The end of history

From the Telegram’s Saturday edition, comes a provocative idea from another opinion piece:

If Churchill Falls is the alpha and omega of provincial politics, what happens now?

How does a political culture evolve once it has reached the promised land, where have-not is no more?

Mr. Williams did not change the province’s political culture so much as he embodied it. And for the past forty years, that culture has been predicated on the politics of anticipation.

For two generations, Newfoundlanders have waited for political deliverance from the injustices of the past.

This anticipation created a political teleology so deeply ingrained that it’s hardly recognized, let alone questioned. The unspoken assumption has always been that Newfoundland and Labrador is not just a place but a time: it’s always on the cusp of going somewhere, becoming something, fighting someone.

To be a Newfoundlander is to know in your bones that the next big announcement is just around the corner, because one day the sun will surely shine.

Being Premier of Newfoundland and Labrador has meant never having to say you’re sorry, because suffering have-not status and Ottawa’s perfidy justifies doing whatever is necessary, from hauling down a national flag to slandering opponents as traitors and betrayers.

Yet if politics has meant struggle, what happens when the struggle is won?

Historian Jerry Bannister comes up with a poser.

After all, Labrador hydro-electric power is the political equivalent of paradise on Earth in Newfoundland and Labrador. 

It’s something that is always just around the next bend.

It’s the better tomorrow we have to be ready for.

So what happens now that we are supposedly at that point in history?

What’s next?

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Another Muskrat Falls sceptic

Add talk show host Randy Simms to the pile of people who now appreciate that the Lower Churchill announcement wasn’t about a deal to get the thing done.

His column in the Saturday Telegram (not online) couldn’t have been any plainer:

Premier Danny Williams did much the same thing, declaring, "Today will go down in history as the day that finally eclipses that day back in
1969 when the Upper Churchill Contract was signed."

Really?

…

I think the spectacle we saw at the term sheet signing was more
political than practical. It was done for the benefit of the home
audience.

And it only took a couple of weeks.

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Fear and loathing on the energy campaign trail

Natural resources minister Kathy Dunderdale is one busy minister these days.  She’s turned up in several interviews since the Muskrat Falls announcement to respond to criticise of the announcement coming from Roger Grimes.

As in her interview with CBC Radio’s West Coast Morning Show, Dunderdale dismissed Grimes’ comments.  She claimed he didn’t know what he was talking about when he talked about electricity prices going up dramatically if the provincial government’s proposal became a reality. The tone of her voice suggests a certain loathing for the former premier. 

That’s typical of the Danny Williams crowd, by the way.  They have a special and personal hatred for Grimes. So intense is the hatred that the Danny fans worked hard to vote in a recent CBC online poll and picked the one option that personally dismissed Roger Grimes as being irrelevant to the discussion just because he is Roger Grimes.

Funny thing, though, is that in every interview Kathy Dunderdale winds up explaining that electricity prices in the province would just about double. In her West Coast Morning Show interview she actually explained things such that you’d believe prices would go up even more than double. 

Dunderdale claimed that electricity prices would increase an average of five percent each year from now until 2017. That’s the year Nalcor would supposedly bring Muskrat Falls on line. So electricity prices would be about 35% higher than they are now, according to Dunderdale. 

At that point, as Dunderdale notes, Nalcor could start charging for the cost of power coming from Muskrat Falls. She’s already said that Muskrat Falls power would cost between 14.3 and 16.5 cents per kilowatt hour to produce. Add in a rate of return for both Nalcor and the electricity retailer and you are well on your way to electricity prices in the provinces being more than double what they are today.

Double the current price.

Guaranteed.

The provincial government thinks that they can justify their proposal because, as Dunderdale says, they have a projection that oil will be $120 by 2017 and could be as much as $200 a barrel within a decade.  So much power on the island currently comes from oil generation that electricity prices will go up because oil will be this and that price along the way.  After 2017, Dunderdale says, the increases from Muskrat Falls will be less than what they would be without it, all because of the price of oil.

Well, the truth is that electricity prices could be all those things, but then again, the world of the future could be completely different. That’s because those oil prices aren’t guaranteed. The number the provincial government has from its consultant is a guess.  it may be an educated guess but it is still a guess, all the same.

The government’s guess is potentially as reliable as the forecasts in the middle of 2008 that oil would hit $200 a barrel by the end of that year and continue upward thereafter.

We all know what actually happened.

For Dunderdale though – and really for the current provincial government – these numbers are real.  Listen to Dunderdale in that interview as she tells the host what oil prices will be next year.  She speaks as if it is already 2011 and the prices are known.  There’s something vaguely creepy about the way Dunderdale acts as if she and her colleagues can read the future.

