04 January 2013

Tom Johnson is Redundant #nlpoli

Pity Tom Johnson.

The St. John’s lawyer landed a steady source of billable hours when the provincial Conservatives made him the consumer advocate at the public utilities board.

Tom has been doing a fine job of advocating for consumers, even if his version puts an interesting twist on what he is advocating for consumers to do.

Take last year, for example.  Johnson advocated during the Muskrat Falls hearings.  He advocated  for the Muskrat Falls project.  That means, in effect, that consumers will be forced to pay for the entire Muskrat Falls project in their electricity bills, plus profit for the companies involved. 

Well done, Tom.  Consumers will be thanking you in the future.

In the meantime, though, Tom is not resting on his laurels.  This time, Tom is hard at it advocating during an application by Newfoundland Power for its return on equity. 

“I am completely opposed to Newfoundland Power’s position on the return of equity they’re seeking and we’ll have to have the board decide on that matter,” Johnson said [to the Telegram].

He has publicly stated his objections to the proposed return — 10.4 per cent in 2013 and 10.5 per cent in 2014 — since Newfoundland Power’s initial filing with the regulator.

Too bad Tom is now redundant.

You see as part of the Muskrat Falls thing that Tom loves, the provincial government started making a whole bunch of changes to the way electricity prices are set in Newfoundland and Labrador.  They are still set by the public utilities board under the Electrical Power Control Act, 1994 but that is changing rapidly.

Bill 61 passed the House of Assembly just before Christmas and received Royal Assent the same day.  It may not be in force yet, but when it comes into effect the provincial cabinet will have the power to direct the public utilities board  - in effect - to set electricity rates the way cabinet directs.

Bill 61 amends the EPCA 1994 as follows.  The old section 5.1 becomes 5.1 (1) and right after it goes this:

(2) Notwithstanding a provision of this Act or the Public Utilities Act, for the purpose of the Muskrat Falls Project the Lieutenant-Governor in Council may direct the public utilities board to implement policies, procedures and directives respecting the exercise of powers and the performance of the duties of the public utilities board under this Act or the Public Utilities Act, …

Then it lists a selection of the policies, procedures, and directives the cabinet can set.  One of them is the rate of  return of a public utility.

The smart bunnies out there are already chuckling.  This section only relates to the Muskrat Falls project and the Newfoundland  Power application isn’t about that.

Look in Bill 61 about what “Muskrat Falls Project” means.  You’ll find a reference to a new section of the Energy Corporation Act, which, in turn, sends you off to the new section 2.1 of the Energy Corporation Act also in Bill 61.

As you might expect, the definition includes every aspect of the project anyone could think of.  It includes:

raising and securing equity or debt financing and any related derivative contracts necessary to construct the facilities and otherwise engage in the activities referred to in paragraphs (a) to (c), including without limitation the negotiation, conclusion and execution of agreements and security documentation with a lender providing that financing or refinancing to the projects.

The smart bunnies are still chuckling.

And then they hit subsection (2) and their grins vanish.

That section says that without even considering all that big definition contained in the first bit cabinet can declare “any activities, agreements and amendments in connection with or in respect of” the definition of Muskrat Falls Project in subsection (1) even where “that activity, agreement or amendment may not otherwise qualify under this section.”

One of the big considerations in raising any financing for Muskrat Falls will be the rate of return – the guaranteed profit – that Nalcor and its subsidiaries will earn from electricity rates. The rate of return the companies can make affects the end price for consumers.  Doesn’t matter if we are talking about Nalcor and its subsidiaries or one of the private companies, like Newfoundland Power; it’s all part of the same package.

You can see where this is going, right? 

It may not happen in this case.  We don’t know what the PUB may decide.  We don’t know for sure – at this moment -  if this Act is actually in force yet or if it will be in effect before this board deals with this application.

Doesn’t matter.  The point is that cabinet has the power to set rates.  The current rates are connected to Nalcor’s ability to raise cash now and in the future.   At some point, it is going to be hard for cabinet not to exercise its new powers to set electricity rates or aspects of existing rates because it could have an impact on Muskrat Falls.

If Bill 61 doesn’t give cabinet all the power it needs, then the promised changes to the Public Utilities Act itself almost certainly will. 

And Tom Johnson and all the other bits and pieces of the existing system used to set electricity prices are redundant.  If cabinet needs to raise the return rate to help Nalcor finance its $8.0 billion boondoggle, it will.  If they need to lower the rate for Newfoundland Power in order to hold down consumer prices, then it will.

Even if Tom Johnson decided to actually stand up for consumers – and thereby risk his appointment  - it wouldn’t matter because the same people that gave Tom his job also decided that they will force consumers to pay whatever it takes to make Muskrat Falls happen.


End of Story.

Bill 61 means that Tom Johnson, consumer advocate, is effectively out of job.

What Tom should be doing, instead of racking up more billable hours, is handing in his resignation. If Johnson wanted to give consumers some benefit, he’d let us save a few bucks from his pay.  We are going to need even penny we can scrape up to cover the costs of Muskrat Falls.