Premier Danny Williams is promising a Lower Churchill deal before the end of the year and one way he could finance the project is by offloading the cost onto American and Canadian taxpayers.
Some American politicians are trying to redefine state environmental subsidies that currently don’t include hydro megaprojects like the Lower Churchill. In Massachusetts, Republican gubernatorial candidate Charles Baker not only advocated for big hydro as part of the state’s energy future, he also favoured giving big hydro projects the “renewable” status that would make them eligible for state subsidies.
According to the Boston Globe, the subsidies in Massachusetts alone could be worth as much as six cents a kilowatt hour.
Incumbent Democratic governor Deval Patrick - who won re-election last week - opposed the idea:
“It does not make sense to give renewable energy incentives to a foreign-owned enterprise for something that needs no subsidy,’’ Patrick said in a statement to the [Boston] Globe. “It would amount to a windfall of hundreds of millions of dollars for Canadian ratepayers at the expense of Massachusetts customers.’’
That doesn’t mean the idea is dead in Massachusetts, though. Energy giant Hydro-Quebec is lobbying hard for the “renewable” status for its own projects. Earlier this year, the company won a battle in Vermont to make hydro eligible for subsidies. That’s all part of HQ’s push to take its share of the New England energy market from 8.5% to upwards of 12%.
Lowering the cost of Lower Churchill power by six cents a kilowatt hour could make Muskrat Falls financially viable, especially if NALCOR left the American marketing to a private sector partner and let that company keep the subsidies. NALCOR already sells power at the Quebec-New York border to Emera. Under a deal announced in 2009, the Newfoundland and Labrador company apparently gets about the same rate per kilowatt hour it got from a similar deal with Quebec that expired in 2009. Any other financial details, like profits from seasonal price fluctuations, seem to flow to the private sector. It’s hard to know for sure since details of the 2009 detail are confidential.
And while Danny Williams claimed last week he’d lay any development deal for the very expensive Muskrat Falls version of the project in front of the public, he hasn’t lived up to similar promises yet on other projects. Many of the key details of the 2007 Hebron deal remain shrouded in secrecy. Amendments to the province’s open records laws in 2008 shield the publicly owned NALCOR from disclosure of its financial dealings even though it receives public funds to run the company and its subsidiaries.
Foreign tax credits aren’t the only way NALCOR could subsidise the cost of building Muskrat Falls.
Under the most recent version of the Lower Churchill described recently by Premier Danny Williams, 40% of the power from Muskrat Falls would come to eastern Newfoundland. NALCOR’s environmental submissions on the project make it clear, however, that the island portion of the province doesn’t need the power now or in the foreseeable future. The company also plans to keep its diesel generators at Holyrood running even after it builds any new lines to the island from Labrador.
Shipping power to a part of the province that doesn’t need it would give the public utilities board the legal basis to offset any losses from sales to Nova Scotia or into Quebec by offloading them on local ratepayers. That’s because provincial laws require that the public utilities board to set rates that protect NALCOR’s financial position from its entire operations. But that rate-setting power only applies to domestic rates. PUB doesn’t regulate export prices. By using Lower Churchill power in the province – even when it isn’t needed - NALCOR could use local ratepayers to subsidise power exports.
Taxpayers could get hit another way on the deal as well. Any NALCOR debt for the project – likely to be at least $6.0 billion – will wind up on the balance sheet of the provincial government, one of the most indebted provincial governments in Canada on a per capita basis.
- srbp -