Tom Marshall used to be the finance minister.
He’s the guy who consistently, year after year, spent more than the people of the province could afford. Tom didn’t do it by himself: he had the support of all his colleagues in cabinet.
And since 2009, Tom and his colleagues have admitted that they mismanaged the provincial government accounts by overspending.
Along the way, Tom has claimed some things that aren’t true. Like saying that he and his colleagues lowered the provincial debt when they didn’t.
So now that he is natural resources minister, Tom Marshall is still telling people things that aren’t true. This time it is about the glories of the 2008 expropriation.
What Tom says.
Two different things.
Tom’s been at it for a couple of days now in the House of Assembly. NDP leader Lorraine Michael wants the provincial government to send in an auditor to put a value on the Abitibi assets.
Tom says no need. He already knows it was a wonderful thing. Note the detail and precision Tom uses in reply to one of Lorraine’s questions:
In calculating the value to the Province over the next twenty-five years, as I said, we have to look at things like discount rates, the cost of fuel, interest rates, market price for electricity and so on. Based on these factors I have been advised that they are projected to provide a total benefit to the Province, to Nalcor, and to the ratepayers in this Province of hundreds of millions of dollars over the next twenty-five years.
Yes, friends: someone added up lots of stuff and showed Tom a very big number. What precisely these unnamed people showed him or what big number it was, Tom won’t say.
It doesn’t really matter, though because Tom’s claims here are simply not true.
You see, the taxpayers of Newfoundland and Labrador do not benefit or gain anything at all from these hydro-electric assets. Nalcor does.
Taxpayers covered the entire cost of the expropriation. The provincial government turned the assets over to Nalcor for absolutely no cost whatsoever. They got 100 megawatts of generating capacity for free.
They sell that electricity to Newfoundland Power at established market rates. Those rates include charges to offset the cost of fuel for the thermal plant at Holyrood. There is no discount for the people who bought and paid for the 100 megawatts of generation for the lower cost of Nalcor’s new generating capacity. Taxpayers have not received a single fraction of a single penny in any discount, reduction, rebate or other cost reduction.
Not one teeny tiny break.
Having paid for the generating facilities, taxpayers pay again for the electricity that comes from them at exactly the same rate they would have if the government had not forced the expropriation bill through the House and lied about it repeatedly at the time and ever since.
That may be, some of you are saying, but Hydro just went looking for a rate decrease because it used Holyrood less. There’s the “displacement” Marshall was talking about.
For one thing, the main reason for the decrease is a drop in fuel costs. The secondary reason is more water, not more generating capacity.
Then you have to consider a physical problem that Nalcor doesn’t plan to fix for another few years. The transmission lines across the Isthmus of Avalon are pretty well maxed out. Hydro has a huge surplus of electricity in central Newfoundland, even without the Abitibi assets. All but one of the paper machines that used run in the province are now gone. The problem for Hydro is they just can’t get all that surplus to the big demand on the northeast Avalon.
So they have to run Holyrood.
But even then, Hydro only runs Holyrood for a few weeks a year, in total, and only at maximum capacity for a few hours usually. Last winter, they fried one of the generators entirely and managed to struggle through the rest of the winter without it.
Any other decreased use of the Holyrood’s thermal generators since 2008 has been caused by the same factors as reduced use before 2008. Winters are milder. As a result, the people on the Avalon peninsula are not sucking juice at the same rate they might in a bitterly bold winter that lasted months. Less use means less cost. Lower fuel prices mean less cost.
Then there’s the financing model Nalcor is using for Muskrat Falls. Basically, it involves taxpayers footing the entire bill for building the project and then paying full price for the electricity afterward. The full price includes all the Holyrood fuel prices even after they start generating power at Muskrat Falls. The only way Nalcor can make enough money to pay off the huge loans they are going to need to build one of the most expensive hydro projects ever is to take all the money they are getting now for Bunker C fuel and using it to pay off the loans over the course of 50 years.
But that cash won’t be enough.
They will almost certainly have to get all the rate increases built into their assumed fuel prices even if those prices don’t go up as Nalcor predicted plus a bunch more besides to cover cost over-runs.
So that eight percent price decrease Nalcor is pushing for July? It won’t last. It can’t last.
Muskrat Falls guarantees electricity prices in this province will go up. Period.
The profits Nalcor reaps from those hydro assets the provincial government handed over to the company for free will also go into paying off the enormous Muskrat Falls debt.
Simply put: taxpayers get no benefit from the 2008 expropriation at all.
They just get the bills.
And the same model Nalcor used in 2008 is the basis for Muskrat Falls.