01 June 2012

Dunderdale rejects Locke’s advice on Muskrat #nlpoli

Sometimes you agree with people.  Sometimes you don’t.

All it means is that you agree sometimes and disagree at others.

Premier Kathy Dunderdale didn’t seem to understand that point when she spoke to the St. John’s Board of Trade back in January:

Memorial University economist Dr. Wade Locke, has concluded Muskrat Falls is the least-cost option by a factor of 2.2 billion dollars.

It is interesting to me that the most vocal and ever predictable critics of the Muskrat Falls development were quick in their attempts to disparage the work of Dr. Locke – something they had not done previously when Dr. Locke has presented on, for example, the province’s financial position.

The Premier liked what Wade had to say because it matched what she wanted.  Well, these days, Kathy is in the same spot as the unnamed “most vocal and predictable critics” she found interesting six months ago.

New Democratic Party leader Lorraine Michael had enough time at the end of Question Period on Thursday to fire of this little gem at the Premier:

Will she agree with her own expert, Dr. Wade Locke, that $8 billion would be too much to pay for Muskrat Falls?

“No,  Mr. Speaker,” came the reply.

Lorraine was referring to comments Wade Locke made the comments in a presentation to the Irish Loop Chamber of Commerce last month.  There are stories on the speech in both the Business Post (Volume 7, No. 4).

According to the Business Post, Locke said that Nalcor’s current cost estimate of $6.2 billion will change when the corporation arrives at its next major decision point.

“The question becomes (by) how much,” Locke said.
“That will be public and that will be all part of the discussion. These things are quite simple in one sense: We can say, ‘Do we need this power? And if we need it,
what does it cost?’”

Increase the cost by 25%, to around $8.0 billion, and Locke believes “we’ve got some rethinking to do, I think.”  Locke said that  one alternative might be to consider ways of changing demand.

According to Locke, if there is a higher demand for
electricity on the island in the future and we don’t pursue
Muskrat Falls, Nalcor will have to implement policies
to influence how and when people use electricity. By charging different rates for power at different times of the day, the company could influence people’s power consumption habits and thereby lower the amount of energy needed to meet peak demand.

Now aside from the chuckles over the fact that Kathy doesn’t agree with Wade, there are a couple of other things about Locke’s latest shift in position.

First of all, Locke didn’t do an analysis back when the Premier loved him unless it was the one Nalcor has been using all along.  In Locke’s presentation at the Harris Centre, for example, it was pretty clear he just regurgitated Nalcor’s own statements. 

What’s more, he simply didn’t do any original analysis of his own on things like natural gas for the Harris Centre session.  Locke still rejects natural gas as an alternative, according to the Business Post.  take all that for what it’s worth.

Second of all, the $6.2 billion figure is already grossly out of whack.  A review by Manitoba Hydro International pegged the cost of the dam, the line to the island and all the thermal generation Nalcor will need until 2067 at around $6.6 billion.  Interest cost take the total up to $7.7 billion and that’s without the line to Nova Scotia.

$7.7 billion.

That’s pretty close to $8.0 billion, Locke’s magic number.  Interesting, no?

Third of all, Locke’s new position on demand management is just a cause for anyone who was at the Harris Centre session to spit coffee across the room.  Locke spent an inordinate amount of time misrepresenting economist Jim Feehan’s suggestion on changing demand and then setting fire to the Feehan straw man he’d built.  Not very convincing.

Locke’s conversion to demand management looks a wee bit suspicious.  What you still seem to have is a guy who is situating his estimate rather than presenting the results of a detailed analysis of all the options to meet the electricity needs for the province.

That wouldn’t matter to the Premier, of course. She loved him when he agreed with her and now she rejects his idea because it doesn’t match hers.  That’s how you make bad decisions.

-srbp-

1 comment:

rod said...

The justification will be this. If the gap narrows from 2.2 billion down to zero, it will still be viable. Reason, doing the project will result in the same costs as not doing the project. No brainer. I can hear Jerome now.