It’s right up there with her other unsettling claim.  By 2019, claimed Dunderdale, “we will have an energy deficit so we will have to ration energy or we will not be able to provide to ratepayers electricity when they need it.”

Energy rationing. 

Maybe blackouts in some areas during the inter months – the peak demand times in this province – because the system can’t handle the demand.

Pretty scary stuff.

That’s the essence of the provincial government’s position:  support this or else the place will be a wreck.  Maybe super high electricity prices even worse than the super duper prices you are guaranteed to get under our plan for this super duper energy mega project.

Support this plan to jack up the public debt in the province with the horrendously high public debt already because, if not, you know,  we’ll have to cut off your granny’s heat for a few hours in the winter time.

Fear.

It’s been a powerful political tool for the current administration, so it’s no surprise they are using it.  They’ve thrived on mongering fear of outsiders. During the row last year over the government’s plan to sling power lines through a world heritage site, Danny Williams talked about the costs and possible cuts to health care.

Within the past couple of weeks he’s tossed out the view that the province might be descending into anarchy.  Why?  Because someone had a strong opinion that didn’t match is or something.

Only a week after the announcement and the provincial government is already resorting to fear as the major way of selling people on a giant electricity price increase and a gigantic hike in the public debt.

No surprise that fear and loathing are core elements of the Williams administration’s political arsenal.  it’s just a bit surprising that they’ve turned up [this quickly] as the core of their efforts to convince people to get behind what Danny Williams has described as his crowning political achievement.

Sorta takes the shine off the tiara.

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* edited to add words for clarification and to correct typo

Doubling electricity rates for the Lower Churchill: then and now

"If we had to pay for it ourselves it would be safe to say the rates in Newfoundland would double," Marshall said.

Turns out that Fortis headman Stan Marshall might have been in tune with a higher celestial power even if he was 12 years ahead of the rest of the world.

Stan Marshall gave that comment more than a decade ago to the Telegram business editor Chris Flanagan. The story – titled “Deal would double rates: Fortis boss skeptical of Quebec to Newfoundland line benefits” – appeared on the front page of the Saturday, February 21, 1998 edition of the province’s largest circulation daily.

Marshall was talking about a then-rumoured proposal to build an 1,100 kilometre, $2.0 billion line from the Lower Churchill to Soldier’s Pond. He told the Telegram that in his view the line would wind up being severely underutilized in the short-term and would cause financial headaches for the provincial government for maintenance and replacement.

At the time, however, the provincial government and Newfoundland and Labrador Hydro weren’t proposing that provincial taxpayers foot the bill, as with the proposal announced last week by Premier Danny Williams.  In 1998 and in some subsequent discussions the whole line would have been cost-shared with the federal government. 

What’s more, while power rates may well have doubled under the 1998 proposal, the provincial portion of the entire project would have been supported by the sale of power from the much larger and more lucrative Gull Island portion of the Lower Churchill to markets in Quebec and potentially elsewhere.

In the Williams version, Newfoundland and Labrador taxpayers would pay for the Muskrat Falls dam and the line to St. John’s.  Ratepayers in Newfoundland and Labrador would cover the cost through higher electricity rates and, in all likelihood, by carrying an additional $4.5 billion in public debt on top of the province’s existing, enormous public debt.

The only power export guaranteed under the new proposal would be 170 megawatts handed to Nova Scotia-based Emera in exchange for its building the line to get the power to Nova Scotia.  Under the proposed agreement, Emera could buy up any other export power at the Cape Breton landfall. What’s more, while Nalcor might get some right to wheel power through Erma’s Canadian transmission holdings, Emera could also step in to replace Nalcor in an export deal provided Emera compensated Nalcor.

In a media interview this week, provincial energy minister Kathy Dunderdale said power from the proposed project would cost at least 14.3 cents a kilowatt hour to produce;  she also gave a figure of $165 per megawatt hour which translates to 16.5 cents a kilowatt hour. 

But that’s the wholesale cost for the Williams proposal.  The rate for consumers would likely be higher in order to allow Nalcor and its partner Emera an appropriate rate of return.  The consumer rate would also have to include a return for electricity retailer Newfoundland Power, a Fortis company.  Taken altogether, rates on the island for residential users would likely be double the current rate of about 9.5 cents a kilowatt hour.

According to Dunderdale, the provincial government is justifying its projected rate hike based on a single projection from one consulting firm that the price of oil in the later part of this decade will be around $120 a barrel.  According to Dunderdale,  without the line from Labrador, the only alternative will be continued use of expensive diesel fuel for the large diesel plant at Holyrood as well as some additional wind and small hydro generation.

