The provincial government announced on Thursday that it had directed the provincial energy corporation to build a new transmission line between Churchill Falls and western Labrador.
You’ve got to wonder why.
Not why they decided to build the line. Apparently, there’s a need for the additional power.
Not even why it took them so long to announce it.
No.
You’ve got to wonder why this $300 million project needed a cabinet decision.
After all, this is a government that claims it has “no higher priority” fuelling economic growth. Representatives of the company building a new mine in the region kept talking about two things: how much debt they were talking on in order to build the mine and how much they needed the power in order to to convince investors to give them cash.
You’d think that under those circumstances, the government would set up the rules so that a company that wanted to create 800 jobs in construction, 500 mobs during operations, and produce billions in revenue for the government would just not have to wait and wait and wait to get started.
You’d think that a massive energy corporation capable of spending billions and billions of taxpayers dollars for a relatively small hydro-electric dam and a gigantic transmission line could manage to figure out the need for a much smaller transmission line on ground they already know intimately.
And you’d think they could go ahead without having to wait for cabinet to give Ed Martin and his team the thumbs up. The brilliant boys behind Muskrat Falls apparently couldn’t sort out a simple $300 million job.
No, the need for a political decision on this project is a bit of a head scratcher.
Premier Tom Marshall muttered something to reporters after the announcement about having to make sure that the company paid taxes in Newfoundland and Labrador and not in another province. Odd statement, that, what with the mine being in this province and therefore that the company would have to pay local taxes like everyone else.
For all the concern about taxes, Marshall and his colleagues weren’t overly concerned about having the company pay for the new transmission line. It’s going to cost about $300 million. The provincial
government has only asked the company to pay about 20% of the construction cost.
None of that information on costs is in the official government news release, incidentally. It came from questions put by reporters to the Premier and natural resources minister Derrick Dalley. The news release doesn’t have any information of any consequence in it at all, actually.
What it does have is some misleading statements, especially about the cost to consumers. Take this sentence, for example: “the Board of Commissioners of Public Utilities (PUB) will maintain its role to review the costs incurred by Newfoundland and Labrador Hydro, and to set rates for customers in the province.”
That makes it sound like the company will pay rates set by the public utilities board. What the sentence refers to is the board’s responsibility to set electricity rates for consumers, not industry. The board reviews all of Newfoundland and Labrador Hydro’s costs when it sets consumer electricity rates.
But notice this sentence from the news release: “All planning, design and construction activities pertaining to the transmission line will be exempt from approval by the board.” Used to be that the public utilities board examined and approved all capital projects like this transmission line so that it could ensure that consumers were receiving electricity at the lowest cost. That was the policy set down in 1994 when the House of Assembly approved.
That went out the window in December 2012. Changes made to the Act in that month effectively stripped the PUB of that ability. The power to direct rates shifted to cabinet. It’s the same as the rates industrial users like Alderon will pay. Changes made to the Electrical Power Control Act in December 2012 give cabinet the power to set electricity rates in Labrador for industrial users.
Over the past decade, the provincial Conservatives have slowly turned back the clock in so many areas of public policy in this province. Economic development and electricity price-setting are just two examples of how the Conservatives have returned these things to the exclusive domain of secret talks between politicians and business interests. There’s no accident that Premier Tom Marshall regularly quotes Joe Smallwood or praises some of the deals Joe Smallwood cut. Tom and his colleagues like to do things just as they were done back in the Golden Age of bad policy.
Keeping all these deals secrets allows the politicians to use public money to reward their friends and punish their enemies. It’s old-fashioned patronage politics. The provincial government could have set up a pretty simple system that would efficiently get a project like Kami up and running quickly. They could create a royalty regime and a set of local benefits rule that delivers the maximum benefit to the people who own the ore or the oil while rewarding the initiative of the investors in projects like Kami or Hebron.
But if you did that, the politicians couldn’t make announcements about all the wonderful things they have done for the voters when a project gets rolling. They couldn’t get political credit for it.
And as much as it might be painful for the politician to deal with people tossed out of work by a mine closure – or idling to use the phrase that calms Derrick Dalley’s nerves – those people are nothing if they are not dependent on the politicians. Dependents tend to do as they are told and that is something almost every politician prefers to uppity voters who expect politicians to do what voters want.
