For some time now, Nalcor has needed an extra line from Bay d’Espoir to increase the capacity across the Isthmus of Avalon.
They just kept finding excuses not to install it.
In January 2014, Nalcor chief executive Ed Martin told CBC’s Ted Blades that the line would be the most expensive option with additional generation on the Avalon being more cost-effective. Nalcor’s analysis, according to Martin, showed there was no justification for the extra line.
The rolling blackouts on the island of Newfoundland could warn of bigger problems to come, if a new paper by the analyst JM is correct.
Underestimating peak load and the potential impact on the Muskrat Falls solution
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Some observations:
1. Yep. It’s a crisis.
When you have a major utility cutting electricity to people in a blizzard at random, for random periods of time because it cannot supply enough electricity to meet demand, you have a crisis.
That’s what it feels like to the people in it. That’s what it is.
People never knew when their lights would be on or off, nor would they know for how long. The Newfoundland Power and the NL Hydro operations people who briefed the public were straightforward and factual. They did their jobs well.
The thing is that the public emergency system, including the politicians, didn’t clue in that randomly shutting off power to thousands of voters at a time over the course of several days might be a bit of a problem for the voters.
As the Telegram reported on Saturday, the Public Utilities Board has suspended consideration of Newfoundland and Labrador Hydro’s 2013 capital works application.
The company is having trouble answering a couple of questions.
Here are the ones that are causing problems.
At least two of companies whose long-term power purchase agreements were ripped up under the December 2008 expropriation bill will still get all their cash under long-term power purchase arrangements, according to natural resources minister Kathy Dunderdale.
Abitibi is not included in the arrangements, apparently.
Dunderdale told the House of Assembly on Thursday that:
…we made a commitment to both of those companies [Fortis and ENEL] that regardless of what happened with Abitibi, at the end of this process we would ensure that they were kept whole, that they were properly compensated for fair market value for the assets. The PPAs that they have with Abitibi would also be honoured, Mr. Speaker.
Dunderdale said that the provincial government’s energy corporation - NALCOR - is still discussing arrangements with the two companies. The power purchase arrangements date from 1997 and 2001. The exact duration is currently unknown to your humble e-scribbler but would typically be in the range of 20 to 30 years.
ENEL partnered with Abitibi on the Star Lake project to supply electricity to Newfoundland and Labrador Hydro. Bill 75 seized all the generating and transmission assets of the Star Lake partnership and revoked all the agreement related to it, as listed at Annex E of Bill 75.
Dunderdale made no reference to the other companies also affected by the seizure:
Fortis – the other company Dunderdale discussed – was a partner in the Exploits Hydro Partnership. Under a long-term power-purchase agreement, Exploits partnership sold power to Newfoundland and Labrador Hydro.
Dunderdale also admitted what Bond Papers readers already knew: the provincial government is paying for a long-term loan for the Exploits partnership. The outstanding balance on the loan is $59 million. The provincial government paid the 2009 instalment.
The hydro-electric assets are likely the only ones seized in 2008 that could generate any reliable revenue to offset the costs of environmental clean-up at former Abitibi sites in the province. Payment of loans and royalties to the companies other than Abitibi as if the expropriation never happened would significantly reduce any revenue NALCOR could gain from the assets.
Dunderdale’s admission today could also further undermine any legal cases the provincial government is pursuing. One of the problems government faced in recent Quebec court decisions on the Abitibi bankruptcy protection proceedings is that its environmental clean-up actions appeared to be aimed solely at Abitibi and were not part of the routine administration of provincial environmental laws.
Dunderdale’s admission makes it pretty clear that the government is treating some of the companies affected by the expropriation very differently from Abitibi.
Colouring the expropriation as aimed solely against Abitibi could also colour the move and undermine any defence of Abitibi’s NAFTA challenge.
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labradore makes a couple of very interesting points about Danny Williams and the failed New Brunswick Power deal, what with a major story that remains unreported in the mainstream a full six months after it broke.
Frankly it’s hard to know what’s more interesting here: Shawn’s failure, Danny’s intervention or the reason why the mainstream media continues to ignore a gigantic energy story in Newfoundland and Labrador that is directly related to the first two.
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Related: “Five years of secret talks…”
The way some people talk, you’d think this was the first time Newfoundland and Labrador’s energy company had intervened in the United States over wheeling rights for electricity from Labrador.
Well, for those who think that, guess again.
The year was 1997 and then-mines and energy minister Rex Gibbons announced:
"Hydro's objective is to secure the province's right to transmit electricity from Labrador to North American markets on terms that are open and non-discriminatory. … This is consistent with FERC's Order 888, requiring that `Customers in the United States should not be denied access to cheaper supplies of electric energy, whether such electric energy is from a domestic source or a foreign source'."