By comparison, [according to the provincial government] the Labrador dam and the new power line would be cheaper for consumers than the alternative.  To date, the provincial government hasn’t released any details to support their claims about the cost of alternative power generation to meet anticipated demand.  The only documents they’ve released are a graph and a chart without any of the context used to come up with the figures.

The provincial government also claims that the Labrador dam and new line would “displace” Holyrood’s diesel generation.  That claim isn’t backed by Nalcor’s own plans.

In 1998, Stan Marshall also had concerns about the cost of maintenance on the new line:

"If there's a real ice storm it will have to be rebuilt and I hope somebody's going to pay for that," Marshall said. 

Marshall said the line simply does not make economic sense. 

"If someone offered you the transmission line or $2 billion, you'd  take the $2 billion," he said, but added there are political and long- term factors others might want to consider. 

"I don't know what the political agenda is here and what the
government is trying to achieve," he said.

Plus ca change?

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*updated – words added to clarify attribution

Related:

• NL and US taxpayers may help subsidize costly big-hydro project (09 November 2010)

Coming soon:  demand projections and crude price forecasts

Muskrat Falls = expensive power

In an interview with CBC Radio’s St. John’s Morning Show on Monday, deputy premier Kathy Dunderdale told listeners that Muskrat Falls power will cost between 14.3 and 16.5 cents per kilowatt hour to produce in 2017, the year of first commercial power.

Jeff Gilhooley: And how much – I’ve only got a minute left here unfortunately – I didn’t hear that in the announcement on Thursday, what is the new power going to cost us?

Kathy Dunderdale: The new power is going to cost us about $165 a megawatt hour.

Gilhooley: And how does that compare with what is coming out of Holyrood now? Any idea?

Dunderdale: Ah, I wouldn’t be able to give you that comparison right off the top of my head, Geoff, I don’t have those numbers before us, before me, but in terms of when we bring that on in 2017 that’s the cost in 2017, $165, or excuse me it’s $143 a megawatt hour. Anything that we would do other than Muskrat Falls would be either the same cost at that time, but escalating right up through the roof over the next 10, 15, 20 years.

The provincial government has not released any information the models they used to forecast prices for alternatives to building Muskrat Falls.  As such, Dunderdale’s claim about prices escalating through the roof is as reliable as her claim about the death of the Rhode Island memorandum of  understanding.

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Technicolor Dreaming Update:  In an interview with CBC’s supper hour news program, Dunderdale said that government’s price estimates for electricity include a PIRA forecast of crude prices being 50% above current levels by 2017-2020.  That would put crude at prices above US$120.

Double Down Update: nottawa takes this a step further and offers a link to a comparison of electricity prices over the past decade.  The Williams Muskrat Falls proposal is based on the idea electricity prices will double within the next 10 years.

Lower Churchill opinion: The End

The votes are tallied and despite an overnight dump of about 20,000 electronic “votes” the forces desperate to goose the VOCM question of the Day in favour of the Premier’s Lower Churchill proposal came up short.

If they weren’t obsessed with this sort of trivia, imagine what they could have accomplished.

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No US market for Lower Churchill power: NL deputy premier

A VOCM news story running this weekend contains the following comments attributed to the province’s deputy premier, Kathy Dunderdale:

Dunderdale says the power Nova Scotia is buying from Newfoundland will be used domestically and nowhere else.

Dunderdale says the price that Nova Scotia is paying for the power is higher than market prices in the United States. She says there is no market for Nova Scotia to take our power and sell it elsewhere.

Dunderdale says the power will be used in Nova Scotia to replace coal-fire generation and to meet their energy targets.

Of course, if there is no market for Nova Scotia’s Emera to sell Muskrat Falls power in the United States, there’d be no market for this province to do it either.

That’s pretty much what your humble e-scribbler’s been saying about the Lower Churchill as well.

Meanwhile, from a PostMedia News story on last week’s Muskrat Falls announcement, comes an assessment by energy analyst Tom Adams:

However , Tom Adams , a Toronto-based energy consultant, says the once-rich markets of the Northeastern U.S. are now awash in cheap natural gas and demand there is also depressed by U.S. economic woes -- making it difficult, if not impossible, to sell much of the power from the Lower Churchill at feasible prices.

As a result, Adams says the economics of shipping electricity from the remote reaches of Labrador south by sub-sea cable simply won't work. He says Thursday's announcement wasn't a firm deal at all, but merely a "lobbying campaign" by Newfoundland and Nova Scotia for a "federal handout."

