Cost over-runs on Muskrat Falls as well as other costs not included in previous calculations by Nalcor will likely increase current electricity prices by almost double their rate in 2011, according to a recent assessment.
JM, a professional engineer who has worked extensively in the construction of large engineering projects, totalled up revised project costs and other factors including:
- the most recent Muskrat Falls cost increases,
- the cost of a third line to the Avalon from Bay d’Espoir,
- a new line to western Labrador,
- lower-than-expected electricity demand,
- a win by Hydro-Quebec in its lawsuit, and,
- revenue from export sales of electricity.
JM estimates that any revenue from sales would only lower the price of Muskrat falls electricity by about three cents a kilowatt hour.
However, the reader should be reminded that the government of Newfoundland will be borrowing 1 Billion dollars to finance the equity contributions into the project. Assuming a 5% annual interest rate on the borrowed equity there would be an annual interest payment of 50 million dollars. What Nalcor put in one pocket, they take from the other.