Kremlinology 36: Thinking with your ass

We’d all like to think that political ideas come out of politicians’ heads after careful thought and lots of research.

In Newfoundland and Labrador, government ideas tend to spring from the ass.

A whole bunch of people in the province are not happy with federal plans to close a coast guard emergency call centre and shift the work to the Joint Regional Search and Rescue Centre in Halifax.  Those people think the federal Conservatives pulled that idea out of someone’s ass.

Organized labour in the province is screaming blue murder about the decision.  The opposition parties in the provincial legislature are raising a stink.    They wanted to have an emergency session of the legislature and pass a resolution condemning the action.  Kathy wouldn’t do it.

Meanwhile, Premier Kathy Dunderdale has been taking her time trying to figure out out to get in front of this issue politically while not pissing off the guy on whom she is dependant for a loan guarantee to help finance her mega-debt project slash election gimmick, better known as Muskrat Falls.

Premier Kathy Dunderdale told reporters last week that someone in her office was trying to get a telephone call through to the Prime Minister. 

And a week later, she had to stand in front of reporters and tell them she was still trying to speak with her pal Steve on the telephone.

Well, either that or arrange a meeting whichever came first.

But on that most 19th century of technologies?

Nada on the telephone hooking up thingy.

The message is getting through, though, Kathy assures us.

And pressure is being applied using that passively voice sentence.

How, exactly is it getting through asked the brazen fish broadcast host Brian Callahan of fish minister Clyde Jackman?  No call.  No meeting.  How is the word getting through from the provincial government to the federals?

Jackman didn’t know.

He just said we’d all know soon what the feds decided to do for sure on the call centre. 

Now just to put that in perspective for those unfamiliar with anything that happened in the world before say 1999, that isn’t the way these things work usually. 

Even in the darkest hours after the collapse of the Meech Lake Accord, Brian Mulroney would still answer the phone even if he knew Clyde Wells was on the other end. 

The day Igor ripped through the province, Stephen Harper called Danny Williams to offer up whatever help Dan-o wanted.  That’s right.  Dan didn’t even have to wait to get his call returned.  he got one free from Steve.  Now Dan might have reportedly said no thanks because he didn’t want Peter Mackay to horn in on the credit for saving Danny’s bacon, but at least he actually did get the Prime Minister himself on the horn.

So Kathy’s message obviously isn’t getting through to the federal government on anything.  Her loan guarantee is looking a bit more dodgy than before, she doesn’t really have anything to offer as a distraction and her poll results are still sucking worse than the St. John’s sewerage treatment plant on full reverse.

Not a good place to be in politically, especially for a party that used to thrive on issues just like this. 

So what to do?

Offer to take over some bits of search and rescue in the province from the federal government.

Never mind the constitution.

Never mind that for decades provincial premiers have been fighting to keep the feds from dumping their responsibilities into provincial laps free of federal charge.

Never mind the cost to the public purse.

Never mind the fact mismanagement by Kath and her predecessor have left the government in a rough financial spot despite unprecedented government revenues  such that the next decade could make everyone look longingly on the 1930s.

Never mind, even, that Kath and her mates buggered up the Igor thing that looked suspiciously like an emergency of the searching and rescuing type so that you’d wonder if they could actually find each other in the dark, in a closet with both hands and a flashlight.

No.

Faced with being outflanked politically by her local opponents, Kath opted to show how much she is different from every other politician in a long, sorry line of politicians in this province.

She decided to think with her ass.

In the past week, she could have fired off a strongly worded letter to Ottawa.

She could have sent a fax to Peter Penashue, the regional minister who is also the intergovernmental affairs minister.

She could have told reporters that she had made clear the views of her government that this was just not on.

When asked about it, she could have gone for the sophisticated answer and pointed out that the loan guarantee was another issue and that she would always look out for the best interests yada, yada, yada.

Instead, she opted for the ass-thought.

And to make matters worse, Kathy blathered on in public to reporters about her blatant political impotence by telling them that she has been a week trying to figure out how to get Steve to call her back but without success.

You don’t have to look at her possible motives for offering to take federal responsibilities off their hands and pay for them with provincial cash to boot.  Nor do you have to look very hard to find the considerable numbers of flaws in her political bungling of what should have been a relatively small political issue.

What you can see pretty clearly is that Kathy Dunderdale and her political staff came up with this idea on the fly in a desperate attempt to be seen to be doing something on the issue.  All they’ve really done in the process is show seasoned observers that they really don’t have a clue.

It is also pretty clear that they really don’t have any sense of direction, generally.  That’s not surprising, mind you, given that when Danny did a runner, Kathy was only supposed to keep the office warm for a few months until his permanent replacement showed up. They’ve been coasting for a while.

But you would think that when the governing Tories decided to keep Kathy on a bit longer than originally planned, they’d have given her a set of ideas and some people who could actually manage these sorts of issues for her. That’s what experienced, seasoned political parties should be able to do after only seven years in office.

Should be able to do, but can’t in this case.

And just other other governments that couldn’t manage the small stuff, they went to the usual repository of Newfoundland political brilliance:  the ass.

After a mere seven years in office.

Not a good sign.

Not a good sign at all.

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US has surplus electricity

A conference in Halifax last week heard a tale of electricity demand in the United States that you certainly aren’t hearing from proponents of mega-debt projects north of the border.

Massachusetts-based consultant Danielle Powers said that the New England states have enough capacity to meet anticipated demand in the near term.  At the same time, Powers said the situation could change if up to 8500 megawatts of existing generation in the United States wound up out of production.

But still:

"When you look at (natural gas) prices right now, I don't know how the case is made financially to bring the resources in," she responded. "In the near term, unless I'm missing something, I don't see it working."

Price seems to be the key.  Another American consultant quoted in the same New Brunswick Business Journal article put it the same way.  John Kerry is policy director for the Conference of New England Governors:

"There will be, at some point in the future, the need for reasonably priced Canadian power," he said at the Atlantic Power conference. "The lower the price, the greater the chance they will purchase Canadian power."

Something says Kerry wouldn’t think that 14.3 cents per kilowatt hour plus wheeling charges through three Canadian provinces and up to five American states will wind up with “reasonably priced” power in New England.

