07 November 2013

Firm and Unfirm #nlpoli

With the House of Assembly open again, the major topic of Question Period was Muskrat Falls and the second version of the deal to ship power to Nova Scotia.

Premier Kathy Dunderdale explained it on Monday in terms of firm and “non-firm”.  Firm power is what you know that the hydro plants will be able to produce reliably.  The unfirm power is the stuff that you can get when there is plenty of water.

What’s interesting is how much of this unfirm power the Premier says is around.  It is:

“half a terawatt to four or five terawatts a year. Based on fifty years of hydrogeology, the amount of snow or rain in this Province, we have been able to commit to Emera 1.2 extra terawatts of power on average; …, some years that might be 0.5 terawatt, another year that might be three.”

On the face of it, that is such a really interesting idea that it is worth digging into the notion a bit more.

Notice that the Premier did not specifically refer to sending more electricity from Muskrat Falls to Nova Scotia as part of this new deal.  Instead, she talks generally about the whole electricity generating system in the province.

That’s not surprising.

Nova Scotia will get electricity from Bay d’Espoir

Back in early 2012, energy analyst Tom Adams pointed out the problems with water flows on the Churchill River and how it would adversely affected the amount of electricity Nalcor could get from Muskrat Falls even with a water management agreement.

Nalcor launched a vicious personal attack on Adams and claimed he was wrong.  Then in August, Nalcor boss Ed Martin acknowledged that Adams was right when he said that Nalcor planned to meet its commitments to places like Nova Scotia out of the whole pool of electricity generated in the province. 

Regular readers will probably remember this issue from a post in August 2012 and another one in October 2012.  Those posts lay out the whole issue neatly and succinctly.  They include a discussion of the transmission lines and the problems Nalcor would have in running electricity from Muskrat Falls, converting it from direct current to alternating current and back again before going on to Nova Scotia.

But nothing makes the origin of Nova Scotia’s electricity plainer than Emera’s own official map of the Maritime Link.  It shows the starting point in Newfoundland at Granite Canal.  That’s part of the Bay d’Espoir generating complex.

Nova Scotia: the primary beneficiary of our resources

People – like natural resources minister Derrick Dalley in the House on Wednesday - who talk about getting a great benefit in Newfoundland and Labrador from Muskrat Falls clearly don’t know what they are talking about.

People who talk about exporting Muskrat Falls electricity and making money from it also don;t know what they are talking about.

Emera will get its basic block of power not from Muskrat Falls but from a facility paid for in full by taxpayers in Newfoundland and Labrador 40 years ago.  There’s a fair bit of surplus capacity at Bay d’Espoir right now, what with the closure of two paper mills and a serious downsizing of the third.

All the electricity and the unfirm electricity Kathy Dunderdale spoke about on Monday could go to meet needs within the province.  The only thing Nalcor needs to get that electricity to the main market in St. John’s is an upgrade to the lines across the Isthmus of Avalon.  Estimated cost is about half a billion dollars.  That’s actually the lowest cost way of meeting electricity needs in the province. 

Instead of meeting domestic needs, the provincial government is going to send that electricity to Nova Scotia.  Emera will get the first block for free.  They’ll get any additional electricity they need, as it comes available, for whatever the market price is at the time.  Nalcor looks set to supply that from the island.

While all that super low-cost electricity from Bay d’Espoir will go to benefit Emera and Nova Scotians, the people of Newfoundland will get whatever electricity they need from Muskrat Falls.  They’ll be literally giving away some of the cheapest electricity around – it’s already paid for  - and buying some of the most expensive electricity available. 

Totally nuts, isn’t it?

Well, there’s more.

The original plan for the Lower Churchill was to build the bigger, more cost-effective plant at Gull Island.  All the electricity was to go out of the province at a profit.  The draft deal that Dean MacDonald sabotaged in 2002 actually would be producing money today from exports.  What’s more the provincial government had enough cash from oil revenues to pay for it in full by now.  Instead, we are buying a much smaller plant.

By 2010, Nalcor couldn’t find firm markets for the power so they and the provincial government decided to build the smaller plant at Muskrat Falls.  The result of the provincial government’s decision in 2010 to build Muskrat Falls anyway is that the province  will export cheap power and get precious little in exchange for it.  Power that should be used in Newfoundland and Labrador will go to Nova Scotia. Then they’ll force domestic consumers to pay full price, plus profit, for electricity from a project that now has to be built to replace the Nova Scotia give-aways.

On top of all that, Emera will also make a profit on its share of the electricity transmitted from Muskrat Falls to the island.  That’s right.  Under the Emera deal, they get to own a portion of domestic transmission in the province under the new system of partial privatization.  

Meanwhile in Quebec…

Of course, all that electricity from Muskrat Falls depends entirely on having enough water flowing through the turbines to generate the 4.9 terawatt hours a year of firm power Nalcor claims the thing will make.

The problem for the provincial government is that Hydro-Quebec has launched a lawsuit in Quebec that will likely gut the water management agreement that Nalcor insists solves all problems. What Nalcor claims is firm is decidedly unfirm.  Nalcor vice president Gil Bennett may not have retweeted what turned out to be one of the most popular SRBP posts ever, but those who did read it since last November understand the magnitude of the problem. Without that agreement solidly in place, Nalcor won’t reliably get more than about 20% of its rated capacity out of Muskrat Falls.

Hydro-Quebec is going to have an easier time making its case against Nalcor these days thanks to Kathy Dunderdale.  One of the things Nalcor can point to is the way successive governments in Newfoundland and Labrador have tried to screw Hydro-Quebec over the 1969 power contract. 

One of those screw jobs was the 2008 water management legislation.  Hydro-Quebec caught the provincial government in the act of trying to reassign water rights given to Churchill Falls (Labrador) Corporation in 1962 and hand them to Nalcor.  The result was that the provincial government called an emergency session of the legislature in 2009 to change the legislation.

Now at the time, Kathy Dunderdale and her predecessor insisted that they weren’t trying to frig Hydro-Quebec.  The whole thing was just a misunderstanding.  Now it turns out they both were fibbing their asses off.

As Kathy Dunderdale told the House on Tuesday:

one of the things that we realized right from the very start was that we had to have control of water management of not just the Churchill River, Mr. Speaker, but of all rivers in our Province. A valuable resource that belongs to the people of the Province, and government should be the stewards of that resource.

As a result, we brought in a bill on water management in this House of Assembly in 2007, in which Newfoundland and Labrador took control of the Churchill River, and every other river in the Province. In order to do that, we understood water management from start to finish, especially how it related to the Upper Churchill, Mr. Speaker.

Kathy Dunderdale got the date of the water rights bill wrong but that’s minor. She might have been referring to another piece of legislation that actually helped Hydro-Quebec control Muskrat Falls.  The rest is an admission that the original bill was intended to take control of the Churchill River.  And that, gentle readers, makes it highly unlikely that another key part of this whole scheme is as firm as Kathy and her friends insist it is.