01 October 2012

Labrador Mining and Power Rates #nlpoli

In her scrum with reporters last week, Premier Kathy Dunderdale answered questions about possible rates offered to new mining companies in Labrador if the Muskrat Falls project goes ahead.

She mentioned the low electricity rate IOCC and Wabush mines receive from Churchill Falls as an example of how industrial customers get better deals than consumers.

Yeah, well, no.

IOCC and Wabush Mines are part owners of a company called Twin Falls Power Company.  They each own one third.  The other third used to be long to Brinco.  Now it belongs to Nalcor.

TwinCo had a power plant near Churchill Falls.  They built the thing to run power to western Labrador. In order to make the Churchill Falls plant work at optimum capacity, TwinCo had to shut down.  The company closed down the TwinCo plant in exchange for a guaranteed supply of electricity from Churchill Falls at a rate comparable to the cost of operating their own plant.

It’s a great deal for Wabush Mines and IOCC but then again, they built their own plant to supply power at that sort of cost anyway. 

Their situation is very different from a company like Alderon – for example – that is apparently counting on getting electricity for its mining operation in Labrador at a rate of four cents a kilowatt hour.  Alderon, you may recall, is suing a couple of people, over comments they allegedly made about the miner and former premier Danny Williams, one of the company’s directors.

No small irony that Williams’ business interests are running into some public resistance to the idea of giving mining companies favourable electricity rates.  He adamantly opposed the idea when the two companies involved in TwinCo talked about renegotiating the deal earlier than its planned expiry date in 2014.

Here’s an excerpt from a CBC story in October 2006:

"We do acknowledge that this is a huge company which makes a big contribution," Williams told CBC News.

"By the same token, they also have to understand that we have to get a fair return for the people of this province."

Under a power agreement struck in the 1960s, IOC pays 0.5 cents per kilowatt/hour for its power, while other industrial users pay 6.5 cents for the same energy — or 13 times as much.