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This week has 22 e-mails

The controversy over the provincial government’s bungling of the emergency response to Hurricane Igor got a bit more curious on Monday when labradore released a series of e-mails he obtained from the provincial government under access to information laws.

The e-mails document a part of the record of how Danny Williams wound up recording a segment of This Hour has 22 Minutes the same week as the disaster.  Coupled with documents released to the Packet in April, they undermine the provincial government’s contention that they needed three or four days to figure out how bad things were before they asked the federal government for assistance.

CBC was originally scheduled to record the Williams’ appearance on September 21.  They put that off until later in the week, but here’s where things get really interesting. 

At 11: 00 AM the day of the storm, Danny Williams’ publicist sent an e-mail to an unidentified person at 22 minutes  that included the following comments:

We've cleared his schedule as we will be going around the province visiting sites. Destruction is widespread already and the storm hasn't even hit full force yet.

At that point they knew things were very bad.  They also knew they’d be “visiting sites”.  They obviously didn’t need to assess the situation since the provincial government’s emergency response organization had all sorts of sources of accurate information on roads, hospitals, schools and anything else going on in the province.  Williams and his crew were planning the standard politicians’ sight-seeing tours of disaster areas.  

Now the official explanation for the four day delay in calling in federal assistance is that the provincial government needed to figure out how bad things were and what they needed to do.    Williams’ successor Kathy Dunderdale, Tom Hedderson,  the municipal affairs minister at the time and the current municipal affairs minister, Kevin “Fairity” O’Brien all have tried on variations of that same argument.

But before noon on the day the storm hit, the Premier’s Office already knew that “Destruction” was widespread.

Later on the same day,  Williams’ publicist wrote this:

State of emergency being declared in a few places already. Major damage and flooding. The place is a mess.

But what really stands out is what you get when you cross reference the comments by Williams’ publicist with situation reporters released to the Packet by the federal government about its response to Igor. For some reason they are on the CBC’s website and not available from either the packet or its daily big-brother, the Telegram.

In an e-mail giving the situation as of 13:15 PM September 21, a federal situation report contained this note:

Highway infrastructure is profoundly impacted. Of all events, Fire and Emergency Services NL (FESNL) has stated that this is by far the worst disaster that they are facing.

The note refers to a death that happened.

But bear in mind this information came to the federal emergency co-ordination team from the provincial government’s team at FESNL.  Public Safety Canada and the National Defence both had liaison officers at the FESNL emergency operations centre to make co-ordination easier.

So if the provincial government had such a handle on the scope of the problem, why did they hesitate to call in extra resources?

Good question.

So far there hasn’t been a good answer.

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Minister Chickenshit

Municipal affairs minister Kevin “Fairity” O’Brien continues to defend bungled decision-making at the topmost levels of the province’s emergency response system by citing the work done by the hard-working men and women who actually did the heavy lifting during Hurricane Igor.

Geoff Meeker’s got a solid post on the whole controversy over O’Brien’s unfounded and despicable attack on the integrity of the reporter and editor at the Packet for printing a story based on fact.

Two things:

1.  Fairity can’t refute the evidence so he follows the pattern of his idol and launches into character assassination instead.  Pure chickenshit. 

2.  Like poultry poo, O’Brien’s comments stink to the high heavens.  Every time O’Brien launches into one of his diatribes, he only fuels public resentment aimed at government over the whole issue. 

Keep going Kevin.

It takes a rare type of political genius to think that making a bad situation worse is a good idea.

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Will one of them change parties?

Good to his word from last February, former Conservative member of parliament Rex Barnes is challenging Ray Hunter for the Tory nomination Grand Falls-Windsor-Green Bay South.

Notice in a piece from NTV News that Barnes is rattling off a bunch of problems that have come up since the Conservatives swept to power in 2003.  That Internet connection one is especially noticeable given that the Tories coughed up $20 million to help several private sector companies expand their business in the province.

Now this is a place where party affiliation is often a case of whatever-gets-me-elected.  Ask Dipper cum Tory cum Connie Trevor Taylor about flags of convenience. Right off the bat, Rex is getting a few points for sticking with the team he started with.

But given that his constituents are complaining about stuff his buddies did or failed to do - as the case may be, it seems odd he wants to run for the Tories. As for incumbent Ray Hunter, he hasn’t always been so well loved inside the Tory caucus.

The nomination fight is on Wednesday.

It might be interesting to see if the loser  - whoever that might be – decides to change parties.  After all, this district is one that turned up on a few lists of districts the Liberals could pick up even while Danny was still around.  With temporary leader Kathy “Dropping-like-a-stone” Dunderdale, the Tories might have a hard time hanging onto this seat regardless of whether the Tories run Rex or Ray.

If one of them changes teams after the nomination, that might be a clue as to how Tories are assessing the chances of them hanging onto this seat.

And if Kathy Dunderdale turns up with a fire truck to give away, or someone starts laying pavement any time soon, you can bet its on the Tory list of vulnerable seats.

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Making the Most of Our Energy Resources (Part I – Electricity Reform)

In slightly more than a decade, fundamentally bad policy decisions by Liberal and Conservative administrations have turned the provincial government’s electricity corporation into an unregulated, unaccountable monster.

Such is the power of this hydra corporation as we enter the second decade of the new millennium that it can corrupt the public body  - the board of commissioners of public utilities - that is supposed to control the corporation in the public interest and turn it, instead, into nothing more than a tool of the corporation’s Muskrat Falls venture, all with the enthusiastic support of the provincial government.

The result of all this is that the people of the province will not be getting the most of their own resources.  Rather, they will pay dearly to supply discounted energy to other people.

No single act created the beast.

No single act will bring it under control.

But there is no question that the province’s electricity industry must be radically over-hauled.  If we allow the industry to continue on its current disastrous course, what should be a very rosy future for the people of Newfoundland and Labrador  may well turn out to be as bleak as the bleakest time in the province’s history during the 20th century.

In reforming the electricity industry in the province, we must keep an eye on our basic principles.

