On Monday, the Nova Scotia regulator approved the Maritime Link but only condition that Emera secure enough extra electricity at market rates to make the project the lowest cost option. Meanwhile in Quebec, Hydro-Quebec announced it was seeking a court opinion on its right to access virtually all the output from Churchill Falls.
The interplay of the two things could work together to deliver a horrible result for the people of Newfoundland and Labrador.
First of all, the Nova Scotia Utility and Regulatory Board expressed clear doubts that Nalcor can deliver extra electricity beyond the Nova Scotia Block. This is not a new idea. The UARB approval has conditions that could trigger some aspects of the sanction agreement between Emera and Nalcor. That’s something for another post.
For this part, let’s look at the condition of the need for additional power at low cost. The UARB decision includes a chart that shows the market prices somewhere between five cents per kilowatt hour and nine cents per kilowatt hour. If the UARB and others are right, Nalcor can’t meet that because they just don;t have available surpluses.
So where would Emera go?
Look no further than Hydro-Quebec, the same company that filed for a decision on how much electricity it actually can get from Churchill Falls under the 1969 power contract. In last year’s extensive discussion on the water management agreement, it seemed that Nalcor was assuming they could somehow get more electricity from Churchill Falls. They’d could get the extras it from a creative interpretation of the contract, as Hydro-Quebec disputes.
They could also get some extra juice – theoretically - from the water that CFLCo will save at Churchill Falls by using electricity from Muskrat Falls to offset generation at Churchill Falls. This seems to be part of the water management agreement Nalcor imposed on Churchill Falls (Labrador) Corporation and hence Hydro-Quebec via the Public Utilities Board.
As an aside, some of you will want to go read a post from last November. it’s been consistently the most popular post here ever since. The post lays out - succinctly – the concerns raised by the 2041 Group and the comments by Nalcor’s lead wrangler on the Muskrat Falls project – Gil Bennett – who never addressed the 2041 concerns. This water management agreement was evidently another huge risk for this project that Nalcor and the provincial Conservatives never disclosed to the public.
Emera has already been looking at alternative sources of electricity. Company representatives told the UARB that it had held discussions with Hydro-Quebec as recently as Q1, 2013. What’s more, Emera has been looking at purchasing electricity from Churchill Falls.
Emera NL boss Rick Janega told the UARB that the market-priced energy “can come from Upper Churchill. It could be Newfoundland and Labrador Hydro selling it. It could be Hydro Quebec selling it from Churchill Falls. We will be interconnected to over 6,000 megawatts of hydro capacity and we're going to sit and analyze none [sic: some?] of that being available to Nova Scotia with a new transmission facility.” [Para 198]
Janega disputed any assertion that Emera didn't have access to Muskrat Falls’ surplus. He also repeated that with the Maritime Link and the Labrador-Island Link, “we have a transmission facility that is going to connect us to energy that is being sold to the market every single day from a 5,400 megawatt plus generating facility [Churchill Falls].”
The idea of Hydro-Quebec selling Churchill Falls power and wheeling it through Newfoundland and Labrador to Nova Scotia would be fine with the Government of Newfoundland and Labrador. In a comment late Monday, energy minister Tom Marshall said that the UARB decision merely told Emera it had to find cheap electricity but didn’t oblige Nalcor to deliver it. Nalcor boss Ed Martin told reporters on Monday afternoon that “Emera is going to have to determine which is the best option for them.” Emera would profit either way, of course, since it gains a piece of any transmission charges within Newfoundland and Labrador under the Muskrat Falls deal.
And local ratepayers?
Well, Nalcor is already committed to Muskrat Falls no matter what. So great is the threat from cheap power that Nalcor had to close off any chance that Newfoundland Power could cut a deal with Hydro-Quebec and bring cheap electricity to the same people Nalcor wanted to stick with the full bill for Muskrat Falls.
In December 2012, the House of Assembly passed Bill 61. One of its provisions closed the island market to competition. The principles of the Muskrat Falls project have always been fundamentally wrong. Events on Monday confirmed just how terribly wrong they are.