Tom Adams’ blog post is attracting much attention in Newfoundland and Labrador on Monday.
No surprise in that, given that Adams’ did some calculations of water flows and came to the conclusion that for at least part of the year, Muskrat Falls wouldn’t be able to meet its commitments to ship electricity to Nova Scotia.
But Adams hit such a nerve that Nalcor boss Ed Martin posted a comment on his own corporate blog that purports to correct Adams’ inaccurate comments.
Martin doesn’t really provide anything concrete. He just points to the mass of stuff filed with the public utilities board. Some of it comes from the best minds available, donchyaknow. Lots of well worn lines but nothing that specifically refutes anything Adams said.
And then Martin points to the water management agreement imposed by the public utilities board on Nalcor and Churchill Falls (Labrador) Corporation in 2009:
I’m not sure if you are aware of legislation in our province that requires a water management agreement to be in place between Nalcor and Churchill Falls (Labrador) Corporation (Churchill Falls). The legislation requires the two power producers to use available storage, primarily in the Churchill Falls reservoir, and their respective generating facilities to optimize the production of power while maintaining the contractual obligations of Churchill Falls to its customers.
The first sentence is a bit condescending but look at the last bit: “optimize the production” while maintaining the contractual obligations of Churchill Falls to its customers.”
Priority for Churchill Falls
Not exactly.
Clauses 3.1 and 3.2 of the water management agreement give Churchill Falls customers more than an equal status with Muskrat Falls.
While we can’t be sure Martin is aware of the actual words in the water management agreement and their implications, here they are for greater certainty:
3.1 No Adverse Effect
The parties acknowledge that pursuant to Section 5.7 of the Act, nothing in this Agreement shall adversely affect a provision of a contract for the supply of Power and Energy entered into by a Supplier and a third party prior to this Agreement, or a renewal of that contract (collectively "Prior Power Contracts"), and that all provisions of this Agreement and ancillary documents and agreements shall be interpreted accordingly.
3.2 Acknowledgement of Prior Power Contracts
The Suppliers acknowledge that the following are the sole contracts for the supply of Power and Energy entered into by a Supplier and a third party prior to this Agreement:
(a) the power contract entered into between Hydro-Quebec and CF(L)Co dated May 12, 1969 as well as Schedule III of such power contract which relates to its
renewal (the "HQ Power Contract" );(b) the Churchill Falls Guaranteed Winter Availability Contract between Hydro-Quebec and CF(L)Co dated November 1, 1998, as amended on March 29, 2000;
(c) the sublease entered into between Twin Falls Power Corporation Limited and CF(L)Co dated November 15, 1961, as amended on April 15, 1963, November 30,
1967 and July 1, 1974 and renewed pursuant to an agreement dated June 9, 1989,and the operating lease between the same parties dated November 30, 1967, as
amended on July 1, 1974 and November 10, 1981; and,(d) the power contract entered into between Newfoundland and Labrador Hydro-Electric Corporation and CF(L)Co dated March 9, 1998, as amended on April 1, 2009.
Note the reference to section 5.7 of the Electrical Power Control Act, 1994. That was part of a package of amendments to the EPCA then-natural resources minister Kathy Dunderdale rammed through the House of Assembly on the second last and last day of the spring 2007 session.
Provision of an agreement void
5.7 A provision of an agreement referred to in section 5.4 or 5.5 shall not adversely affect a provision of a contract for the supply of power entered into by a person bound by the agreement and a third party that was entered into before the agreement under section 5.4 or 5.5 was entered into or established, or a renewal of that contract.
During the very brief discussion in the House – it wasn’t a debate by any means - Dunderdale mentioned this clause specifically:
The amendment will ensure the delivery commitments under existing contracts are honoured, including the 1969 power contract for the Upper Churchill. This protection is explicitly written into the amendment.
When you look at the details, it’s pretty clear that the water management agreement gives priority to any demands related to Churchill Falls. As long as there’s enough water and there is no conflict, everything on the river will be fine.
But what happens when the water flows needed at Muskrat Falls don’t match with the needs of Churchill Falls? Well, Muskrat loses every time.
This is something that the current administration voted for in 2007. It’s included in the 2009 water management agreement.
No dispute on Nova Scotia?
With that firmly in your brain, go back and read Ed Martin’s blog post again.
Notice what’s missing.
At no point does Martin mention the problem of delivering electricity to Nova Scotia in the peak winter demand months of January to March. Churchill Falls will be cranking water down stream to run Muskrat Falls so water management is not an issue.
The problem Tom Adams identified is that Muskrat Falls likely won’t crank out enough electricity to feed the entire island in place of Holyrood and ship electricity to Nova Scotia at the same time.
Surely if Nalcor wanted to specifically refute Adams, they’d have mentioned that big issue specifically.
- srbp -