1. The entrepreneurial private sector must be the main engine of growth in a globally competitive economy.
2. The provincial government must regulate the industry to support economically and environmentally sustainable development.
3. At the same time, the provincial government must ensure that the people of the province – the resource owners – get their fair return at the lowest possible level of risk.

With those three elements in mind, let us now turn to some specific actions.

Privatize


While there may have been an argument in favour of nationalising the provincial electricity companies 40 years ago, those rationales have long since vanished.  Even some of the politicians who created the hydro corporation in the mid-1970s now think it was a bad idea. And if privatizing a Crown hydro corporation is a good policy for a former Parti Quebecois activist, the idea is well worth considering in this province.

Privatizing the provincial government’s energy corporation remains the best way to reform the provincial electricity industry almost two decades after a provincial government first pursued the idea.  Turning the corporation over to the private sector would net the provincial government significant cash while at the same time removing a huge debt from public shoulders. 

In the past 20 years public attitudes have changed.  A renewed sense of confidence in the public would support the creation – in effect – of several new corporations doing business within the province and expanding outside its borders.

The provincial government will need a plan on how to privatise the electricity corporations. They could entirely in the private sector from the start.  The provincial government could sell shares or accept offers – as Danny Williams was ready to do – for any or all of the company and its assets. 

Alternately, the provincial government could create Norwegian-style hybrid companies that are jointly own by the state and private share-holders. The public interest in hybrids would be managed through a parliamentary oversight committee similar to the type used in Norway and elsewhere to remove Crown corporations from decisions that may be based on too many partisan considerations.

In either approach, the new companies must be incorporated under the Corporations Act* and subject to exactly the same laws and taxes as all other companies in the province.

Embrace Competition


No matter what route the provincial government choses to take on privatization, it must sell off the generation assets seized from private sector companies in the 2008 expropriation legislation. This will be an important first step in smashing the dangerous monopoly created under the 2007 energy plan.  It will also send a powerful message to investors that the provincial government will not tolerate such grotesque abuses of power.

Reform would also mean replacing the provincial energy corporation’s  tangled mass of interlocking directorates and companies with clearly defined companies that look after electricity transmission (TransCo) and generation (GenCo).  GenCo could be also subdivided into the island generation assets and those in Labrador.

Churchill Falls (Labrador) Corporation should remain a separate company and possibly would be retained as a Crown corporation as proposed in 1994. The provincial government should move quickly to repeal legislation that supports the Lower Churchill Corporation, including the 1978 development corporation act.

In the future any Lower Churchill development should be undertaken by the private sector, based on sound financial plans.

For TransCo, the provincial government will also have to set an open access transmission tariff or give the public utilities direction to do so. OATT allows open access to transmission facilities. It is part of the competitive system fostered by American regulatory changes in the early 1990s. This is an important part of connecting the province into the North American electricity market system fairly and equitably.

Protect the Public


The 1994 version of the Electrical Power Control Act created a role for the public utilities board in managing the electricity industry in the province.  The provincial government should repeal a series of exemptions granted in late 2000 that effectively stripped the PUB of its power to ensure that the people of the province benefit from the electricity they need at the lowest possible cost, as mandated by the EPCA, 1994.

As part of the reform, the PUB leadership must be removed from the realm of political pork and patronage.  New commissioners should be appointed from the winners of an international competition.  Funding for an expanded commission that we will need to carry out the PUB’s new role should come from a combination of public funds and levies on the regulated industries.

The PUB’s first task will be assessing the province’s energy needs for the future.  This will determine what, if any new power sources might be needed.  The PUB can then re-allocate existing generation to meet the forecast need or call for new projects.

Set the Taxes and the Policies


In the new world, the provincial government will have a new role.  At first, politicians and bureaucrats will have to get used to a new role instead of involved in all sorts of high-powered negotiations for which they have usually turned out to be uncomfortably unsuited.

The provincial government will have to set broad electricity policy to deal with environmental issues:  how much of the province’s domestic supply should be from renewable sources?  Should the province allow natural gas generation?  What about nuclear power?

The provincial government will also have to set taxes and other charges that generators, transmitters and domestic retailers will have to pay to the people of the province in exchange for developing electricity resources. This could turn out to be an interesting new source of provincial government cash. There’s another post coming on that aspect.

The government would also have to set the broad rules that the public utilities board would follow when setting retail prices within the province.

Taken altogether, these reforms to the provincial electricity industry would:

• Reduce the public debt load.
• Produce an initial pot of cash for the provincial government from sales.  This would be followed by new annual revenue from taxes and other charges that the provincial government currently doesn’t collect.
• Promote sustainable development of new energy sources at the lowest cost for domestic consumers.
• Create a stable environment in which entrepreneurs can attract investment in order to develop the province’s full energy potential.

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* Corrected from Companies Act

The Weekly Traffic Report, June 13 to 17, 2011

1. Nalcor negotiating Muskrat transmission with Hydro-Quebec
2. Cross Sheila off your list
3. Titanic records available from UK National Archives
4. 24 French
5. Belize wants to buy out Fortis interest in Belize power company
6. 15 ideas (and more) for a stronger Newfoundland and Labrador – Introduction
7. Spend ‘em if ya got ‘em:  the Alberta version
8. 15 ideas (and more)  - Setting the Table
9. Building the fishery of the future (15 ideas series)
10. The looming debt problem:  update and Politics and Disasters

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Local pols to s**t bricks

Tom Hedderson, Fairity O’Brien and other lame local politicians will likely be re-thinking their political futures soon.

CBC announced Friday that Anthony Germain will be hosting the CBC’s flagship morning show in Newfoundland and Labrador later this summer.  He will replace Jeff Gilhooley, who is retiring in July.

His reporting career spans two decades from local radio in New Brunswick to CBC Radio's parliamentary bureau in Ottawa. In the nation's capital, Germain won investigative awards from the Canadian Association of Journalists for investigative reporting on both radio and television.

Germain has hosted CBC Radio's flagship political show The House as well as the local Ottawa morning show. He has been a guest host on The Current, As It Happens, and The Sunday Edition.

Germain is currently the CBC’s China correspondent.