"There is a lot less here than meets the eye," he says.

Turns out Newfoundland and Labrador’s provincial government had the same thought.

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Unpublish update:  Good thing the copy is here because VOCM disappeared that story from its website. See the comments section for more.

Falling down on the job – Lower Churchill opinion

Not so very long ago, the Reform-based Conservative Party had an army who spent their time clicking madly to make that any question of the day on the VOCM website went the way the Premier would like.

It was all part of the machinery designed to maintain an illusion that the regime du jour is wildly popular. Incidentally, November is one of the four months of the year when the entire poll goosing apparatus usually goes into high gear.

How times have changed.

At 10:30 AM on Saturday, the VO question of the day results looked like this:

Only one third of the respondents – out of a hefty 7207 - like the Premier’s Lower Churchill deal. Almost half did not like it and, curiously enough, another 21% were not sure about it.

Not sure?

Perhaps someone is falling down on the job.

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World of Tomorrow: media studies ph.d, Ver. 2.0

In 1969, the province’s major daily newspaper proudly declared that the contract to develop Churchill Falls was a good thing:

Fears that Newfoundland came out on the short end of the stick in the agreement to develop Churchill Falls appear to be unfounded.

In fact, Newfoundland fares quite well, although it may appear otherwise on the surface.

At the same time, the paper’s John Carter did acknowledge that the “$950 million project in Labrador… probably would have come earlier had it not been for Premier J.R. Smallwood's uncontrolled outbursts of provincialism...”.

Fast forward four decades and it is clear that, to paraphrase Premier Danny Williams from Thursday’s dog and pony show, the experience of that disastrous contract has surely taught everyone in the province a few lessons on what not to do the next time.

Over at the Telegram, they learned their lesson very well about waiting until they had an actual agreement to study before heaping on the praise.  Friday’s editorial begins with these sober and cautious words:

Lower Churchill is no longer a dream. It’s a reality.

Uh huh.

Right.

And the editorial accepts every single statement by every single government official from Thursday without question at all.

Lesson learned, indeed.

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Aboriginal land claims remain substantial barrier to Williams’ legacy plan

Innu leader Joseph Roche may have been at the news conference announcing something or other about Muskrat Falls but, as he told the invite-only audience, the whole thing isn’t going anywhere until the Innu land claims issues are settled.

"One of the key outstanding issues now is the consent of our Innu people," Riche said.

"But we cannot do that yet, we need the federal government to resolve outstanding issues for our land rights agreement … it has been thirty years in the making and we have lost many of our elders and leaders in that time. Without this, the Lower Churchill project can not proceed." [cbc.ca/nl]

Riche was one of the invitees and the provincial government distributed a backgrounder on Innu issues.  But, as Premier Danny Williams knows already, the New Dawn agreement is stone cold dead. Riche reportedly put a damper on the excitement at the hotel news conference when he reminded people this thing wasn’t close to being a deal as far as Innu were concerned.

Chief Riche was talking about issues with the federal government, a key player the provincial government left out of the talks to this point.  That’s just one of the problems.  There is a substantial opposition within the Innu community to the project self and they aren’t interested in seeking anything happen on the river, period, full-stop, end of story, do-not-pass go and forget about the two hundred bucks.

And for those who missed it, someone seems to think that by selecting Muskrat falls as the first site, that will outflank the Innu opposition.  Elizabeth Penashue’s annual walk to Gull island doesn’t mean that Muskrat Falls isn’t as important.

The Innu aren’t the only aboriginal group with a claim that needs attention.

So far the provincial government has ignored the Metis of Labrador even though the Lower Churchill dams would be within the Metis claim area.  What’s worse for Williams is that the Metis are still smarting over his broken election promise from 2003 or his comment in 2009 that the project needed the Innu but not the Metis.

Other Premiers have long under-estimated the challenges of aboriginal land claims issues.  At the time he announced a memorandum of understanding to do way more that Danny Williams proposed, Premier Brian Tobin boasted he could finish a land claims deal with the Innu in 12 weeks.

That was 12 years ago. 

And Tobin’s proposal had a far more substantial basis for agreement than a terms sheet.

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The World of Tomorrow: media studies ph.d edition

When there is so much official bullshit flying around, it shouldn’t be surprising that conventional news media wind up piling it higher and deeper on their own.

From the only newspaper Newfoundland nationalists care about comes a comment that ties Shawn McCarthy with the Ceeb’s Vic Adopia  for most ludicrous assertion of the day by a reporter:

He has been battling Quebec Premier Jean Charest for years over Hydro-Québec’s refusal to transmit power from the Lower Churchill project through its existing transmission grid to markets in Ontario and the United States.