As it turned out, NL Hydro cut its first deal with Hydro-Quebec a couple of years later to sell surplus power from Churchill Falls. The first deal was a straight sale to Hydro-Quebec. The price at the Quebec border was basically the same as the price obtained at the US border or farther south, after all the wheeling and other charges were taken into account. As you can see from this 2000 backgrounder, NL Hydro has been on top of the whole issue for some time.
Curiously enough, the situation hasn’t really changed all that much in 10 years or so, despite all the chest thumping that’s been going on lately. NL Hydro gets roughly the same price per kilowatt hour from the April deal that it got from the previous deal - signed in 2004 – that saw the power sold to Hydro-Quebec at the border.
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The Telegram’s Rob Antle did a bang-up job of shedding some extra light on the ongoing skirmish between Newfoundland and Labrador Hydro and Hydro-Quebec over transmission of electricity through Quebec.
So far all anyone has had has been the Premier’s characterisation of the whole affair.
Well, for the record, here is the link to what appears to be the ongoing kerfuffle as it appears before the Quebec energy regulator agency, the Regie d’energie.
But if you scoot along to the United States Federal Energy Regulatory Commission – better known as FERC – you’ll find there a copy of a decision taken last November. This is one of the documents cited in Antle’s piece.
Now the interesting thing is that all of this fuss happened before last spring’s announcement of a deal to wheel power through Quebec and sell it to Emera. Newfoundland and Labrador Hydro will pay Hydro-Quebec $19 million annually in wheeling charges on the block of power.
The Premier was fulsome in his praise for the deal at the time:
“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…”.
Curious that he is now talking as if that whole deal never happened and that the provincial energy corporation can’t ship a watt of power through Quebec.
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A deal is close according to the Globe and Mail that would see Hydro-Quebec buy all of NB Power for $10 billion.
But the Globe story contains some of its characteristic shit reporting in the sub-head: “blocking access of other provinces' utilities to U.S. markets”.
There’s more the same drivel farther down the story but don’t buy most of it because it just isn’t true.
This sale can’t block access for anyone to NB’s power grid. It can’t, not if NB Power and HQ want to keep selling power into the US.
And from the looks of it at least one statement could be completely false: “Newfoundland and Labrador Hydro has complained to regulators in Quebec and the United States that Hydro-Québec's transmission arm is not providing it fair access to U.S. markets.”
You see Danny Williams has bitched alright, but he was bitching because he couldn’t get HQ to buy into the Lower Churchill.
But…
According to Ed Martin, Williams right-hand on any of a number of issues, there is no problem whatsoever with Hydro-Quebec. Thus it would be very odd if the company Martin runs was doing things – as the Globe reports - like filing formal complaints alleging some pretty serious unfair market practices against HQ.
All they have actually done is pursue a tariff through Quebec which they duly got. Your see – Shawn and Rheal take note – NL Hydro has already been wheeling power into the United States across lines in Quebec in a deal touted by none other than …wait for it…Danny Williams Hisself.
Notice there is no further detail on that in the Globe story. That’s a pretty good clue that Rheal Seguin and and Shawn McCarthy just didn’t do their homework. Instead, they seem to have opted for a half-backed paraphrase of an equally a half-baked version of the old Danny story and not rely on what Danny’s energy minister said.
In the process, the bitching morphed into a complaint filed with a Canadian or American utility regulator. Look farther on in the story and that’s exactly what they do, and as you can see they got the bitching story and the bit about the alternate transmission line wrong too. That’s what you get for quoting Liz’s thumbs and not doing any real research.
There’s also another completely asinine comment about HQ getting greater access to the US as a result. If the guys at the Globe even bothered to check their facts, they’d know that HQ already owns capacity on the grid through New Brunswick. The story has been out there since the spring. That’s definitely not the motivation for this deal.
The upside to this story is that New Brunswickers will shed a 90-year-old chronic debt pig and retire in the process what the Globe describes as 40% of public debt in one fell swoop.
Let’s just hope that while about half the story appears to be complete fiction, the bit about New Brunswickers shedding their debt burden turns out to be true.
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The Newfoundland and Labrador government is making quick changes to a 2008 law after lawyers for the Churchill Falls (Labrador) Corporation - CF(L)Co – raised questions about the impact of the bill on the company’s 1961 lease and rights to all property related to Churchill Falls.
Lawyers for CF(L)Co raised the issue with the provincial government’s NALCOR Energy company during talks on water management for the proposed Lower Churchill project.
The changes were tabled Tuesday in an emergency sitting of the House of Assembly.
It appears that - reminiscent of the 1980 water rights reversion bill - the 2008 bill stripped CF(L)Co of its lease.
In the original 2008 bill - Energy Corporation of Newfoundland and Labrador Water Rights Act - the Lower Churchill River is described as including “all waters that originate within the Churchill River catchment area and all rivers that naturally flow within the catchment area or from diversions into the catchment area.”
