The threat from Muskrat Falls
can only be removed by concerted action that addresses the project’s financial
burden, restores integrity to the system of electricity regulation, and that
breaks, once and for all time, the fundamentally corrupt relationship between
the provincial hydro-electric corporation and the provincial government. This
is the only way to restore power to the province’s people so that they may
control their own future.
Electricity rates should be set by a new Energy Regulatory Authority that would be responsible for regulating both electricity service and onshore oil and gas exploration and development. The ERA’s electricity division would manage the electricity system as set down in Part II the Electrical Power Control Act, 1994.
The ERA
would set rates to provide electricity service to provincial consumers at the
lowest cost consistent with reliable service.
As proposed by Jim Feehan, rates would be set in a way that ensures that
neither consumers nor service providers are subsidized. Rates of return would not be guaranteed but
would be the result of efficiency within the service providers.
Nalcor and
Newfoundland and Labrador Hydro would not have a monopoly on wholesaling
electricity. Newfoundland Power would be
able to obtain electricity from any source.
To pay for Muskrat Falls,
Nalcor and the provincial government would first assess the financial
requirements, eliminate unnecessary costs, and reduce what can be reduced
before developing a payment plan.
Consumers would pay only for the portions of the Muskrat Falls project
that supplies electricity to them in rates set by the ERA. The provincial government would pay for the
“equity” portions of the Muskrat Falls debt through general revenues, possibly
following a third federal loan guarantee that reduced the interest costs of the
debt. Operations and maintenance costs
of Muskrat Falls would be apportioned between rates, as described above, and
Nalcor’s own revenues.
The balance
owed would come from Nalcor and the provincial government. One of the potentially most valuable revenue
sources would be a new tax on electricity production that could yield upwards
of $450 million a year. The bulk of the tax would be paid by Emera and
Hydro-Quebec, both of which currently profit from free or near-free electricity
through two patently unfair agreements. Federal assistance in the form of moral
suasion may be required to ensure that the two companies assist the people of
Newfoundland and Labrador in a fashion that is modest compared to the financial
windfalls they have reaped through Churchill Falls and Muskrat Falls.
Lastly, the
provincial government must change its relationship to Nalcor/Newfoundland and
Labrador Hydro. Ideally, the government would
divest entirely of the corporation in the most financially advantageous way
possible. This would likely produce sufficient revenue to address some or all
of the Muskrat Falls debt.
Failing
that, the provincial government would fundamentally alter the relationship with
the Crown corporation, treating it like private sector corporations.
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Read the complete mitigation proposal.