Germain will be the latest in a series of heavy-hitter hosts on the corporation’s major morning broadcast in the province.  The CBC has three other morning shows serving regions of the province but the St. John’s show has the largest audience and has been growing in popularity with the local audience.

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“Letter perfect”? Guess again.

Municipal affairs minister Kevin “Fairity” O’Brien thinks that his government’s response to last year’s Hurricane Igor disaster was absolutely correct in every respect.

In fact, he is so convinced of the rightness of what he and his colleagues did that 

“I would not change a thing and it's fine for you to say, like looking at an email — a paper trail — and say that somebody up in Ottawa or someone somewhere else was scratching their head," said an emotional O'Brien [in a CBC interview].

You can hear the full O’Brien interview here:  CBC Radio St. John’s Morning Show.

CBC left the final word of their piece with someone who was coping with the disaster while cabinet ministers flitted around on helicopters “assessing” things and talking to reporters:

Eric Squires, the Anglican minister in Catalina and the organizer of relief efforts when people were left without necessities, said the provincial government failed residents.

"[I'm] really disgusted because we were desperate out here for water and bread," said Rev. Squires.

"I called [provincial] fire and emergency services to ask if we could get a boat to go across the bay to get some bread and water and they said 'No, buy what you want and send us the bill.' And during the same time they turned down [federal] help for us."

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Politics and Disasters

Even to people not desperately in need of help in the wake of last year’s Hurricane Igor, it was pretty obvious  - at the time - the provincial government was more geared to stoking and stroking political egos than anything else.

By the second or third day, media reports made it obvious that people desperately needed help, the provincial government couldn’t deliver help and that assistance from the federal government was a mere telephone call away.

Only a blind partisan or cockeyed optimist thought otherwise and  - given the most recent developments - only a complete fool would claim otherwise today.

Information released to the Clarenville Packet under federal access to information laws documents the extent of the bungling inside the highest levels of the provincial government.  we aren’t talking about the front line workers or contractors.  We are talking senior bureaucrats,  their political masters and their political masters’ legion of fart catchers.

An intra-agency meeting of the Regional Emergency Management Coordinating Committee (REMCC) was held the afternoon of Sept. 21. Representatives of Public Safety Canada, Environment and National Defense departments, and the provincial government noted resources were on standby.

Captain Michael Pretty of the Canadian Forces offered to have 180 staff deployed in six to 10 hours and the HMSC St. John’s and two helicopters mobilized.

The Canadian Coast Guard had 36 generators (125-700 watt) and 45 water removal pumps, with operators, available.

The province also had access to the national emergency stockpile of food.

The province declined all these offers.

And so it went day after day.

Evidence mounted that the provincial government simply was completely incapable of responding and at still the politicians refused to make a simple request for aid.

While the federal agencies standing by to assist initially thought the provincial government had a grip on things, by mid morning on September 23 they had changed their minds.  The Packet quotes a federal situation report that power was out in wide areas, food supplies were running short and citizens were having to take matters into their own hands to deal with shortages of everything including medical supplies.

By the time provincial officials realised they were in the middle of a mess, they could not even draft a simple letter to request aid.  The Canadian Forces liaison officer had to include a letter in an e-mail, asking the officials to print it off, sign it and send it back.

It still took the provincial government 24 hours more to respond and even then it very consciously and deliberately restricted the aid to the barest minimum.  As the Packet reports:

The official RFA [request for assistance] was sent by the province to the federal Department of Public Safety at 2:07 p.m. on Friday, Sept. 24.

It asked, specifically, for “Sea King helicopters and the ship-based naval support necessary to maintain operation of said helicopters.

“For greater certainty, the province of Newfoundland and Labrador is requesting no other assistance from the DND at this time," the province stated in its request.

Thankfully, the federal officials ignored that last direction.

As Canadian Forces ships aircraft and personnel streamed into the province, the Prime Minister and Premier took a helicopter tour of a part of the region.

Danny Williams’ staff, meanwhile, had been co-ordinating a television appearance for the Premier all through the hurricane aftermath. 

Williams left the Prime Minister later in the afternoon of Friday, September 24 and drove to a downtown St. John’s school where a crew from “This hour has 22 minutes” and a classroom full of elementary school students waited to record a sketch due to air the following week.  The sketch featured Williams spewing some characteristic invective.

Just to illustrate the extent to which the provincial government’s bungling and miss-placed priorities were apparent at the time, take a look at posts your humble e-scribbler made last September.  The first came on September 23. There’s another on September 24.

The second, a week later, highlighted the way in which the government’s public statements seemed designed to stroke political egos rather than provide concrete information to people affected by the disaster.  It turned out to be an apt metaphor for what was going on inside the disaster response headquarters.

As the Packet notes, the first provincial assistance request to the federal government focused entirely on cash to pay compensation for victims.  At a time when thousands were still stranded, lacking power and with dwindling food supplies, the provincial authorities were busily handing out claims packets and looking to Uncle Ottawa for cash.  Meanwhile, the politicians were flying around staging photo ops for the evening news programs.

Danny Williams’ successor had a chance on Thursday to address the rather blindingly obvious shortcomings of the provincial government’s response.  Kathy Dunderdale said everything had been handled very well.  Not satisfied with the completely foolish response alone, Dunderdale went farther.  The delay in asking for federal help was merely to ensure the provincial officials had proper plans.  After all, said Dunderdale, all those soldiers, sailors and air crew would merely be an added burden on local communities already reeling from the disaster.

Yes, friends,  in Kathy’s world, help is actually a hindrance. In the face of such comments, it doesn’t matter if Dunderdale is genuinely so stupid that she spouts such nonsense or merely thinks the rest of us are even more stupid such that we’d believe such a thing.

What matters is that her remarks are  - without doubt or debate – utterly wrong.

They are stupid in a way that gives the word a new meaning.

The Canadian Forces came to Newfoundland last September with clothing, food, and shelter not only for themselves but for others as well. That is precisely why they came in the first place.  They stood ready from the beginning to come from the moment the storm hit.