Clause three of the then stated that
any property in and rights to the use and flow of water, previously conferred by a grant, lease, licence or other instrument or under a statute of the province, or vested in, acquired by or accruing to a person by whatever means relating to the Lower Churchill River are extinguished. [Emphasis added]
By combining the two clauses, the new bill effectively cancelled the 1961 Churchill Falls lease. The 2008 law also blocked rights holders from any legal action and stripped them of any entitlement to compensation.
The bill became law on June 4, 2008. There is no indication when cabinet issued the license to the energy corporation, now known as NALCOR Energy.
The changes introduced in Tuesday’s emergency session make it plain that the 2008 water rights law applies only to the Lower Churchill and that, for absolute certainty, the 2008 bill “ excludes the area described in Appendix A to The Churchill Falls (Labrador) Corporation Limited (Lease) Act, 1961, and all waters while they are in that area.”
For its part, the Williams administration is downplaying the session and the hasty changes. In a news release, Dunderdale said that the act was never intended to cover Churchill Falls.
But the very fact the session was called to deal with one set of amendments to one bill suggests the issues involved are far from routine and that the legal implications of the water rights bill would be significant if left unamended.
Emergency or special sessions occur very rarely and usually only deal with extraordinary issues like war or labour disputes that threaten public health and safety.
Ordinarily – and if the implications of the bill were considered inconsequential or inadvertent - CF(L)Co and NALCOR could simply have made routine amendments in the regular fall sitting a condition of an overall deal on water rights management on the Churchill River.
Interestingly, the provincial government also tried to downplay the water rights bill in 2008, even to the point of making apparently misleading statements in the legislature.
In June 2008, natural resources minister Kathy Dunderdale told the House of Assembly that the bill was needed since government had decided against using the Lower Churchill Development Corporation as the vehicle to develop the Gull Island and Muskrat Falls power projects.
But the 2008 water rights bill didn’t repeal the 1978 Lower Churchill Development Act, nor did it remove the LCDC option for development of the Lower Churchill. The 2008 bill merely extinguished previously existing rights, leases, grants and licenses.
This marks the second time since 1975 that a Progressive Conservative administration in Newfoundland and Labrador has found itself in hot water over legislation related to Churchill Falls.
In 1980 Brian Peckford’s administration introduced the Upper Churchill Water Rights Reversion Act. The bill expressly cancelled the 1961 lease. A subsequent legal challenge by creditors led to a landmark decision by the Supreme Court of Canada that ruled the 1980 statute was illegal.
One of the influential factors in that case was public comments by politicians that identified the real purpose of the bill as being to undo the 1969 Churchill Falls agreement.
If the 2008 water rights bill effectively expropriated the Churchill Falls complex, it would be the second such move by the Williams administration in 2008. In December 2008, the Williams administration moved to seize assets of Abitibi, Enel and Fortis including hydro-electric generating facilities.
Revelation of the 2008 water rights ploy is the fourth Lower Churchill-related blockbuster news in a week.
On Friday, natural resources minister Kathy Dunderdale revealed that the provincial government had been trying unsuccessfully for five years to interest Hydro Quebec in an ownership stake in the Lower Churchill project.
Dunderdale told Open Line Show host Randy Simms and his audience that the provincial government proposed to “set the Upper Churchill [issue] to one side.”
This move came despite commitments by Premier Danny Williams that there would be no Quebec involvement in the Lower Churchill without redress for the appalling 1969 deal that sees Hydro Quebec buy electricity at better than 1/30th the cost for which it is sold to consumers. Williams has repeatedly railed against the 1969 deal as an example of a resource give-away by previous provincial governments.
The offer of an ownership stake to Hydro Quebec also flies in the face of Williams’ 2006 commitment to develop the Lower Churchill without any outside help:
"It's an opportunity for us to get back some of what we've lost on the Upper Churchill, and the fact that we're going to do this alone is significant," Williams said in an interview.
The Dunderdale revelation came after Williams accused Hydro Quebec of doing everything possible to block the Lower Churchill project.
Williams also said last week that his government would no longer plan to string hydro lines from the Lower Churchill through a UNESCO World Heritage site.
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Far from going it alone on the Lower Churchill or seriously pursuing a transmission route around Quebec, the Williams administration has been working fervently to get Hydro Quebec on board as a co-owner of the Labrador project.
Those efforts have been in vain, according to natural resources minister Kathy Dunderdale.
Dunderdale told VOCM Open Line show host Randy Simms on Friday morning that over the past five years, the Williams administration “got a path beaten to their [Hydro Quebec’s] door” in an attempt to have HQ become what Dunderdale described as an “equity partner” in the Lower Churchill.
Dunderdale described the Lower Churchill “piece” as a “win-win” for Hydro Quebec. She said that despite efforts by the Government of Newfoundland and Labrador there was “no take up [from Hydro Quebec] on the proposal.”