Hydro-Quebec hasn’t refused to wheel Lower Churchill power.  NALCOR energy has refused to option space on the grid or start talks to build any needed extra transmission capacity.

But it gets better. 

Since April 2009, NALCOR has been wheeling Churchill Falls power through Quebec to Emera at the New York border. That deal – which came long after the Lower Churchill transmission requests involved in recent Regie decisions – prompted Danny Williams to state proudly that Labrador power was no longer stranded:

This is truly a historic and momentous occasion for the people of our province, as never before have we been granted access through the province of Quebec with our own power.

But what is really amazing about the Globe piece is that Danny Williams actually spent five years trying to get Hydro-Quebec to take an ownership stake in the Lower Churchill without redress for the 1969 deal set to one side.

Oh, and just for fun, here’s what Danny Williams said in St. John’s on Thursday about whatever it was he announced with Darrell Dexter:

This is a day of great historic significance to Newfoundland and Labrador as we move forward with development of the Lower Churchill project, on our own terms and free of the geographic stranglehold of Quebec which has for too long determined the fate of the most attractive clean energy project in North America.

Historic agreement with Quebec. 

Historic agreement with someone else because Quebec wouldn’t agree.

Which is it?

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The World of Tomorrow: Basic Math

Muskrat Falls:  824 megawatts with an estimated capital cost of $6.2 billion.  That works out to about $7.5 million per installed megawatt.

La Romaine:  1,550 megawatts for $6.5 billion.  That works out to $4.1 million per installed megawatt.

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The World of Tomorrow

Wow.

Seldom has an announcement of any kind been accompanied by such a litany of sheer bullshit.

CBC is claiming that this is a deal to build the Lower Churchill and that, oddly enough is what CBC already announced in January 2008. One mainland CBC reporter debriefed his mainland colleague with the ludicrous claim that in the Churchill Falls deal  Newfoundland bore all the costs, and Quebec collects most of the revenue. The rest of his debrief was no better.

So what was announced?

Well, let’s just remind everyone that this morning your humble e-scribbler put it this way:

If this isn’t a concrete deal to start work soon, then Thursday’s announcement can all evaporate as easily as the others did.

This is not even a memorandum of understanding

Today, two companies signed something called a terms sheet.  That’s not a deal, an agreement, an agreement in principle, a memorandum of understanding or a letter of intent.

A terms sheet is – in business parlance – nothing more than a general, non-binding set of instructions to negotiators to guide their future discussions.  For all practical purposes, it has only slightly more value than an informal chat over a beer.

You can tell this is not a firm commitment by the companies to do much beyond keep talking because it has a time limit:  November 30, 2011.

When Danny Williams announced a memorandum of understanding on Hebron, he could treat the thing as a fairly solid basis of agreement.  There were details to work out and there was always the chance of things going sour.  But there was no timeline.  Everyone knew the lawyers would set to work to come up with a formal agreement, but they didn’t stick an expiry date on it.

That’s because they had a commitment to carry forward unless something dramatic intervened.

But this thing has an expiry date clearly stamped on it.

As exciting as some people would like Thursday’s announcement to be, the reality of the it is far different.

Heck, Danny Williams didn’t even get the date right.

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Contextual Update:

• Ready for a better tomorrow:  a May 2006 post that puts the political value of Labrador hydropower in a wider context.  The post title was Brian Tobin’s 1996 provincial election campaign slogan. 

More to follow…

Muskrat Love

To help you get ready for the splendiferous announcement later today, here are some things to keep an eye on.  Undoubtedly, there’ll be more spin than a baton twirlers’ convention riding on the Mad Hatter’s Tea Party ride at Disneyworld.

Just keep your head and you won’t get nauseous.

1.  Ready for a better tomorrow.  Just remember that tomorrow is a day that never seems to get here.

There have been memoranda of understanding before that came to naught.  Remember 1998?  Brian Tobin and Lucien Bouchard dropped a half million to announce not only a Lower Churchill deal but a reworking of the Churchill Falls project as well.  Result:  Nada.

Then there was the memorandum of understanding to sell 200 megawatts of power to Rhode Island.  That fell apart because NALCOR couldn’t deliver the power to Rhode Island at a price anyone could afford.

Don’t forget Frank Moores’ big explosions on either side of the Straits.

And as we look at a likely memorandum of understanding between NALCOR on one side and the Government of Nova Scotia and Emera on the other, let’s not forget that NALCOR already has one:  signed in January 2008.

If this isn’t a concrete deal to start work soon, then Thursday’s announcement can all evaporate as easily as the others did.