Had Danny Williams and his officials asked for them on the first day only to send them home shortly after, the whole affair would have cost them nothing.  Under federal law, a provincial request for aid means that the federal government picks up the whole tab. 

In other words, there was no legitimate reason for any delay in asking for help. 

Yvonne Jones is right:  Kathy Dunderdale owes the people of the Bonavista and Burin peninsulas an apology for the mess regardless of whether it was caused by political egos or old-fashioned incompetence.  If Dunderdale had half a wit about her, she’d have acknowledged the problems and as the new Premier committed to right the wrongs.

Instead she told a monstrous whopper of a tale.  You could call it a lie, but frankly, you cannot be sure that Dunderdale actually knows that what she said is drivel.  Dunderdale might just be so inept that she must rely on briefing notes written by another incompetent.

And that is makes Dunderdale’s response all the worse.  The public can loathe the showboat and all his puffing last September.  He’s gone and no longer matters. She could have distanced herself from him safely and cleanly with no cost.

But Dunderdale didn’t. 

She turnered up, yet again.

Last fall, your humble e-scribbler noted that natural catastrophes sometimes turn out to foreshadow political disasters.  Well, no one could have foreseen the political disaster that is Premier Kathy Dunderdale.

Put Kathy Dunderdale’s demonstrated incompetence on Thursday over Hurricane Igor together with a series of events during her leadership (including her disastrous poll results in May) and you can bet she is going to get quite a surprise come the fall.

That is, Dunderdale will get a surprise in the fall unless a few of her more capable caucus mates decide to get rid of her before then for the good of the party and the province.

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PEI to study electricity supply

The Government of Prince Edward Island has appointed a five member commission to examine the province’s energy supply and pricing.

The commission — which includes Mike O'Brien, David Arsenault, Roger King, Gerald Morneau and Richard Hassard — will spend the next year looking at the future of P.E.I.'s electricity costs.

The province has some of the highest electricity rates in the country. Most of the power is purchased from outside resources — largely New Brunswick.

One potential source for the island is electricity from Muskrat Falls.

Speaking at a conference in Halifax on Tuesday, Bill Marshall, New Brunswick’s former electricity grid regulator said that Muskrat Falls could provide the Maritimes with a source of power cheaper than imports from New England.  It could also allow the region to shut down environmentally dirty thermal plants.

What Marshall didn’t say is that this is only possible because Nalcor and the provincial government plan to sell Muskrat Falls power to consumers outside Newfoundland and Labrador below the cost of producing electricity at Muskrat Falls. Consumers inside the province will pay the full cost of production plus guaranteed profits to Nalcor, Emera and Newfoundland Power.

According to Premier Kathy Dunderdale, Muskrat Falls power will cost 14.3 cents per kilowatt hour to produce, assuming the project meets all current cost projections.  That’s about four times the current wholesale cost of electricity in Ontario.

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Strengthening the Treasury

Consider the simple reality.

The current provincial administration has more money – without considering federal transfers – than any other government in the province’s history.

Most of the government’s money comes from oil.

Oil prices are at persistent record high levels.

There are fewer people in the province than in 30 years.

Yet the provincial government is going to be running record deficits for the next five years.

And if Wade Locke’s analysis is only partially true, the provincial government will run record deficits virtually every year for the next decade and more and build debt to unprecedented, unthinkable levels.

That’s all without factoring in the Muskrat Falls mega-debt project.

We got into this state because successive provincial administrations believed in overspending today and ignoring tomorrow.  Over the past seven years in particular, the scale of fundamental mismanagement has been breathtaking. Danny Williams and his associates haven’t done anything others haven’t done before. It’s just been astonishing that they have followed a reckless course despite all the experience in this province and elsewhere that warned against it.

To appreciate just how well people in this province understood what needed to be done compare the recently Alberta expert panel’s economic strategy with the the 1992 Strategic Economic Plan developed over the course of two and a half years of widespread consultation.  Allow for the difference in the two provinces and it is remarkable how similar the language is.  Both talk about the need to develop infrastructure, broaden the economic base, promote entrepreneurship and soundly manage provincial spending.

We’ll get to the economic policies in another post in this series.  For now let’s toss out some ideas that the provincial should implement in order to make sure the public treasury is definitely managed prudently to provide a prosperous and secure future.

There are at least three basic principles that underpin these ideas:

First, recognise that the role of the provincial government is to create a climate in which personal and collective innovation in the private sector can create economically and environmentally sustainable jobs.  Government just isn’t good at it and decades of experience in Newfoundland and Labrador shows it is a bad idea for government to become as heavily involved in the economy as it has become in the past seven years.

Second, recognise that while government spending can play an important role in balancing the ups and downs of the economic cycle, it is a very bad idea to make people dependent on public spending for their primary economic activity.  It didn’t work in the Soviet Union and it won’t work here.

Third, non-renewable resources won’t last forever.  As such, the government must – as a moral obligation to the people it serves – adopt strict policies that maximise the long term benefit from resource revenues.

Now the ideas:

1. Balance the province’s books every year. Mandate that all publicly owned entities follow the same policies.
2. Spend percentages of non-renewable resource revenues in one of four ways.  Put a percentage toward an annual spending increase but limit annual spending increases to the average rate of inflation for the previous three years.  If the Conservatives had merely increased annual spending increases to five percent – instead of 10% and more – they could still have stimulated the economy when they needed to,  built needed infrastructure and had provided for a steady and reliable growth despite the recession plus they would have avoided the looming debt and very real deficit problem. We’ll get to public sector issues – including wages - in another post.
3. Put another percentage into annual capital works spending that is based on a five year plan of maintenance and new construction.
4. Put another percentage into real debt reduction.   All the current administration has done so far is pay off any debt that came due anyway.  Some of that was already covered by money put aside in other years in something called sinking funds.  The current crowd haven’t made a meaningful cut to what the provincial government owes in total. That must change.
5. Put a fourth percentage of non-renewable revenues into a sovereign wealth fund as they have done in Norway.   Invested properly, this fund can provide new income for the provincial government every year long after the last barrel of oil is gone from the ground.
6. If non-renewable revenues skyrocket in any year, commit to apply the bonus to debt reduction and to the investment fund.
7. Review program spending every five years to make sure that programs meet a real need and are run as efficiently and as effectively as possible.  Scrap programs that are no longer relevant or that have outlived their usefulness.  At the same time…
8. Introduce new programs only if they can be funded within existing spending levels or if they can be financed with new money outside government.
9. Adopt the most demanding and transparent public audit and reporting policies in the world.  End the current misleading practice of reporting the public accounts on both a cash and accrual basis without explaining the difference to people.  The people deserve to know exactly how the government is handling their money.
10. Work with the federal government to eliminate duplication of services and increase co-operation as with economic development (e.g ACOA and ENL) and taxation (e.g. HST).