The new version of events offered by Dunderdale is at odds with media reports this week of Premier Danny Williams’ speech to the Canadian Energy Forum meeting in St. John’s last Wednesday. Williams reportedly accused Hydro Quebec of protecting its own interests and of blocking efforts to develop the Lower Churchill.
However, Dunderdale’s comments fit with a more careful reading of Williams’ remarks at the energy forum.
On Wednesday, Williams accused Hydro Quebec of blocking the Lower Churchill project by not being interested in it at all. Instead, the Quebec Crown corporation was pursuing other projects – like La Romaine – which Williams said was inferior to the Lower Churchill: Williams is quoted by the Telegram in a Friday story [not online] as saying “La Romaine is not as good a project as the Lower Churchill.”
Hydro Quebec is pursuing several projects within Quebec, including alternative sources of energy to hydro, all of which are aimed at boosting Hydro Quebec’s portfolio of capacity by more than 4500 megawatts.
That was known at the time Williams made the decision in 2006 to “go it alone” on the Lower Churchill. He also Williams attacked the other projects in 2006. At that time, he claimed that those projects would get to market before the Lower Churchill and hence would beat out his pet project. In 2006, Williams vowed to continue in spite of competition.
Friday marked the first time, however, that there was public acknowledgement the provincial government was actually trying to lure Hydro Quebec into an ownership position.
This week also marked the first time Williams linked a possible Hydro Quebec financial stake in the Lower Churchill to the 1969 Churchill falls contract. Williams told the forum that as a result of Hydro Quebec’s exorbitant profits from Churchill Falls, “the very least I would expect Hydro-Quebec to co-operate with us to the fullest on getting the Lower Churchill through.”
Previously, Williams has consistently tied any negotiations with Hydro Quebec over the Lower Churchill with “redress” for the 1969 contract. That’s inconsistent with offering Hydro Quebec an ownership stake in the new project.
Williams also said that Hydro Quebec had filed procedural applications in an effort to stall a hearing by the Quebec energy regulator - Regie de l’energie – into an objection filed by NALCOR/Newfoundland and Labrador Hydro over a regulatory issue.
That’s a bizarre way to describe things, though. Newfoundland and Labrador Hydro is one of several interveners in a decision on transmission rates for 2009. NL Hydro filed its notice seeking intervener status at the last minute. But since the rate hearings affect more companies than NL Hydro and NL Hydro is one of a dozen interveners, it’s hard to see how a routine regulatory process is part of a plot to frustrate the Lower Churchill.
What’s more, Williams’ claim flies in the face of successful efforts by NL Hydro to wheel power through Quebec. Hydro started the process in 2006. In early 2009, Hydro announced successful completion of a deal with Hydro Quebec’s transmission arm to wheel power through Quebec to markets in the United States.
Efforts to cut a deal with Hydro-Quebec while claiming something else are only the latest in a series of erratic moves and claims by the provincial government since 2003.
In 2006, Williams rejected out of hand a proposal from Hydro Quebec and Ontario’s Energy Financing Company to finance the Lower Churchill. The proposal came in response to a called for expressions of interest issued by the Williams administration. Under the proposal, Ontario and Quebec would buy the power and cover the costs of upgrading transmission facilities within the provinces and across the provincial boundaries. The proposal also included flexible options on financing the construction of the two generating dams at Gull Island and Muskrat Falls.
Williams tossed that proposal and several others aside in favour of what he characterised at the time as going it alone.
In 2006, Williams said publicly that investors should look to the Lower Churchill instead of projects Quebec because Quebec is politically unstable. Williams later apologised because people found the comment offensive but he did not retract his comments about Quebec’s political climate.
Williams has also sought financial support from others despite the “go-it-alone” claim. In successive federal elections, Williams has raised the idea of federal loan guarantees with federal party leaders. He has also tied federal financial support for the Lower Churchill as some apparent form of compensation for having to run transmission lines around Gros Morne national park.
The erratic public positions don’t stop there.
In 2008, natural resources minister Kathy Dunderdale indicated the provincial government was considering a law suit against the federal government over the 1969 contract. Later in the day, the provincial government backtracked.
In early 2009, an official with NL Hydro hinted that the provincial government was considering financing options other than the “go-it-alone” version. Little did the people of Newfoundland and Labrador know what the other options were.
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Even in the Land Through the Looking Glass that is Newfoundland and Labrador these days, a news release about an emergency session of the House of Assembly to deal with an amendment to a single piece of legislation is very odd, indeed.
As the official version puts it:
In the course of negotiating a water management agreement for the Churchill River, CF(L)Co advised Nalcor that it felt aspects of the Energy Corporation of Newfoundland and Labrador Water Rights Act infringed upon its water rights lease for the Churchill Falls development. This was not the intent of the act, and government has agreed to amend it so as to avoid any ambiguity.
