Over at Uncle Gnarley, JM’s at it again with the first of a two-parter on Nalcor and its problems with forecasting for Muskrat Falls.
Nalcor assumed that they would get 830 megawatts of electricity out of Muskrat Falls in the winter months when demand is highest. That’s the number they gave everyone else and, as you can tell by the language Nalcor uses, it was an assumption, not a solid forecast. Now they say they should be able to get 673 MW at Soldier;s Pond from Muskrat Falls. That’s a difference of 157 MW, not an inconsiderable difference.
Conservative leadership candidate Steve Kent may be running in third place in the race, but the guy makes bold promises.
His energy policy includes the pledge about Muskrat Falls that he will “bring this project in on time, and on budget.”
That’s a rather silly promise considering that the project – originally budgeted at $5.0 billion – is already officially estimated to cost $7.0 billion and will more likely cost something well above $8.0 billion before everything is done. For those of you doing the math, that puts the project officially at 40% more than when the project was approved in 2010 and more likely about 60% over budget.
Companies large and small in the province are under considerable stress as a result of Nalcor’s Muskrat Falls project.
The cause? This CBC story from Labrador mentions “steep wages” as the major issue:
"Over across the river, the average paying job is up to $40 an hour, and that’s before benefits and everything else, so it’s very, very hard to compete with," said [Mike] Hickey [of Hickey’s Construction].
According to CBC, Hickey’s been having a hard time keeping employees as a result. He just can’t compete with those kinds of wages.
Temporary premier Tom Marshall and natural resources minister Derrick Dalley released a 40-odd page document on Thursday. It’s was supposed to be a report of a committee of senior public servants appointed to provide something called “oversight” of the project.
Neither the report nor the committee actually reports on anything about the project. This first report is actually about re[porting on the project. More specifically it contains information about the oversight committee, all the other sources of “oversight” for the project, some boilerplate about project schedules and budgets, and a report from Ernst and Young.
That last document takes up about 12 pages of the total. It is dated July 25 and describes what Ernst and Young suggest would be the best way for this “oversight” to work.
If you wanted to know how to say absolutely nothing useful in 40 pages, this is the document to study.
. . . → Read More: The Sir Robert Bond Papers: Another tired dog and sway-backed pony show #nlpoli
Tony Collins loves Muskrat Falls.
He loves it so much that every now and again he takes the valuable space from his column in the weekend Telegram and lets loose with a verbal assault on the people who don’t love the project as much as he does.
The last time Tony got in a lather about Muskrat Falls was 2012. Back then, he was “tired” of discussing Muskrat Falls. Time to “get on with it”, he said, just like all the other blue-bleeding Conservatives.
The Telegram’s Peter Jackson used the most recent JM paper on consumer electricity prices and Muskrat Falls as part of his Wednesday column.
Peter made some worthwhile observations, so head over and read the column if you haven’t already. That includes pointing out that current forecasts have electricity prices in Ontario and British Columbia rising by 42% and 45% by 2018.
“All these numbers are maddening,” writes Jackson, “both in terms of scale and in terms of variability between Nalcor and critics.”
A couple of years ago, Liberal leader Dwight Ball said the Liberals would use earnings from Muskrat Falls to lower electricity prices for consumers in this province.
The Conservatives dismissed the idea at the time.
Then a couple of weeks ago, with news the cost of Muskrat Falls continues to climb, Premier Tom Marshall told the province that he and his colleagues had adopted the idea of using revenues from Muskrat Falls to lower consumer prices as their own policy.
That’s not all of it. To understand the importance of Marshall’s comments fully you have to start at the beginning.
Cost over-runs on Muskrat Falls as well as other costs not included in previous calculations by Nalcor will likely increase current electricity prices by almost double their rate in 2011, according to a recent assessment.
JM, a professional engineer who has worked extensively in the construction of large engineering projects, totalled up revised project costs and other factors including:
the most recent Muskrat Falls cost increases, the cost of a third line to the Avalon from Bay d’Espoir, a new line to western Labrador, lower-than-expected electricity demand, a win by Hydro-Quebec in its lawsuit, and, revenue from export sales of (Read more…)
Nalcor boss Ed Martin told everyone in the province last week that his pet project has increased in price by almost another billion dollars. It’s now more than $8.0 billion, when the 2010 price was $5.0 billion.
That wasn’t news. Martin and the provincial government knew that last December, as SRBP pointed out last December. We’ve known it since last year. Martin and the provincial government just refused to tell the people paying for the project about it when the people building it knew the costs.
Martin insists it is still cheapest. We know that isn’t true because Nalcor plans to buy cheaper electricity from elsewhere and import it here over the Maritime Link while charging local consumers for electricity that is far more expensive but that they aren’t getting.
Martin also said something to the effect that we are just paying ourselves for this project and the electricity . . . → Read More: The Sir Robert Bond Papers: Paying everyone but ourselves #nlpoli
$6.99 billion is the new cost estimate for the Muskrat Falls dam and the link to the island.
