23 July 2013

UARB: “substantial uncertainty” about Nalcor supply of market-priced energy #nlpoli

You can read the full decision by the UARB (pdf) but here are some points to note.

Right off the bat, you will see in the full report that Nova Scotia consumers had the benefit of reviews by several consultants all of which are included in the UARB report.  This stands in stark contrast to the rigged reviews conducted in Newfoundland and Labrador before the final approval by the provincial government. 

Right off that the bat, that means that the public interest was far better served in Nova Scotia than it was at any point during the past decade in dealing with the Lower Churchill.

Beyond that, here’s what the Board found:

[451] Under s. 5(1)(a) of the Maritime Link Cost Recovery Process Regulations, the Board must approve the ML Project if the “project represents the lowest long-term
cost alternative for electricity for ratepayers in the Province”.

[452] Taking into account all of the evidence, the Board finds, on the balance of probabilities, that the ML Project (with the Market-priced Energy factored in) represents
the lowest long-term cost alternative for electricity for ratepayers in Nova Scotia. In the absence of Market-priced Energy, the ML Project is not the lowest long-term cost alternative.

That’s plain enough but already some people are missing the key part of the decision:  as it stands right now, Muskrat Falls and the Maritime link are not the lowest cost option for Nova Scotia consumers. 

That’s why the UARB attached a huge condition to its approval.  The condition is that Emera has to secure from Nalcor additional electricity at market prices.  What the UARB approved is what Emera presented to the UARB.  The Emera presentation included additional cheap power that Emera doesn’t actually have. 

As the UARB noted there are reasons to be concerned about Emera’s assumption that Nalcor will supply the energy Emera included in its calculations.  There is the possibility of acquiring Churchill Falls power after 2041 but until then, the UARB noted at paragraph 456, the board thinks there is “substantial uncertainty” about Emera’s ability to get the electricity from Nalcor. That uncertainty comes from Nalcor’s own claims about domestic demand for Muskrat Falls power as well as limited alternative sources. 

The UARB also thought it unlikely that Nalcor would give up its existing contract with Hydro-Quebec to wheel power from Churchill Falls into the United States.  That’s a curious idea given that the provincial government decided to close markets on the island last year to secure the monopoly Nalcor will use to pay for Muskrat Falls.  At the same time, that market closure effectively puts Newfoundland and Labrador in violation of the principles (FERC 888) that enable it to sell power into the United States in the first place.

It’s also curious since it’s been established for some time that Muskrat Falls will have trouble delivering the Nova Scotia block, as the original description of the project suggested.  On top of that, a 2012  SRBP analysis in Newfoundland and Labrador identified the recall block that is currently sent to the United States as one source of energy to meet Nalcor’s Nova Scotia commitments.

Here are a couple of other interesting points from the decision:

The Maritime Link will be at a price disadvantage for exports in part because the anticipated transmission losses (17%) are triple those of a land line through Quebec (5%). [Para 194].

Wind, you say?  “While NL only has 50 MW of wind on its system to date, Nancy Tower, Chief Executive Officer of Emera Newfoundland and Labrador, indicated there is interest in NL to add 5,000 MW of wind in the future.” [Para 197]

That would comes as a surprise to anyone in Newfoundland and Labrador, where Nalcor dismissed wind power during the Muskrat Falls hearings as unreliable.