First of all, one must realise, of course, that NALCOR is the parent of Churchill Falls (Labrador) Corporation or CFLCo. It holds 65% of the shares, in fact, and the two companies are not completely separate entities. They are rather closely and intimately connected, in fact.
Second of all, one must also note that the section of the Electrical Power Control Act 1994 requiring a water management agreement came into effect this past January.
In 2007, the current administration introduced this amendment in the legislature requiring two companies trying to generate hydro from the same river to come to some agreement on water sharing have one imposed by the public utilities board. For whatever reason the current administration did not give it force of law until early 2009.
Third of all, the original lease that CF(L)Co holds has been around since 1961. its provisions are well known to a host people inside and outside the provincial government. in fact, given the history of the lease, it’s probably one of the most well studied and well-understood pieces of legal documentation existing anywhere in Canada.
And that’s the really odd thing.
Well, aside from the oddity of the company effectively negotiating with Itself, and then notifying Itself in the course of negotiations that Itself had a problem with something Itself had been party to previously because that infringed on something else Itself had also been party to much earlier.
You see, there is nothing that would have been noticed during the negotiation of a water management agreement for the Churchill River since January 2009 involving NALCOR, Energy Corporation, Newfoundland and Labrador Hydro or CF(L)Co or whatever name the Crown version of Sybil is using at the moment that wasn’t painfully obvious to NALCOR, Energy Corporation Hydro or CF(L)Co or Sybil, as she then was, when the provincial government introduced the changes to the EPCA, 1994 in 2007 and then introduced the Energy Corporation of Newfoundland and Labrador Water Rights Act in early 2008.
What seems to be up for discussion here is something your humble e-scribbler pointed out back in February.
If that weren’t enough, changes to the Electrical Power Control Act – passed in 2007 but only quietly implemented after the expropriation in December 2008 – ensures that NALCO can enforce its control over future developments through the Public Utilities Board.
If one takes the implication from a set of Hydro Quebec questions about the Lower Churchill environmental assessment, the proposed water management regime appears to require that Churchill Falls be run in such a way as to maximize the generation at the Gull Island and Muskrat Falls dams under all contingencies.
This might adversely affect CF(L)Co and some of its contractual arrangements to supply power. It would also seem to go against several sections of the original lease.
If the government news release is clear – and that is by no means obvious – then the emergency session of the legislature is likely to be about passing an amendment that removes the last clause of the water rights act. That’s the one that requires a water management agreement be reached or that one be imposed by the public utilities board.
What’s so interesting – if that’s the case – is that this is coming in an emergency session and not simply held for the fall sitting. An amendment to the legislation could have been made later on with the requirement to produce the amendment being made a condition of any water management agreement.
There must be some sort of threat at work here, something much more significant than the prospect of an agreement between “Nalcor Energy or its subsidiary and CF(L)Co”. Incidentally, CF(L)Co is a subsidiary of NALCOR.
Rather, there might not be much hope of a deal at all in the near term. Instead, CF(L)Co - perhaps at the insistence of one of its shareholders – is protecting its interests and ensuring that the legal problems inherent in the EPCA amendment and the water rights act be eliminated now, without question or condition.
And if it was anything else, like say a repeat of the old water rights reversion act, then the thing would have been trumpeted in news conference held by the Premier. Something says he just wouldn’t be able to resist the temptation to grandstand against any slight.
Nope. This is something government is trying to downplay, somewhat.
But rest assured: emergency sessions like this one don’t happen every day and they sure as heck don’t come for a routine amendment, even if it is one intended merely to avoid “ambiguity”.
There’s something big behind this.
And it may not be pretty for the Lower Churchill project.
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The New Brunswick electricity is booked, with only 310 megawatts of capacity expected to come free in 2015, according to the Telegraph Journal.
Preliminary studies of the New Brunswick system commissioned by Newfoundland and Labrador Hydro show that while the existing grid could handle power from the Lower Churchill, the booked capacity - particularly across the New Brunswick to Maine intertie - is “the limiting factor.”
"When you reach an intertie and it is fully booked, fully reserved, you need to reach an agreement with one of the holders of the capacity," said Sylvain Gignac, the president of the NBSO [New Brunswick System Operator], which polices the province's transmission lines.
"It will be tough without building new transmission, except if they reach a deal with one of the biggest holders, which are Hydro-Québec Energy Marketing (HQ Energy Marketing Inc.) and New Brunswick Power (NB Power)."
In the current configuration, Newfoundland and Labrador Hydro would have to cut a deal with an existing user to ship what the Telegraph Journal says would be 740 megawatts through New Brunswick.
The alternative would be to build new capacity. Nova Scotia-based Emera is reportedly looking at a new connection from Canada into the New England market.
In an interview with the Telegraph Journal, Hydro chief executive Ed Martin repeated the standard Hydro forecast:
Commercial customers in Newfoundland and Labrador could take on some of Lower Churchill's power, Martin said, adding that the closure of a thermal generator could free up a greater need for the project's power there.