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The looming debt problem: update

Canadian household debt is at at record levels according to report by the Certified General Accountants Association.

The latest report adds a new twist to a discussion of the potential risks for consumer debt in this province discussed in a post last week.

Table 17 from the report shows provinces with  segments of the population considered to be highly vulnerable for debt growth and financial problems associated with heavy debt loads.

Another table (19 on page 74) shows levels of savings for Newfoundland and Labrador are relatively low.  At the same time, house prices increased at the highest average level of all provinces for the period 2007 to 2009. 

According to some thinking, the economic vulnerability represented by small savings could be offset by the relatively high level of equity that could be represented in the high house prices. That would theoretically make Newfoundland and Labrador no more risky than Alberta where the savings levels are the highest in the country while house prices have dropped lately.

Small problem.

House prices can shift dramatically while savings and investments tend to hold value over a long period of time.

The summary of that chapter’s conclusions also sounds a strong warning, even allowing that the conclusions are for the country as a whole, not just one province.  Incidentally, this is all one paragraph in the report.  The layout is changed here to make reading easier:

First, the positive signs of improving labour market conditions portrayed by the unemployment rate and the hiring intentions of firms may be deceptive. Labour market conditions continue to be fairly weak: the market’s ability to keep up with the increase in working age population recovers slowly (and even deteriorates in some of the provinces); the long-term unemployment rate continues to increase while the decline in the proportion of discouraged workers has not  yet materialized.   Weak labour market conditions may suppress the short-to-medium term growth in earnings while increased and more prolonged absence of employment may decrease individual’s life-long earnings.

Second, certain socio-economic groups (i.e. youth, workers with low educational attainment, lone parents, and self-employed) may be seen as vulnerable as they are faced with higher labour market stress due to elevated likelihood of longer-term unemployment and reduced employment options.

Third, individuals in vulnerable groups that reside in provinces having a weak labour market may be at a higher risk of elevated financial stress. 

Fourth, the recent recession and economic recovery brought only slight improvements to the conventional savings out of income; at the same time, accumulation of savings through wealth has been weakening in the past several years. Neither active savings from income, nor passive savings through equity are evenly distributed across provinces and households. The lack (or low levels) of active savings may jeopardize individual’s ability to pay and honour debt obligations in the future.

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Cross Sheila off your list

Remember the December deal and all the claims that the provincial Tories would all be standing for re-election, bar none?

Yeah, well you could take that one to the bank. Not.

As your humble e-scribbler told you a while ago there are a few Conservatives who will be cashing out rather than take another run at fattening the pension even more.

For the record, here’s the partial list from last week’s post:

The provincial Conservatives, for example, included a pledge to run again for all incumbents in the December deal that installed Kathy Dunderdale for a longer interim term than originally planned.

Before then, the slate of incumbents likely to quit included Dunderdale herself.  Finance minister Tom Marshall was reputedly headed for retirement, along with Sheila Osborne , Bob Ridgley*, Roger Fitzgerald, Dave Denine and a few others who were pensionable.

Michael Connors of NTV tweeted on Wednesday that St. John’s West incumbent Sheila Osborne is leaving.

Local rumblings also have it that minister of something or other Dave Denine will also leave a seat vacant should some Mount Pearl municipal councilor want to take a shot at a promotion and a bigger salary.

Can Sheila’s bro Tom Ridgley be far behind?  How about Fairity O’Brien and Harry Harding?

It could only be a matter of time. The Tories are a little over halfway through their list of nominations and some districts are conspicuous by their absence.

Stay tuned.

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* Corrected from Tom Ridgeley in original.

Spend ‘em if ya got ‘em: the Alberta version

In light of the suggestion the provincial government needs a blue ribbon panel of experts to decide how to safeguard the provincial economic future, take a look at what is going on in Alberta.

Conservative premier Ed Stelmach appointed just such a panel headed up by former federal cabinet minister David Emerson.

And, not surprisingly, the Stelmach government is likely to reject all of the panel’s suggestions. You can find an excellent discussion of it in a Jeff Simpson column from the end of May.

The Stelmach government’s decision is hardly surprising given the history of Conservative governments in Alberta since Peter Lougheed left office.  But it is also hardly surprising since the current Conservative administration in this province is basically following the same policy of spending that Alberta Conservatives have been following. 

What the locals haven’t adopted is the low tax, small government mantra of their western cousins.  They also don’t have the enormous oil and gas resources.

What they share with their Alberta relatives is the same fundamental attitudes that the panel identifies as being serious risks:  complacency and insularity.  As you can read on page 16 of the panel’s report:

Alberta has resources the world needs, but we cannot assume the world will beat a path to our door. Boom times can breed complacency. We can forget we are facing stiff global competition, and that our productivity lags that of competitor countries…

The report criticises the fixation with “selling stuff” to people.  There’s a parallel in this province, incidentally, in the drive to build expensive electricity projects at huge cost.  The current provincial government talks about it as a strategic investment but, in reality, it is nothing more than “selling stuff” to people.

What the Emerson panel described as a strategic approach is decidedly different:

We must take steps now to ensure we realize the full benefit of our energy resources and broaden our economic base in the new global context. As we look outward, we must expand our thinking beyond simply “selling stuff” to those who want it.

Now is the time to think more broadly about investing strategically in businesses in other parts of the world, attracting investment to Alberta, becoming part of the international networks that are creating exciting new knowledge and technology, and finding specialized niches we might fill in global supply networks. We must invest in helping Albertans engage with the world and prosper in a global economy, carefully considering how we use our current public wealth to build a legacy for future generations.

