29 July 2013

More Gil Bennett nuttiness #nlpoli

Gill Bennett is a smart guy.  That’s why he is in charge of a project as large as Muskrat Falls.

So when Gil Bennett says something that obviously is not true, it looks a lot more suspicious than when he dodges the important question and answers the question no one asked.

What Gil Bennett Claimed

On Friday, Bennett talked to reporters about the Hydro-Quebec lawsuit.  NTV has this quote:
“We don’t see a relationship between this action and water management, and when you talk about integration [of Churchill Falls and Muskrat Falls]  we look at that as water management, the co-ordination of production between the two facilities,” Bennett said. “This issue that they’re dealing with is not related to water management.”
The Saturday Telegram had another one in its story titled “Muskrat Falls project continues under fire”:
“The co-ordination of the production between the facilities on the river system is still required, under any interpretation of the power contract,” he said, when asked about the management of water.
Bennett is pretty clear.  The Hydro-Quebec suit has nothing to do with the water management agreement.


Let’s see if that is true.

Let’s look at the statement of claim, as provided in the translation enabled by the always insightful labradore.

What the 1969 Contract provides, according to HQ

You don’t have to look any further than paragraph three to see that Bennett’s comment is simply not true.  Hydro-Quebec states that the 1969 contract provides it with the exclusive right to purchase almost all the electricity and the “operational flexibility to enable it to plan and coordinate the operation of the [Churchill Falls] plant with that of its entire fleet.”

Now that’s a translation via google, but it substantially captures the original French:  “flexibilité opérationnelle destinée à lui permettre de planifier et de coordonner l'exploitation de la Centrale avec celle de l'ensemble de son parc de production.”  Your humble e-scribbler and his university French would render it more like “the operational flexibility that would permit the company to plan and co-ordinate the production at the Centrale [i.e. Churchill Falls] with that of the rest of its production capacity.

In other words, a core feature of the 1969 contract is the legal right to get the power from Churchill Falls when they want it. Logically, that means they also have the right to operate the reservoir and plant in such a way that Hydro Quebec doesn’t get power when they don’t want it. 

This is such an important aspect of the statement of claim, Hydro-Quebec has even given it a section all to itself, on pages 11 and 12.  Paragraph 69 states that  - in SRBP translation - “operational flexibility includes allowing  Hydro-Quebec to reduce its supply in the summer and autumn periods [in order to] to accumulate water in the Churchill Falls reservoir.  This seasonal flexibility allows [Hydro-Quebec]  to benefit from sufficient amounts of energy from the [Churchill Falls] plant during the winter, during which energy demand is highest in Quebec.”

The only restriction on reducing the output at Churchill Falls in the off season would be the parts of the 1969 that ensure the plant produced enough electricity to meet the Recall requirement of 300 megawatts and the TwinCo block of something like 225 MW.

Why that is bad for Gil’s plan

You can see the consequence of this Hydro-Quebec right in a document Nalcor tabled at the public utilities board hearings and that we’ve mentioned here several times.  You can start reading at page 49 of the first link, in the discussion about pre-filed evidence.
Water management through coordination of flows and storage mitigates the effects of irregular delivery requirements and production at Churchill Falls. For example, in any month, CF(L)Co deliveries could be requested in a manner that calls for Continuous Energy to be produced at an increased rate for part of the month with the remainder of the Continuous Energy to be produced at a reduced rate later in the month. 
Irregular production at Churchill Falls will have different effects on the lower Churchill facilities depending upon the uncontrolled natural inflows at various times of the year. In many months, the lower Churchill facilities would have insufficient water for production requirements during periods of reduced production at Churchill Falls. However, during the spring runoff, there would be excess water, resulting in spillage, during periods of increased production at Churchill Falls. These problems would be compounded if full CF(L)Co delivery of Continuous Energy was scheduled early in one month followed by full production late in the following month.
The rest of the example in the document that Gil Bennett’s team produced and sent to the public utilities board the variation in production at Churchill Falls changes the water flows down river.  The Nalcor evidence used two specific examples.  The March one is when the water levels are probably the lowest.  May is when the spring run-off pushes water availability to the maximum.  In one of the examples, the Lower Churchill would be capable of producing only 17% of its rated capacity at a time when Churchill was meeting only the TwinCo and Recall demand.


The Water Management Agreement Problem

It’s that very problem  - Hydro-Quebec can schedule production and therefore water flows - that Nalcor said made a water management agreement essential. 

Nalcor also said the WMA  - imposed under the amended Electrical Power Control Act, 1994 - would fix the problem.

But, the funny thing is that the WMA also had two clauses that said nothing in the agreement would interfere with the provisions of all the contracts between Churchill Falls (Labrador) Corporation and Hydro-Quebec.
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.
And the Conservatives made a specific change to the EPCA back when Kathy Dunderdale was natural resources minister that exempted all those earlier contracts from any water management agreement:
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.
Kathy actually introduced the amendment bill in the House.  It’ interesting to read the statement Kathy made.  It consists of a series of sentences that amount to nothing more than here is this bill, it does this, this and this, and that’s it.

Basically, if the Quebec courts agree with Hydro-Quebec about what the 1969 contract means in that respect, Hydro-Quebec effectively controls the water flows on the Churchill River.  No one should be confused about that since that’s basically in the 1969 contract.

Those fairly simple points also explain why what Gil Bennett said  - this is not related to water management – and the undeniable reality – it’s all about water management – are two completely different things.  Why Bennett is saying things are are obviously wrong is another question. 

What’s unmistakeable is that he’s just dead wrong.

This Hydro-Quebec law suit is all about water management and, by extension, the viability of Muskrat Falls.