But New England remains the No. 1 market for the company.
"We would certainly target there but we're in business and anywhere we have a need that we can fulfill, we're going to consider that," Martin said.
Martin did not disclose what customers those might be. Environmental impact documents for the Lower Churchill project do include a demand forecast that shows a domestic need for power from the Muskrat Falls and Gull Island sites. As well, the thermal plant at Holyrood will be maintained in operation – not closed as suggested in Martin’s comment – to help manage the transmission of power from the Lower Churchill.
Hydro seems to be counting on Emera to add to the capacity across the international border. The recent deal between Hydro and Emera that sees the latter buy power from Hydro could well be part of a much larger, developing relationship between the two companies.
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1. Five year sale of 130 megawatts (MW), 2004-2009: $46 million annually. [See Note 1]
2. Price (per kilowatt hour) for the five years: 4.0 cents per KWH.
3. Two year deal to sell 130 MW of power to Emera: Minimum $40 million annually.
4. a. Price for Emera deal (low; $40 million for 130 MW): 3.5 cents per KWH
b. Price for Emera deal (high; $80 million for 250 MW): 3.6 cents per KWH [See Note 2]
5. Cost of wheeling (paid to Hydro Quebec Transenergie): $19 million.
6. Cost of wheeling: 1.6 cents per KWH.
7. Average consumer electricity price, New York, 2008: 16.9 cents per KWH. [21.125 Canadian cents per KWH at 25% exchange rate]
8. Average consumer electricity price, New York, June to Sept 2008: 19.825 cents per KWH. [See Note 3]
The figure at left shows pricing trends to 1999 for New York State. (Source: US EIA)
The information released thus far covers wheeling costs to the New York border.
Additional wheeling costs would apply for each transmission system through which the power is wheeled before delivery to the final consumer.
Emera is a broker, not a New York state energy retailer.
10. The GWAC is apparently still in place. This requires Newfoundland and Labrador Hydro to operate the plant at Churchill falls at peak efficiency to deliver at least 682 MW to Hydro Quebec during the winter months. This amount may have been increased under this deal to 800 MW to replace the power that was sold to Quebec from 1998 to 2009 as part of the GWAC but which will now be wheeled to New York.
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Note 1: Values in Canadian dollars. American prices in American dollars, except as noted.
Note 2: 130 megawatts is equivalent to 1.1388 billion KWH. 250 MW is equivalent to 2.19 billion KWH. The figures at Line 4 are derived by simply dividing the revenue by the power output. Since Newfoundland and Labrador Hydro did not release sufficient detail it is unclear if the revenue figures correspond to the power output or not. 130 megawatts at the higher price yields a price of 7.0 cents per KWH.
Note 3: Source: New York Energy Research and Development Authority
Running a block of 130 megawatts of power through Quebec will cost Newfoundland and Labrador Hydro $19 million annually over the course of a five year deal with Hydro Quebec Transenergie.
The wheeling arrangement facilities the sale of the power to American markets. The sale in the Untied States is brokered through Emera. The Emera deal is for a duration of two years. Newfoundland and Labrador Hydro is expected to net between $40 million and $80 million annually.
A previous deal to sell the same block of power directly to Hydro Quebec netted the Newfoundland and Labrador provincial energy company $46 million a year over a five year period. According to Le Devoir, Quebec sold the block on the American spot market.
In effect that would mean the deal announced Thursday merely replaces Hydro-Quebec with Emera as the broker. Hydro-Quebec still earns money on the project through its transmission arm and ultimately through its share of Churchill Falls Labrador Corporation, which generates the power.
Quebec energy minister Claude Bechard described the deal as win-win since it shows Newfoundland and Labrador had accepted the rules of the market instead of seeking special access to the Americans and a federal subsidy for a transmission line through Quebec.
«C'est aussi une bonne nouvelle pour le Québec en ce sens qu'on sait que Terre-Neuve voulait que le fédéral subventionne une ligne, voulait avoir des conditions spéciales pour exporter de l'énergie aux États-Unis. Donc, ils viennent d'accepter, si on veut, les règles du marché.»
Le Devoir said the deal includes a block of 800 megawatts of power for Quebec and 300 MW for Newfoundland and Labrador. Out of the 300 MW, Newfoundland and Labrador will ship 130 MW to the United States after satisfying local demand with the other 170 MW.
However, under the 1969 Churchill falls deal, Hydro-Quebec purchases the lion’s share of Churchill Falls power – more than 5200 MW – at a fixed cost of fractions of a penny per kilowatt hour.
This arrangement of 800 MW for Hydro Quebec seems to be an increase in the amount guaranteed for winter availability (GWAC) in Quebec under a special 1998 agreement. Under the original 1998 deal, Hydro Quebec received a guarantee on delivery of 682 megawatts during winter months and the Churchill Falls power plant would be operated at peak performance during the inter months to guarantee the additional power.
