10 February 2020

The Rate Mitigation Circus of Horrors #nlpoli

Late Friday evening, the Muskrat Falls rate mitigation circus came to town.


Around 7:40 PM, long after everyone with sense had gone home for the day, natural resources minister Siobhan Coady released the last report from the Public Utilities Board review that started in 2018.

As expected, it told us nothing more than what we already knew.

That didn't stop people from getting upset, yet again, at the prospect of electricity rates twice what they are currently paying if no one does anything about it.

We got this reminder because the charter Dwight Ball gave the PUB was to repeat precisely what Ball knew his officials had already done in 2017.

It was like another pathetic re-run of the ploy from 2011 when Kathy Dunderdale – just as jammed up then as Dwight Ball was in 2018 – asked the PUB to look at Muskrat Falls using all the same assumptions and limitations that led the government to endorse the project in the first place.

In this case, Ball was in a pickle – and likely a rage - because he and his star by-election candidate at the time stood in front of a crowd during a by-election, promised everyone they wouldn’t have to pay for Muskrat Falls,  and then watched everyone burst out laughing since the two obviously had no idea what they were talking about.

So, someone in the political back room came up with the novel idea of bringing the PUB in to repeat exactly what the officials had already done.  When something works the first time, it is always smart to do it again. /sarcasmfont

You cannot make this shit up.

So here we are on Monday morning, precisely where we were before.

The PUB concluded that if the government sticks to the plan from 2010 and tries to pay for Muskrat falls through electricity rates, then the rates will hit more than 23 cents a kilowatt hour.  This would be a hike so big it is horrendously beyond what people in the electricity industry call rate shock.  This is a penetrating insight into the obvious.  People aren’t even paying that much, and they are shocked.

The PUB did what it was asked to do:  go through a bunch of ideas to generate cash to pay for Muskrat Falls without hiking rates.  Between what they found and some cash the province could identify, the PUB still came up a couple of hundred million bucks short.  That’s where the federal government comes in.

This is – almost word for word on the 128 turgidly-written pages – what a gaggle of government officials figured out in 2017.  It is the basis for the provincial government’s mitigation scheme announced last year, which was so widely known that Ches Crosbie slapped together a version of the same thing and released it before Dwight Ball handed out his scheme.

We know the provincial government officials went through the same exercise in twenty-freaking-seventeen because some of the numbers – like the 17 cents a kilowatt hour one – are the same numbers Dwight Ball used in 2017 when he told James McLeod of the Telegram about his intention to mitigate rates to 17 cents a kilowatt hour.

When people decided that amount was unacceptable, Ball went back to the officials and told them to keep looking for loose change somewhere.  They settled on Ottawa and so for past three years, the provincial government has been talking to federal officials about getting some cash for rates.

There is still no sign of money from Ottawa although Ball assured everyone on Friday that, despite his promise of an answer on mitigation a week or more ago, there was a team in Ottawa set to meet through the weekend to deliver cash.

One of the hang-ups, Ball told reporters in a scrum before the PUB report arrived, is that the federal government is concerned about how much the project will cost.  This is no small problem.  Software to control electricity flows on the transmission from Labrador is lost somewhere in development.  A target delivery date of June 2020 is now pushed off to the indefinite “sometime” in 2020.  Even Pollyanna no longer believes 2020 is a realistic date anymore. On top of that, key components needed to balance the load on the line are so badly screwed up that they will have to be rebuilt, along with the concrete bases on which they are supposed to sit and spin.

The cost?  A half a billion dollars would be a fair guess, but no one knows for sure how long it will take to fix these problems and what the actual cost will be.  Without a final cost, the federal government cannot forecast accurately how much they will need to commit to rate mitigation using the existing scheme. 

As it is, the provincial government is looking for something like $2.0 billion.  Not a huge amount by federal standards, but there is a dangerous implication in all this that other provinces will want the same sort of hand-out.  Then we are not two billion but 20 or 200.  And that is serious cash.

Another problem is that federal officials are not stupid enough to believe that this money need only last to 2030 as the provincial government originally asked.  Muskrat Falls won’t be paid off until the ‘70s, at least.  Then there is the problem of provincial government finances generally.  The provincial government remains precariously close to insolvency.  Even if the 1933 style collapse does not come,  Newfoundland and Labrador may need a series of financial boosts in the coming decade if oil prices tank,  oil demand dwindles, and generally, anything comes along that limits the provincial government’s revenue and the credit markets stomach for Newfoundland and Labrador’s staggering amount of public debt.

