23 August 2012

Two views of Muskrat Falls #nlpoli

In Nova Scotia, energy minister Charlie Parker touted the benefits of the Muskrat falls deal for his province in a letter to the Chronicle Herald, published on Wednesday.

Parker flipped the bird to opposition politician Andrew Younger, taking issue with Younger’s claim that the deal would lead to increase electricity prices for Nova Scotians:

The cost of this electricity will be virtually the same in Year 35 as it is in Year 1 of the agreement. This is the principal benefit of the project and it’s why this government has worked so hard to ensure it goes ahead.

He’s absolutely right.

The cost of Muskrat Falls electricity will be same 35 years after the electricity starts flowing.  If you allow for inflation, the electricity will actually cost less in Year 35 than it did in Year One.

Emera won’t actually pay anything to Nalcor for the block of electricity it is guaranteed to receive for 35 years under the deal with Nalcor.  In that sense the price would be zero cents.  Nothing.  Nada.  Zip.

Emera gets that block of power in exchange for covering the costs of the link from Newfoundland to Cape Breton.  Average that out over 35 years and the Nova Scotia block of electricity will cost something like  3.5 or 4.0 cents per kilowatt hour.  That’s using the 2010 estimated cost for the power line.

Meanwhile, in Newfoundland and Labrador things could not be any more different.

Nalcor provided information to the public utilities board in early 2012 that explained what the company planned to sell Muskrat Falls electricity for in Newfoundland and Labrador.  Remember this is the cost from one part of Nalcor to another.  It won’t be the final price to Newfoundland Power and, therefore, the final price for consumers would be higher.

Nalcor will sell Muskrat Falls power to Hydro at $76 /MWh in $2010, escalating at 2% annually. In Year 1 this escalating selling price will be $87 /MWh.

Quick translation:  the cost of electricity in Year One will be 8.7 cents per kilowatt hour.  Nalcor expects that price to increase by two percent every year.

So right off the bat Newfoundlanders and Labradorians will pay twice the price for their own electricity than Nova Scotians will.

And while Nova Scotia costs will actually go down,  the people who own the river and the dam will pay more for electricity every single year. 

Pretty sweet deal, eh?

Well, pretty sweet for Nova Scotians, at least.

Newfoundlanders and Labradorians, the people who own the plant?

Not so much.