2. Cost.  The lower the number the less likely it is real.  CBC’s David Cochrane mentioned a figure of $4.0 billion.

The line from Muskrat Falls to Soldier’s Pond, just outside St. John’s came with an estimated cost of $2.2 billion in 1998. That would be close to $3.0 billion today.  There’s an estimate of the Nova Scotia line that runs between $800 million and $1.2 billion. Take the upper one just to be on the safe side since proponents tend to underestimate megaproject costs big time. So just the lines alone are likely to cost more than $4.0 billion.

A 900 megawatt project in British Columbia (Site C) is coming with a $6.6 billion price tag so it is safe to work with a cost estimate for this project of around the same amount.

The 70/30 debt-equity ratio NALCOR boss Ed Martin has mused about publicly would give you a borrowing requirement of around $4.0 billion.  There’s David Cochrane’s number.  The rest of the cash would come from NALCOR’s small equity stakes in three offshore projects, unless Emera is coming on board with an ownership stake.

3.  How much is being exported?   A couple of weeks ago 60% of the project’s estimated 800 megawatts would go to Nova Scotia.  According to reports on Wednesday, 60% of the power is now coming to the island and – here’s the kicker – the island portion of the province doesn’t need it.  However, NALCOR does need the captive market in Newfoundland to help underwrite the massive project.

Keep your eye on this one because it will tell you how expensive electricity will get in Newfoundland and Labrador. As it looks now, things are lining up to prove Danny Williams was right when he said last fall that “…good, cheap, competitively priced energy, can't be offered to that whole region.” 

4.  Environmental process Day Zero:  As regular readers already know, this thing will have to go through an environmental review with a whole new section never before considered.

5.  Holyrood.  For some unfathomable reason, no one seems to want to believe NALCOR’s own words on Holyrood:

It is important to consider that whichever expansion scenario occurs, an isolated Island electrical system or interconnected to the Lower Churchill via HVDC link, Holyrood will be an integral and vital component of the electrical system for decades to come. In the isolated case Holyrood will continue to be a generating station; in the interconnected scenario its three generating units will operate as synchronous condensers, providing system stability, inertia and voltage control.

The diesel plant at Holyrood will not be shuttered, mothballed or otherwise displaced or taken offline.  To the contrary, it will run 24/7/365 but at a reduced capacity. Holyrood will be an “integral and vital” component of the province’s electrical system.

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Lower Churchill MOU – the invitation

Some people are getting them via e-mail.

Your humble e-scribbler wasn’t one of them, nor was Nova Scotia Premier Darrell Dexter.

Print this off and save it as a souvenir.

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Sky Captain got his wingman after all Update:  Apparent Dex was just joshin’ Sounded like he just had bad talking points.  Dex is  on the way to tie his province to this very expensive version of the Lower Churchill.

Atta boy, Dex!

Lower Churchill MOU - developing

1.  CBC is reporting an announcement tomorrow on a memorandum of understanding involving Emera, NALCOR, the Government of Nova scotia and the Government of Newfoundland and Labrador to develop Muskrat falls (800 MW)

2.  Nova Scotia Premier Darrell Dexter is denying the reports.

This story is developing.  More will follow.

In the meantime, amuse yourself with:

• Williams announces political exit plan
• US and NL taxpayers might help subsidise costly big-hydro project
• Williams’ shift sends Lower Churchill back to enviro drawing board for second time in a year
• More potato, potato
• Tshaukesh leads quiet resistance to Old Man’s Dream
• What Danny actually said (with translation)
• Danny Williams and the Philosopher’s Stone:  converting principles to cash

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The politics of energy subsidies

From the Atlantic Institute for Market Studies comes a timely rejoinder to the policy in Prince Edward Island of subsidising energy prices out of tax dollars. The arguments in this post refer to the New Democratic Party policy of taxing tax off home heating prices but the concept is the same. The piece is also a timely one for Newfoundland and Labrador where Lorraine Michael recently embraced the policy.  

The argument against the policy of cutting home heating taxes is simple:

It gave people with more than sufficient ability to pay a subsidy they did not need. It encouraged continued consumption at unsustainable levels and it helped the poor not by treating the problem (inefficient homes and too much consumption), but by treating the symptom (high electricity bills).

In Newfoundland and Labrador one suspects that political parties eager – or desperate – for votes in the coming year will lay this sort of policy on thickly to try and buy them up. 