Interesting ideas; ideas worthy of further discussion, especially since they harken back to strategic ideas developed in this province almost two decades ago as the way we could move forward successfully in a highly competitive world.

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Building the fishery of the future

To look at the fishery in Newfoundland and Labrador is to see as clear an example as one may find of the fundamental bankruptcy of the sort of old-fashioned politics that has existed from the earliest of times and that persists right down to modern day Ottawa.

It is not business, as your humble e-scribbler has said before, as much as it is a Frankenstein experiment in social engineering.  Politician after politician after politician has used the fishery for his own political gain. The fishery is the heart and soul of the province, we are told.  Mention fishing and you will find politicians eager to display their passion to rise to its defence against all manner of assailants, most of them entirely fictional.

Is there fundamentally any difference between John Efford, say, and Ryan Cleary? 

Absolutely not.

Cleary with his crusade to find out what happened to the fish is merely the latest version of the old blow-hard Newfoundland politician.  Cleary’s already mounted his ass and headed off to find the missing fish.  If by some miracle, Cleary gets the crowd in Ottawa to fund the junket-commission he wants, he will look, inevitably, in all the places where the information isn’t.  If he doesn’t get the cash – as he won’t – Cleary will claim this is yet another example of Canadian exploitation of the poor benighted fisher folk who form the moral core of a long-suffering society blah blah blah blah.

Either way, Cleary will garner  column inch after sound bite from reporters at home who are always ready to spew the bullshit to the punters or from mainland scribes hard up for copy and who know as much about the eastern-most part of Canada as the average Hmong tribesman does and seem to care even less.

Passion is their thing.  After an early embarrassment and dismissal from cabinet, John Efford rebuilt his political profile as a fisheries crusader who was as full of it as Cleary is, or Tom Rideout or any of a dozen others.

For politicians, all this will be good to the last fish. Kathy Dunderdale is vowing to step into the latest problem at the Marystown plant so that fish are processed in the province and not sent outside where they can be turned into food or some such far more cost-effectively than they can be handled in places like Marystown. 

This is the same problem, incidentally, that Fishery Products International had with the same species and the same plant on a few years ago.  Kath should recall.  She and her colleagues decided the way to handle that was to smash FPI to bits.  The lucrative bits went to foreigners.  The headquarters building changed hands a couple of times within a year and now houses some lovely provincial government tenants. The other bits wound up going to Ocean Choice, the Torily-connected fish processing company that is now experiencing some sort of karmic retribution. 

What goes around, comes around, apparently and in a small province, it seems to pick up speed on the return trip.

So firmly entrenched is the political desire to interfere in the fishery that the current fisheries minister is refusing to accept a dramatic proposal from the fishermen and the processors to do the sorts of things people have been saying they needed to do for years. 

The current provincial government’s decision only further emphasises the extent to which the fishery is controlled by people who have no business in the business.

The solution is to turn control of the industry over to the only people who can decide for themselves how best to run it:  processors and harvesters.

Not surprisingly, therefore, the first bold proposal to reform the fishery is for the provincial government to accept the recent fisheries reform proposal without further delay.

The second idea is to eliminate all subsidies to the industry within two years. They drain the provincial treasury and serve only to prop up businesses that otherwise wouldn’t make it.

The third idea is for the provincial government to abolish processing licenses with the elaborate red tape restrictions that go with it.  The current system helps to keep too many people and too many plants working in an industry featuring low wages, limited capital for investment and with no prospect that new workers will enter the industry to keep it going.

Instead, license processors as businesses under occupational health and safety rules or anything similar legislation. Beyond that?  Nothing. Let processors open plants, close plants or reorganize plants as they see fit based on the business’ finances.  If a plant goes bust, then it goes bust. 

The end result will be fewer plants but fewer plants is exactly what the industry needs.  Where those plants will be and how many that will exist are not things anybody can or should predict.  What will emerge at the end of the change will be stronger companies that are more likely to survive in a highly competitive global market.  In the end there might only be one big company – looking, not surprisingly like FPI – and a bunch of small niche companies.  There could be a couple of bigger, integrated operations but the people in the industry will be able to make a decent living from their work and their industry will be more attractive than the current mess is.

Fish harvesting also needs an overhaul.

The fourth idea is to establish a system of fish auctions using internationally recognised grading systems would improve quality and the cash that fishermen get for their landings.

Processors from any province would be required to bid for landings at the auction sites in a daily competition. Alternately, processors could operate their own fleets or make supply contracts with harvesters.  The two systems could operate side-by-side but harvesters would have a choice. 

Increased competition would also ensure they wouldn’t be victimised in a system like the old one where they had no choice but sell to the handful of locals in a closed system. It would also give fishermen greater control over their own individual operations.

Changes to the harvesting side of the industry will need federal involvement, but federal politicians and bureaucrats would have good reason to support a system that reduces the political and financial headaches of the current system.

Fish harvesting businesses would also profit by the fifth idea, the elimination of the byzantine system of gear restrictions and vessel size restrictions that serve no useful purpose in a modern industry that is run as an industry. “Buddying-up”  - having several licenses on one boat – is an example of how people in the industry are already trying to make sensible changes to meet the economic pressures of the industry.  They are limited in how far they can go, however, by the inertia that keeps in place a system of rules that may have worked decades ago but that simply make no sense any more.

Something that may have worked once but that no longer makes any sense:  that is really the tale of the entire fishing industry in Newfoundland and Labrador, if not all of Atlantic Canada.

To build the fishery of the future, we have to let go of ideas that simply make no sense any more.

We must turn the industry over to the people who are trying to make a living in it.

They know best what to do.

We just need to give them a chance.

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Updated Bonus Idea: Dismantling the Stalinist provincial bureaucracy that is stifling the fishery at the provincial level will allow the fisheries department to focus on new priorities. 

The biggest of these would be encouraging aquaculture .

The next biggest would helping to promote a new identity for local seafood based on quality.  This would be a key part of ensuring the future fishery is internationally competitive.

