost fall to $0.0143?

At one point Dunderdale herself suggested it was about $0.0165

Edward Hollett said...

Two things:

1. Your cost is two low. You've got it at less than two pennies when it should read $0.143.

2. But you are right. Last November, Dunderdale put the cost between 14.3 cents per KwH and 16.5 cents.

Either number is merely a starting point. The final cost will be determined by how expensive the project is and how they have structured the financing. Now you really have to watch out for that. They can hide some of the cost over-runs depending on how they finance it. taxpayers will bear the full cost through rates and taxes but it may not all show up on their power bill.

think of it as the Mike Harris hidden deficit approach to public finance.

Mark said...

decimals. pfft.