Winter is the peak demand time for Quebec. American peak demand is in the summer.
A news release at the time suggested it was a long-term contract valued at $1.0 billion. [link corrected; amount corrected] The wheeling arrangement may have involved more complex negotiations than it first appeared. The news release on Thursday about the Emera deal contained few facts.
Details of the GWAC deal have been removed from the provincial government website. The Hydro website now archives news only as far back as 2002. A search of the site for guaranteed winter availability contract using the sites own search engine returned no results. A google search for the same term yielded several hits, all of which have been apparently removed from the Newfoundland and Labrador Hydro website.
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State-owned energy company Newfoundland and Labrador Hydro has inked a two-year deal with Emera to for the latter to broker the sale of up to 250 megawatts of power from Churchill Falls into the north-eastern United States.
On the face of it, the deal looks like an arrangement to sell power on the spot market instead of the guaranteed purchase arrangement it replaces.
Premier Danny Williams said the agreements mean the province will get the “lion’s share” of the profits from the sale of the power. He said the $40 million to $80 million per year expected for the province comes after HQ and Emera Energy take their cuts.
Williams told members of the media today that, as the price of energy goes up, the revenue for the province will also increase.
By the same token, as prices go down so too would revenue, presumably.No details of the financing were released outside of estimates that Hydro would receive between $40 million and $80 million annually for the power, depending on electricity prices, the available power and the load capacity on the grid at the time of sale.
A separate five year agreement with Hydro Quebec Transenergie, owner of the Quebec energy transmission grid, facilitates the sale. News media reports have been erroneously playing up the Quebec angle on the story even though that aspect was pretty straightforward. Since the American federal energy regulator established a free markets policy in 1992, Canadian electricity markets have had to adopt what is known as an open access transit tariff for electricity that allows power to be wheeled competitively across the province at rates set by the provincial electricity regulators.
Quebec Transenergie didn’t have much choice, provided the existing grid could handle the load. by the same token it’s unclear what New Brunswick premier Shawn Graham meant when he stated that he would not stand by and allow energy to be wheeled through his province at the expense of development in his province. New Brunswick will have to abide by the same free market rules as other energy-producing provinces if it wants to sell power into the United States.
Interestingly, the sale is being handled by Newfoundland and Labrador Hydro, although the power is generated by Churchill Falls Labrador Company. While Hydro used to be the CFLCo parent, the two are now sister companies within the provincial umbrella energy corporation.
The power deal appears to replace a similar arrangement with Hydro Quebec known as the guaranteed winter availability contract. First signed in 1998, the GWAC saw Hydro recall 130 megawatts of power from Churchill Falls under the terms of the 1969 CFLCo development agreement and then re-sell the power to Hydro Quebec at a defined price far above the pernicious terms of the 1969 deal.
The original three-year GWAC contract was renewed for a further three years in 2001 and then for five years by the current provincial government. The five year deal expired on March 31, 2009. The five year deal generated $46 million revenues annually.
The GWAC was a way of forestalling a possible bankruptcy by CFLCo since the 1969 agreement returned insufficient revenue to keep the company solvent over time. The original news release, linked above contained a background presentation but this has disappeared from the provincial government website.
The original GWAC became the subject of some controversy with accusations arising from then opposition energy critic and current Hydro board chairman John Ottenheimer.
It is unclear from Thursday’s announcement if the GWAC and the related shareholder’s agreement within CFLCo have expired, been replaced or will be honoured in some other way. CFLCo is owned by Newfoundland and Labrador Hydro (65.8%) and Hydro Quebec (34.2%).
That information might change the claim today that Hydro captures the “lion’s share” of the revenues from the Emera deal.
Also unclear at this time is the status of the 225 megawatts of power from Churchill Falls that currently flows to western Labrador through Twin Falls Power Company. Twin Falls was a joint venture of the two iron ore companies in western Labrador and BRINCO. The power plant was shut down and TwinCo received a guaranteed price on a block of Churchill Falls power. That agreement expires in 2014.
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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.
In an interview with The Telegram, Premier Danny Williams admits there are considerable hurdles to overcome in developing the Lower Churchill hydroelectric project. The story isn't available online. [Amended; by request, we've removed the article from the post. If it turns up online, we'll supply a link.]
Williams repeated his January estimate that the chances of the project going ahead are 50/50.
"Well, at best that would be late 2009," said Williams. "We're going through the environmental process. We're attempting to reach agreement with the Labrador Innu. I'm optimistic that can happen. (Then we'll
decide) what the nature of the project will be and get the financials in place and be ready to rock'n'roll."
Take that statement as being an admission the project is unlikely to proceed at all. The crucial element is project financing. If that isn't even being reviewed until 2009 - at the earliest - then it's a well as saying the project is not happening in the near future.