Titanic records available from the UK National Archives

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Belize wants to buy out Fortis interest in Belize power company

From Fortis:

“The Government of Belize (the "Government") issued a media release on Friday, June 10, 2011 announcing the Government's interest, "...in purchasing majority shares in BEL so as to assume control of the company." No purchase proposal has been received by Fortis Inc. ("Fortis" or the "Corporation") (TSX:FTS).

Fortis holds an approximate 70% ownership interest in BEL, an integrated electric utility and the principal distributor in Belize, Central America, following investment at the invitation of the Government in 1999. In addition to its investment in BEL, Fortis owns Belize Electric Company Limited ("BECOL"), a non-regulated hydroelectric generation business that operates three hydroelectric generating facilities in Belize.

In June 2008 the Public Utilities Commission of Belize ("PUC") issued a rate order that has had a significant negative impact on the financial condition and operations of BEL. The order effectively disallowed the recovery of previously incurred fuel and purchased power costs in customer rates and set customer rates at a level that does not allow BEL to earn a fair and reasonable return. BEL appealed the PUC rate order to the Supreme Court of Belize. On March 15, 2011, the court rendered its judgment dismissing BEL's application and finding that, among other things, the generally accepted concept of Good Utility Practice is not applicable in Belize. BEL has appealed this judgment to the Court of Appeal of Belize; however, a hearing is not expected until the first quarter of 2012. On May 16, 2011, the Supreme Court of Belize granted BEL's application to enjoin the PUC from engaging in any rate making proceedings or taking any enforcement or penal actions against BEL pending the appeal of its judgment. BEL has been in default of covenants under its long-term lending agreements since 2008 and has had no access to credit during this period.

As at March 31, 2011, the assets of BEL represented less than 2% of the total assets of Fortis; the combined assets of BEL and BECOL represented approximately 3% of the total assets of Fortis.”

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15 ideas (and more) – Setting the Table

Our economic vision for Newfoundland and Labrador is that of an enterprising, educated, distinctive and prosperous people working together to create a competitive economy based on innovation, creativity, productivity and quality.

Strategic Economic Plan, 1992

Our social vision for Newfoundland and Labrador is of a sharing society which balances its economic and social interests, cares for its disadvantaged, nurtures its human and physical environment, celebrates its quality of life and traditional values of individual respect and community responsibility and provides opportunities for personal and collective achievement.

Strategic Social Plan Consultation Paper, 1995

 

Within a mere two decades, Newfoundland and Labrador transformed almost two centuries of economic backwardness into unprecedented growth.

And yet, as we enter the second decade of the 21st century, a number of factors, some identified in the early 1990s, threaten to rob Newfoundlanders and Labradorians of the bright future they worked to achieve through careful planning, steady work, and a steely determination to endure.

Public sector debt remains at record levels.  Rather than reduce debt, the current Conservative administration plans to increase the debt burden still further by building an economically unsound megaproject.  What’s more, the most recent economic forecast predicts that the current administration’s policies could triple the debt within a decade.  That is on top of the burden from the  Muskrat Falls megaproject.

Changes in the province’s population, forecast in the early 1990s, have started to create pressure for new government spending and more government spending.  Just paying the interest on the growing debt will rob money that could be helping to pay for those new services.

The highly competitive global economy that has emerged in the past 20 years, coupled with fall-out from the recent recession, will demand even greater inventiveness if businesses in Newfoundland and Labrador will meet the challenges these changes present. 

Yet, over the past decade government policy has fostered greater social and business dependence on government hand-outs.  The result is a fragile economy that will grow less robust and more susceptible to set-backs.

The answer to these challenges can be found in the principles that lay at the heart of the 1992 Strategic Economic Plan: 

• We must foster a change in people.  We must renew genuine pride, self-reliance and entrepreneurship. We must once more become outward-looking, enterprising, educated and innovative. 
• We must change government.   Our people do not need saviours or demigods.  They can run their own affairs.  We must introduce fundamental democratic reforms.  Decisions about education, health and economic development must be made closer to the people directly affected by them. The role of government is to create an environment in which the private sector can develop economically and environmentally sustainable  businesses.
• We must change relationships. We must replace the chaotic, secretive and highly centralised government of the past decade, with mature, professional and open government based on sound long-term planning and a genuine understanding of the province’s long-term interests.  Beyond that, we must forge new relationships among governments, business, labour, academia and community groups of the sort envisioned two decades ago. We must build a strong relationship between the federal and provincial governments in order to deliver government services as efficiently and effectively as possible while ensuring that the people who pay for those services can hold the right government to account for what they do.

The ideas that will follow in posts over the coming days and weeks are nothing more than the starting point for discussion.

Only through vigorous, free-wheeling public debate can we build a mutual understanding among all the people of the province on both the necessity of change and of the specific changes themselves.

Change is not a luxury.

Change is not merely possible.

Change is essential.

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Next:  Building the Fishery of the Future

Nalcor negotiating Muskrat transmission with Hydro-Quebec

Nalcor is currently trying to strike a deal with Hydro-Quebec on wheeling power through the province to other markets

Read all about it in the Toronto Star.

Newfoundland and Quebec are now trying to negotiate a deal in which Nalcor could get a right of way to move its power through Quebec, directly to Ontario.

It’s buried in an article in which Nalcor chief executive Ed Martin tries to play up the Muskrat project as being cost competitive.

Sounds a bit like the 1964 ploy is still on the go.  That’s the one where Smallwood talked up the Maritime route as a way to get a deal with Quebec, the real preferred option.

Makes sense:  after all, despite all the hysterics and the bullshite to distract the media and the punters, Danny Williams tried consistently via secret talks to try and get Hydro-Quebec to get involved in the Lower Churchill. Local media still haven’t reported that story almost two full years after Kathy Dunderdale blurted it out in public. 

Of course, the Star also doesn’t tell its readers that they would be getting power heavily discounted compared to the price Martin will force on the good taxpayers of Newfoundland and Labrador.

The article notes that Ontario currently pays a wholesale price of 3.15 cents per kilowatt hour for electricity.  Muskrat will cost Newfoundlanders 14.3 cents per Kwh according to current estimates.

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