The ruling Conservatives, despite their supposed reform-based Conservative philosophy, are already trying to sell a future deal on the Lower Churchill as a guarantee of stable prices. They don’t talk about the huge subsidies the thing may well involve or that the whole thing will add enormously to the public debt. Incidentally, the likely reason the Premier has stopped referring to loan guarantees as loan guarantees is that he is acutely aware that any Lower Churchill project as he has proposed it will – inevitably – demolish once and for all any claims about the current Conservative administration’s performance in controlling the public debt and deficit.

It’s all bollocks of course.  Energy prices in the province will stay stable anyways without the Lower Churchill.  NALCOR’s own energy demand forecasts don’t support any such megaproject to supply juice to the island portion of the province.  And with a bit of conservation and efficiency, what increased demand there is could go down.

That’s one of the reasons why this AIMS article is interesting:  it specifically points to conservation as an economically sound policy:

the need for some electricity does not undermine the basic math that it is still cheaper and more efficient and, long term, more sustainable to reduce consumption.

At the same time, providing subsidies to allow everyone, but especially low and fixed income Newfoundlanders and Labradorians, to improve the energy efficiency of their homes would treat the problem of high heating bills rather than the symptom.  At the same time, leaving the prices to reflect the cost of production would promote conservation and efficiency.  The whole idea is progressive socially in addition to being economically and ecologically sound.  It beggars the imagination to figure out why political parties would head down a road of subsidies they know is simply  unsustainable.

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Small island syndrome

So get this.

The provincial government in Prince Edward Island is going to borrow a bunch of money and turn it over to a private sector company – a subsidiary of Fortis, no less – so that islanders can think they are getting cheaper electricity.

In reality, they’ll pay the loan back plus interest out of their tax dollars that should be going to things like health care, education and roads.

And Stan Marshall will laugh all the way to the bank.

Meanwhile in other news, the Premier of another small island continues to chase the latest version of his Get-Outta-Dodge legacy plan. 

He promises to stay at the table – where and with whom we don’t know – trying to squeeze every penny out of the deal, as Faux News tells us, supposedly for the province. no word  on subsidies, but count on having to pay them.

That’s what Bob Ghiz told taxpayers in PEI, too.

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Lower Churchill: US and NL taxpayers might help subsidize costly big hydro project

Premier Danny Williams is promising a Lower Churchill deal before the end of the year and one way he could finance the project is by offloading the cost onto American and Canadian taxpayers.

Some American politicians are trying to redefine state environmental subsidies that currently don’t include hydro megaprojects like the Lower Churchill.  In Massachusetts, Republican gubernatorial candidate Charles Baker not only advocated for big hydro as part of the state’s energy future, he also favoured giving big hydro projects the “renewable” status that would make them eligible for state subsidies. 

According to the Boston Globe, the subsidies in Massachusetts alone could be worth as much as six cents a kilowatt hour.

Incumbent Democratic governor Deval Patrick  - who won re-election last week - opposed the idea:

“It does not make sense to give renewable energy incentives to a foreign-owned enterprise for something that needs no subsidy,’’ Patrick said in a statement to the [Boston] Globe. “It would amount to a windfall of hundreds of millions of dollars for Canadian ratepayers at the expense of Massachusetts customers.’’

That doesn’t mean the idea is dead in Massachusetts, though.  Energy giant Hydro-Quebec is lobbying hard for the “renewable” status for its own projects. Earlier this year, the company won a battle in Vermont to make hydro eligible for subsidies. That’s all part of HQ’s push to take its share of the New England energy market from 8.5% to upwards of 12%.

Lowering the cost of Lower Churchill power by six cents a kilowatt hour could make Muskrat Falls financially viable, especially if NALCOR left the American marketing to a private sector partner and let that company keep the subsidies.  NALCOR already sells power at the Quebec-New York border to Emera.  Under a deal announced in 2009, the Newfoundland and Labrador company apparently gets about the same rate per kilowatt hour it got from a similar deal with Quebec that expired in 2009.  Any other financial details, like profits from seasonal price fluctuations, seem to flow to the private sector.  It’s hard to know for sure since details of the 2009 detail are confidential. 

And while Danny Williams claimed last week he’d lay any development deal for the very expensive Muskrat Falls version of the project in front of the public, he hasn’t lived up to similar promises yet on other projects.  Many of the key details of the 2007 Hebron deal remain shrouded in secrecy.  Amendments to the province’s open records laws in 2008 shield the publicly owned NALCOR from disclosure of its financial dealings even though it receives public funds to run the company and its subsidiaries.

Foreign tax credits aren’t the only way NALCOR could subsidise the cost of building Muskrat Falls.