Surely the federal officials have figured out, even if the provincial ones won’t admit it, that telling the public electricity prices are frozen at 13.5 cents a kilowatt hour causes other problems.  SRBP pointed this out last April as one of the many problems with Dwight Ball’s plan to finish Muskrat Falls.   Dwight Ball’s mitigation scheme means that the government will not only have to cover Muskrat Falls’ costs, but it will now have to cover *all* costs for electricity in the future beyond that 13.5 cents.  Newfoundland Power and Newfoundland and Labrador Hydro capital costs are now the burden of the provincial government.  The public will not tolerate anything beyond 13.5 cents no matter who is in power.

So even if Dwight Ball holds a news conference in a few hours or a few days, the people of Newfoundland and Labrador are still jammed up.  What we need to do with electricity rates and electricity policy is something more comprehensive.  There’s no space to lay it out here, but the SRBP scheme from 2019 would give a way to set electricity rates transparently, sort out a major and ongoing source of the problem within government, and pay for Muskrat Falls.

The problems in the province don’t end there.  At Memorial University, for example, you have three prominent gaggles of professors and students.   One bunch want to cut the provincial government – already $2.0 billion short of cash every year – immediately from its only steady supply of serious cash, in the form of oil royalties.  They have no plan for what to do next and indeed don’t want to talk about a life without oil money.

Another bunch want the government to spend even more money on Memorial University (while maintaining a tuition freeze) even though the government doesn’t have any money and many of the professors’ colleagues want it to have less.   Then there are the ones running around spewing jargon about how there needs to be “democratic reform” and “public engagement” as though there isn’t public engagement now from their colleagues in the other two overlapping camps.  Unfortunately for the professors, their political engagement is devoid of any sign of thought that it is actually an argument for cutting the university off the public tit entirely.

Things are no great shakes among political parties either.  Ches Crosbie and the Conservatives have spent the last year attacking Dwight Ball about a couple of appointments he made.  Asked on Friday if Crosbie would change the process of appointments were, he to become Premier, Crosbie said:  No. The Premier must be able to appoint people that he trusts.  So as much as Crosbie has been relentlessly slagging Ball over the appointments, Crosbie would keep the same process (and appointment standards).  This is beyond hypocrisy to a level of sliminess not found in Newfoundland for – literally - a century.

Another assorted gaggle of “reformers” want to improve “democracy” by getting rid of political parties.  They are forming a political party to accomplish their goal.  They do not see the logical problem in their venture.  They mutter something about working with the current system.

Except that the current system is built on groups of people (political parties) who work with other groups of people, sometimes compromising, to achieve their goals.  The “reformers” are – to a man and woman – not about compromise at all.  They only want their own way, which is why they are frustrated with the current system.  They do not like compromise.

So, you can see where their goal and the approach do not line up, logically.

The New Democratic Party leader, meanwhile, is fond of joining Crosbie in his slimefest only to wonder aloud in the same interview if this is all not just a distraction from real problems.

Ya think?

For Ball’s part, he seems ever ready to throw anyone under the bus if a few people on Twitter complain about something he decided.  Take Carla Foote for example.  Only Ball can make appointments to the senior public service and approve departures of the sort that started the whole Foote mess in the beginning. Yet he denied involvement in the Foote business before, tossed his minister to the wolves over it and, in the most recent twist repeatedly characterized the latest move as Foote resigning to come back to the public service. 

Like Dwight had nothing to do with any of it.

The important part of the scrum on Friday is when Ball explained he was moving Foote again because of the partisan outcry over his first decision.  Ball never admitted it was all at his behest or with his approval but that is neither here nor there.  The truth is he knew about it all and approved it.

As a result of the partisan criticism of another decision, Ball also tossed the former deputy minister of natural resources under a bus in Friday’s scrum.  Have to review the contract to see if there was value for money in it, said Ball of the job Ball set the former DM to work on in the new oil and gas corporation.

This is all the same as the Ed Martin fiasco when Ball insisted he approved of nothing of it and approved of nothing - once the public was outraged at Martin’s $6 billion severance – even though evidence at the time was that Ball knew about the departure and approved it, even if he didn’t ask about the amount. 

Or Ball’s insistence he never supported Muskrat Falls, even though, by his own words, Ball has been a Muskrateer since November 2010 at least.

Or his approval of the 2016 budget and his subsequent rejection of his own budget it - and blaming of the finance minister for it – when people didn’t immediately like its modest attempt to control government’s financial runaway train.

This irrational need to align with even the smallest, most baseless criticism of him at the expense of everything else should surely make one wonder what will happen – as it almost inevitably will – when people start criticizing whatever mitigation plan Ball finally delivers.  The federal government will surely have to factor this in as one of the most unpredictable of the many “moving parts” involved in the mitigation scheme.

No one should wonder why the ordinary people of the province are worried about their future when the elites – including the elite members who deny they are elite – carry on like this.

Nor should anyone be surprised if more people are wondering each day when some people will come forward who can lead the province out of its current circus of horrors.