The provincial government will balance its books this year by borrowing $2.1 billion.
Lots of people don’t know that, as Michael Caine would say.
The government included in its budget plans this year a hike in the HST of two percent.
The tax hike will bring in $200 million.
That $200 million will just about cover the interest in one year on all the new debt the provincial government plans to add between now and 2021.
The $2.1 billion this year is the tip of a very big iceberg of new debt, you see. The new debt will go on top of the other $12 billion we already owe. The total cost just to pay the interest on that debt in 2021 will be $1.0 billion.
When people found out about the HST hike, they lost their minds.
Fast forward to 2017.
Through a mirror, darkly…
2017: that ‘s the year Muskrat Falls comes online.
The only people paying for Muskrat Falls and the people paying that hike in sales tax are the same person. If you are not sure who that might be, go get a bunch of mirrors. 50 of them. Now line them up so you can see the reflection in all of them disappearing off into the distance.
Wave.
The person waving back is the person stuck with paying all of Muskrat Falls. right off into the future If you keep looking, you will see that eventually you disappear and… look! …there are more people. They are your children and grandchildren.
Wave at them.
They are waving back.
No.
They are not giving you the finger.
They are waving.
In 2067, when the last of the Muskrat Falls debt is paid off, kids will hold up the middle finger and jab it up and down violently. Today it means something nasty. In the future it will mean “I love you.”
Seriously.
It will be a thing then.
Watch them as they jab their finger at you. They are saying, thank you, nan and pop, for investing all our inheritance in this lovely dam and giving us the bills to pay for it.
Thank you, thank. you.
Not fuck you, you dozy decrepit geriatric arsehole, even though some are holding up a sign that says exactly those words as they jab the middle finger up and down at you repeatedly.
They are happy, there in that future time.
Danny, Kathy, Tom, and now Paul have said so.
You can trust them.
They always told you the truth.
Every thing will be different in the future, they said.
Thanks to Muskrat Falls.
And they were right.
Of Budgets and Fairy Tales: the true NDP version
If you do not have mirrors, just think about it this way: your humble e-scribbler’s Number One son will be 74 years old when he pays the last bill for Muskrat Falls.
Extra perspective: Emera will still make money off you until at least 2081. That’s when their share in the provincial transmission system ends under the original Muskrat Falls deal that Danny signed.
Ohhhhhhhh.
That’s a pouty face you have on..
Missed that little detail, did you?
Privatised electricity transmission.
Part of the deal.
Endorsed by ALL political parties in the province.
In 2012, they griped about the process in the House of Assembly but all parties endorsed Muskrat Falls for the gloriously wonderful deal it is.
The NDP is bawling and screaming blue murder. Their union masters are bawling and screaming blue murder at the idea of privatising some government services. But in 2012, they gave a private company a piece of the electricity transmission system in Newfoundland and Labrador.
Yes, to privatization!
Yes, to a new electricity tax.
Two thirds of tax filers in Newfoundland and Labrador have a gross income of $35,000 a year before taxes. The New Democrats – like the Liberals and Conservatives – are so firmly opposed to privatization and are so keen to tax the rich that they endorsed Muskrat Falls, without reservation.
Let us all wait while Lana Payne writes a column in the Telegram explaining the evils of privatisation and the need for tax fairness using Muskrat Falls as an example.
Pro tip: do NOT hold your breath while you wait.
Dig Deep
If people lost their mind over $200 million in that HST, imagine how thrilled they going to feel about the hundreds of millions beyond that they will have to pay through their electricity rates to cover the cost of Muskrat Falls.
Every year.
Until 2067.
According to the folks at Nalcor, between the time it comes on line and 2025, Muskrat Falls will make enough money to pay back the $3.1 billion in “equity” taxpayers have put into it. After that, Muskrat Falls will generate another $12 billion over the 17 years after that.
For those who haven’t worked out the math, $3 billion over eight years works out to $375 million a year. $12 billion over 17 years works out to about $705 million.
Each hike of one percent in the HST works out to about $100 million. So if you just got rotted off by a two percent hike in sales tax, hold on to your hat. Muskrat Falls will be like adding another seven percent on to the HST.
Holy Government Financial Viagra, Batman.
The Truth is Out There. Waaaaay Out There.
Bear all that in mind when you read VOCM’s news story that Paul Davis is promising to use revenue from selling “surplus“ Muskrat Falls electricity to keep your energy rates down. We’ll leave to one side, for a moment, the idea that there will be – in fact – surplus electricity from Muskrat Falls.
Let us focus for a moment on the idea there is some other source of actual revenue that government could use to make your electricity cheaper.
There isn’t.
Muskrat Falls has been worked out solely on the basis that you, and you, and all the other taxpaying, electricity-using yous in Newfoundland and Labrador will pay for Muskrat Falls in full, plus profits. You will pay the price dictated by the government to cover the costs.
Full stop.