Under the most recent version of the Lower Churchill described recently by Premier Danny Williams, 40% of the power from Muskrat Falls would come to eastern Newfoundland. NALCOR’s environmental submissions on the project make it clear, however, that the island portion of the province doesn’t need the power now or in the foreseeable future. The company also plans to keep its diesel generators at Holyrood running even after it builds any new lines to the island from Labrador.

Shipping power to a part of the province that doesn’t need it would give the public utilities board the legal basis to offset any losses from sales to Nova Scotia or into Quebec by offloading them on local ratepayers.  That’s because provincial laws require that the public utilities board to set rates that protect NALCOR’s financial position from its entire operations.  But that rate-setting power only applies to domestic rates. PUB doesn’t regulate export prices.  By using Lower Churchill power in the province – even when it isn’t needed - NALCOR could use local ratepayers to subsidise power exports. 

Taxpayers could get hit another way on the deal as well.  Any NALCOR debt for the project – likely to be at least $6.0 billion – will wind up on the balance sheet of the provincial government, one of the most indebted provincial governments in Canada on a per capita basis. 

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Williams’ shift sends Lower Churchill back to enviro drawing board for second time this year

As labradore has it, the panel conducting the environmental reviewing the Lower Churchill project is asking NALCOR  - the provincial government’s energy company - to submit a raft of new documentation now that the Premier has decided to completely revise the project.

Not surprising.

Not surprising at all.

Nor would it be surprising to find that both the panel and the Canadian Environmental Assessment Agency are privately spitting nickels in frustration at the twists and turns they’ve gone through to deal with this project.

Last January, the panel explained to NALCOR that the company’s submissions up to that point didn’t justify the project, as presented.  You got it.  NALCOR could not justify the project.  They also couldn’t demonstrate things like the claimed greenhouse gas emission reductions.  That’s because they don’t have any customers to show how the hydro juice will actually displace fossil fuels used in electricity generation anywhere on the planet.

NALCOR spent eight months  - until August 2010 - revising and revamping stuff, sending it along to the panel and then out to the interested parties for detailed review.

The Innu picked up on the fact that NALCOR and the provincial government were now substantially revising the project – the smaller dam and a whole new transmission routing – and said exactly that in their response filed with the environmental review panel. 

Based on the Premier’s comments at the end of October, the panel had to get the whole thing sorted in order to comply with the panel’s terms of reference.  Specifically, they are asking NALCOR to document:

a.  Changes to the project description, construction (including schedule) and operation;
b.  Transmission interconnection lines;
c.  Changes to accommodation facilities;
d.  New cost estimates;
e.  New socio-economic data and timing, particularly employment, work scheduling approach, labour requirements, goods and services;
f.  Changes to reservoir clearing and impoundment and validity of model results (mercury, flow, ice modeling, etc.);
g.  Harmful alteration, disruption and destruction of fish habitat and implications for the proposed Fish Habitat Compensation Plan;
h.  Potential aquatic and terrestrial impacts;
i.  Traditional land use and Aboriginal issues;
j.  Any other relevant information.

This is going to take another year or two, at least and the whole review is going to get way more interesting. 

The project the panel has right now consists entirely of two dams and a connection back to Churchill Falls so the power can head out through Quebec.  The line to Soldier’s Pond, near St. John’s is entirely within the province so that isn’t part of the federal review. But that’s it.  All that NALCOR is pushing is the same project Brian Tobin pushed in 1998.

Until now, the line to Nova Scotia simply didn’t exist except as a political throw-away line.  Events of the past two months have changed all that.  If NALCOR really intends to ship power to Nova Scotia – as discussed just within the past week -  they will now have to lay that on the table, in detail.  There will also be new interested parties looking for a say in what happens in the line from Newfoundland to Nova Scotia and then maybe in whatever connections will happen in New Brunswick. An already complex project just got a whole lot more complex.

Don’t forget that this project was supposed to be under construction right at this moment.  NALCOR was supposed to sanction it in 2009. 

This latest bad news comes on top of other setbacks and a reminder of the biggest inconvenient truth about the legendary project. Substantial chunks of the Innu community aren’t happy with the project. And if that weren’t enough, an analyst at the Atlantic Provinces Economic Council thinks the province needs to get its fiscal house in order before thinking of adding at least $6.0 billion to the public debt load.

But perhaps the biggest setback of all for Danny Williams’ plan was one entirely of his own making.  After rejecting a proposal to develop the deal with Hydro-Quebec and Ontario Hydro, Williams then spent five years  - entirely in secret - trying to get HQ to take an equity stake in the project. He even offered to set aside his political commitment that he would only sign a Lower Churchill deal if HQ provided redress for the 1969 contract.  HQ just wasn’t interested:  they’d already moved on to other big projects.

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