In the interview Williams exaggerates the development issues, referring to them as hurdles, and claiming that the hurdles are larger than on other mega-projects either under development or under consideration in the province. The other projects are all private sector ones.
The development issues aren't larger.
It all boils down to markets for the power and financing to make it happen.
In 2005, Williams rejected a joint project with Ontario and Quebec which would have seen both provinces purchase the power and assist in the financing and construction.
Williams rejected the proposal without explanation, inserting instead a so-called "go-it-alone" option which had not be evaluated by Newfoundland and Labrador Hydro or government officials before it was publicly announced. However, even in announcing his own idea of having the provincial government build project on its own, he left the door open to equity partners.
Shortly after he went to the federal government looking for a loan guarantee, still insisting the provincial government would build the Lower Churchill project - estimated to cost between $6.0 and $9.0 billion - on its own.
Despite receiving no such commitment from Stephen Harper, Williams insisted Harper promised a loan guarantee and used it as part of his political feud with his fellow Conservative first minister.
Williams has announced only two potential customers for Lower Churchill power. The State of Rhode Island and Nova Scotia's Emera have signed separate memoranda of understanding committing to explore the possibility of purchasing Lower Churchill power.
Beyond that, Newfoundland and Labrador Hydro has had no serious discussions with potential external customers for the project's estimated 2800 megawatts. Even the plan to sell power to eastern Newfoundland - covering at least $2.0 billion of the total project cost - is contingent on the project going forward. That idea, floated by natural resources minister Kathy Dunderdale just before last fall's provincial election seemed to confuse the radio host interviewing her at the time since she insisted the plan wouldn't increase electrical power rates on the Avalon peninsula.
The Lower Churchill project figured prominently in several campaign announcements both during last year's Summer of Love pre-election spending spree and in the energy plan campaign prop.
There are some factual errors in the Peter Walsh story. The Wells administration came close to a deal on the Lower Churchill in the early 1990s, however political issues at the time and changed economic circumstances scuttled the negotiations.
Brian Tobin used development on Churchill River as the start of a re-election campaign he started in 1998. Ultimately none of his promised development occurred.
Roger Grimes had a tentative deal to develop the Lower Churchill but it was scuttled by political opposition within his own caucus and cabinet, heightened by the dramatic resignation of Hydro chairman and Williams associate Dean Macdonald from the Hydro board.
Walsh also repeats a claim that the 1969 Churchill Falls deal has produced $19 billion in revenue for Hydro Quebec versus $1.0 billion for Newfoundland and Labrador Hydro. Those figures are not substantiated by any factual analysis. It is, however, a popular myth.
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As for the shareholder's agreement and the GWAC, Mr. Byrne believes that the GWAC will bring no revenue to the province and will instead be used to keep the Churchill Falls Labrador Company solvent.He was absolutely right and it was known to quite a few at the time that the GWAC was essentially a plan to key Hydro in the black. Anyone who read the thing could see what was going on: Hydro recalled the maximum amount of power it was legally able to do under the 1969 Churchill Falls contract. Finding that it had no domestic customers for the power - quel surprise - Hydro then offered the power for sale to Hydro Quebec which picked up the same block it had just relinquished but at a substantially higher price than under the 1969 contract.
"This contract is a step in the right direction in helping this government meet its financial obligations," said Premier Williams. "Yet, we know we cannot balance our books on revenue growth alone. This is an important but small part of the solution."Of course that's exactly how the books were balanced, by relying solely on revenue growth resulting almost entirely entirely from high oil prices.
Ed Byrne On Churchill Falls
December 12, 2000
The day after Hydro officials released contracts signed between this province and Quebec over the Churchill Falls agreement. P.C. leader Ed Byrne was quick to respond.
On Monday, Newfoundland Hydro gave the media a briefing of two contracts signed in 1998, the guaranteed winter availability contract and the shareholders agreement. Hydro did not release a third contract, the 130 megawatt recall contract, deeming its contents too commercially sensitive. That strikes Ed Byrne as curious, since Hydro had no difficulty releasing the fact that it made $65 million profit from the three year contract - for Mr. Byrne, given that revelation, the 'commercially sensitive' excuse rings hollow. He says if Hydro won`t release the contract, it should be subject to a review by the Auditor General.
As for the shareholder's agreement and the GWAC, Mr. Byrne believes that the GWAC will bring no revenue to the province and will instead be used to keep the Churchill Falls Labrador Company solvent. And further still the shareholders agreement gives Quebec the run of CFLCO, by granting the minority shareholder the power of veto.
Ed Byrne says its time to stop the piecemeal revelations of details of the Churchill Falls contracts, details the province and Hydro defend vigorously, and he condemns as another historical resource giveaway.
The P.C.s will now push a motion in the legislature to have the contracts referred to the public accounts committee, where they can be subject to still closer scrutiny.