Everyone else in the world who might get some electricity from Muskrat Falls will pay less than the electricity cost to make:
- Emera will get a block of power for absolutely nothing at all for 35 years. They get electricity for merely having built the lines to get electricity from the island to Nova Scotia. There is no revenue at all going to Nalcor for that part of Muskrat Falls output.
- If anyone else gets electricity from Muskrat Falls, they will pay the going market rate.
The going market rate for the cost of electricity itself – outside Newfoundland and Labrador - is a fraction of what it will cost to make the electricity at Muskrat Falls. By the time you factor in the cost of transportation, there likely won’t be very much of anything left over from any sales.
To give you an idea how hard it is to make money selling electricity these days, consider that Nalcor gets electricity from Churchill Falls. They use what they need in Labrador and sell the rest. At peak, they get almost as much from this block of surplus Churchill Falls power as they will get – theoretically – from Muskrat Falls.
In 2014, Nalcor made a total of $38 million from selling “surplus” electricity from Churchill Falls. Any “surplus” electricity from Muskrat Falls wouldn’t be much more than the stuff from Churchill Falls. Pretend it is double, just for the fun of it. Consumers will have to pay at least $700 million every year for Muskrat Falls. In a good year, Nalcor might get $80 million or $100 million in electricity sales outside of the province..
Not much of a dent is it, really?
Water Management
The price might not matter anyway. Nalcor’s scheme for Muskrat Falls assumes they will be able top manage the water flow on the river to allow them to get a healthy amount of electricity from Muskrat Falls in the first place.
Nalcor’s own documents show that if they can’t control the water on the river, the would only be able to get little more than 100 megawatts worth of electricity out of the Falls reliably. That’s not enough to give Emera its free electricity, let alone have any “surplus” to sell anywhere.
Water management is the key to the whole deal. Hydro-Quebec is suing about Nalcor’s interpretation of the 1969 sales agreement. Nalcor thinks they will have lots of electricity because, according to their reading of the contract, Hydro-Quebec gets less electricity starting in 2016 than it has received to date.. Hydro-Quebec disagrees.
If Hydro-Quebec wins, they will basically make Muskrat Falls the most expensive mistake in the history of expensive mistakes. Nalcor is so worried about the law suit that two of its officials are refusing to give evidence in the case. Hydro-Quebec has had to come to St. John’s to get a court order here to enforce a court order in Quebec to get the evidence.
We might not have any electricity to sell to let Paul Davis or Dwight Ball use it to lower domestic electricity rates. We won’t know for sure until this law suit is done. If Hydro-Quebec wins its case, we won’t have much electricity at all from Muskrat Falls. We will have to send a block of free stuff to Nova Scotia.
And we will still have to pay back the loans used to build Muskrat Falls.
$700 million a year worth.
Yes, Virginia, the pols are full of crap
In other words, what Paul Davis and Dwight Ball and a few others pols have talked about is just nonsense. There likely won’t be any revenue from sales that will actually allow them to lower electricity rates in this province. And what they might wind up with won;t make much of a difference anyway.
If Hydro-Quebec wins its lawsuit, Nalcor won’t have much of any electricity from Muskrat Falls at all, let alone a surplus.
But we will have a huge debt to repay.
In truth, the reason Nalcor can even entertain selling any electricity from Muskrat Falls abroad is that taxpayers have already covered the cost of the whole thing.
Export sales are not going to subsidize local ratepayers, as the pols would have it Local taxpayers are going to be subsidizing those exports.
That’s exactly the opposite of what the pols are pretending and it is exactly the opposite of what the Lower Churchill was always supposed to be. The current version of Muskrat Falls is the love child of local captains of industry.
We need more of their input.
Clearly.
That’s not all of it, though.
Go back to the House of Assembly on Thursday and notice that Paul Davis couldn’t explain exactly how this imaginary subsidy would actually work out. We don’t have the final costs on Muskrat Falls. Nor do we know what electricity prices will be outside Newfoundland and Labrador.
When we get to the point in time and the point of the day where we know exactly what those revenues are, we know exactly what the costs are of those days, we will finalize those decisions or the government of the day I am sure will. I agree with what the member opposite [opposition leader Dwight Ball] is leading on in that we have to take steps to ensure we keep rates as best and lowest as possible for the people of Newfoundland and Labrador and that means returning those revenues back. In that regard, Mr. Speaker, I certainly support that belief.
Kind of jargony gibberishy but you get the point.
We don’t know what the costs are but, theoretically, we should try and lower electricity rates to the people who will have to pay enormous rates to pay for Muskrat Falls.
Bit of a round-about way of saying it but you realise that the politicians understand the fundamental problem of Muskrat Falls. After all, if Muskrat Falls was an enormous source of revenue that *wasn’t* from local ratepayers’ pockets
They wouldn’t have to try and find a way to lower electricity rates.
The Lower Churchill was supposed to make money for our children and grandchildren by selling electricity to people outside this province. We could use that money to lower electricity costs for our consumers.
Muskrat Falls doesn’t do that.
It does the opposite.
Exactly, precisely and completely the opposite.
And that’s what they intended from the beginning.
-srbp-
