29 January 2015

Nalcor: the power of hubris #nlpoli

On the last electricity bill to arrive Chez Scribbler,  the price per kilowatt hour was a little over 11 cents, all in.

On Wednesday,  Newfoundland and Labrador Hydro applied to the public utilities board for a six percent reduction in electricity rates pending a thorough review of electricity prices now that oil has dropped through the floor.

Nalcor claims that Muskrat Falls is the lowest cost way of meeting electricity demand on the island in the future.  The truth is Nalcor didn’t produce any evidence that they compared potential sources of electricity before they decided to build Muskrat Falls in 2006.*

Nalcor claimed that electricity prices would be so high in 2017 as a result of increased cost for oil that Nalcor could bring Muskrat Falls on line and just direct the oil component of the electricity price to pay for Muskrat Falls.

The most recent Nalcor forecast for electricity prices in 2017 (August 2014) is 15 cents a kilowatt hour.  That’s 36% higher than the rate on the Scribbler bill, which is, of course, a wee bit higher than what the rate will be once Nalcor gets its six percent reduction.

Pride goeth update:  Turns out the most recent estimate is actually 16.4 cents per kilowatt hour in 2018.  The number used in that original paragraph is the estimated cost at the time government sanctioned the project.  Your old e-scribbler also left out some taxes so the correct sanction number was 15.9 cents.

Redo the math:  the difference between the current price on the scribbler’s bill and the forecast price is roughly 49%. Update ends

Even if you don’t want to look at the numbers and percentages,  just understand that for Muskrat Falls to make sense,  oil prices had to climb and electricity prices had to go up.

Electricity prices are going down.

Not up.


If the current trend continues,  Newfoundlanders and Labradorians will wind up with a 36% 49% increase in electricity prices in 2017 (or thereabouts) just to pay for Muskrat falls.  The project will stabilise electricity rates, as supporters of the project promised.  Muskrat Falls will, unfortunately, stabilise the rates far higher than they need to be.

Muskrat Falls never made economic sense.


* Gil Bennett raised a few comments on Twitter about this post.  His first one was that MF was sanctioned until 2012.

True, but this comment  didn’t use the word sanction deliberately.

To deal with Mr. Bennett’s comments properly and in full, read Friday’s post.