With that much money and with such a record of inaccurate forecasts, giving a cost estimate to two decimal places could only be a terribly cynical attempt at humour by the highly paid people running Nalcor.
Did Ed Martin, Gil Bennett and Dawn Dalley really think that people wouldn’t recognise the oldest and most transparent bit of retail psychology on the planet and think this project wouldn’t cost $7.0 billion?
It’s almost $7.0 billion.
Part of the problem the folks at Nalcor have had in trying to build support for on Muskrat Falls is that they never explain things completely, in plain English.
The result is that they look like they are hiding something .That is, they look like they are not being candid or sincere. They often come across as if they are not telling you the whole story.
Take as a fine example, the war of words that is erupting between Nalcor board chair Ken Marshall on the one hand and David Vardy and Ron Penney on the other. Marshall had a lengthy op-ed piece one Saturday, Vardy and Penney had a rebuttal on April 19 and now Marshall is back again.
Nalcor’s effort to have local taxpayers subsidize electricity exports to Massachusetts came up in the House of Assembly on Thursday.
Well, sort of came up.
New Democratic Party leader Lorraine Michael asked a couple of lame questions and got – not surprisingly – a few equally lame answers.
Here they are, in their entirety.
Muskrat Falls is over budget, big time. The latest estimate is $7.4 billion and climbing on a project stat was forecast at $5.0 billion just four years ago.
The project will wind up behind schedule, most likely.
There’s a good chance Nalcor won’t have enough control over water flows on the Churchill River to meet its forecast firm generating capacity from the smaller dam let alone the theoretical project at Gull Island.
But that hasn’t stopped Nalcor from pitching Muskrat Falls and Gull Island to the good folks of Massachusetts with electricity at prices that would be – conservatively – about one third of what Nalcor’s owners will have to pay for electricity from Muskrat Falls.
After 13 days, Nalcor boss Ed martin finally responded to a simple request from the Telegram’s James McLeod for an explanation of what impact a delay in construction might have on project interest costs.
Read McLeod’s original article from Wednesday Telly. it’s a tidy summary of what Martin told him about that specific issue.
The problem for taxpayers is that Martin did his usual job of only talking about what he wanted to talk about. He didn’t try to explain the whole thing to McLeod in such a way that he could actually get the full impact of what was going on.
Martin’s interview was highly political, in other words. Unfortunately for Martin, McLeod posted back-up information consisting of the audio of the whole interview plus a couple of pages of background from Nalcor. They reveal a lot more than the company has previously disclosed.
. . . → Read More: The Sir Robert Bond Papers: Muskrat costs at $7.4 billion … and climbing #nlpoli
People like things in life to fit together.
When things don;t fit together, people get upset. They get fidgety. They try to make things fit together.
It’s an idea regular readers know from other posts. Take this bit from a post from 2012 as a good example of how some people react when faced with a situation where what is happening doesn;t fit with their pre-conceived notions. The context was a decision by then-Premier Kathy Dunderdale to refuse to meet with the parents of a boy who had died tragically.
Some enterprising political science graduate student will be able to write a brilliant doctoral dissertation a few years from now on the parallel ideas in provincial politics and popular situation comedy.
She will find fertile ground in the Big Bang Theory, especially the episode the in which Sheldon explains a complex idea in physics theory using the analogy of a cat in a box that may be either alive or dead based on a random earlier event.
Nalcor, for example, is like a giant box filled with Erwin Schrodinger’s cats.
The folks at Nalcor held a media briefing at 11:00 AM on Tuesday. it was supposed to be about the release of the independent engineer’s review of Muskrat Falls done as part of the federal loan guarantee.
You may recall this was part of some great confusion a few months ago when the provincial energy department answered an access to information request by saying they didn’t have a copy of the report only to have it emerge that Nalcor had had the report since the previous November and briefed at least a couple of cabinet ministers on it in the meantime.
That led to a bizarro series of telephone conversations between energy minister Derek Dalley and the Telegram’s James McLeod that just added to the sense that Dalley – among others – had no idea what was going on in the world. Later on the provincial government announced they were . . . → Read More: The Sir Robert Bond Papers: How not to bolster public confidence: the umpteenth Nalcor edition #nlpoli
As of April 4, Nalcor was “still in the process of negotiating and letting some large contracts for the [Muskrat Falls] project.”
That’s the reply the Telegram got from Nalcor about missing the Muskrat financial update the company was supposed to issue at the end of March.
Haven’t got the information yet.
Well, that’s a bit troubling in itself, given that Nalcor is supposed to be reporting monthly to the provincial government on project costs. So if Nalcor is telling the provincial government that sort of information they can tell the people who are paying the bills (Read more…)
As it turned out, the “robust” oversight of the Muskrat Falls project that everyone was making a big deal about a few weeks ago is – as your humble e-scribbler suspected – an awful lot less than some thought it would be.
What a surprise.
According to a major Telegram story on Monday morning, the provincial government won’t be able to release some information about Muskrat Falls because of the provincial access to information laws.
There’s only one problem: the Telegram got the whole thing wrong.
The provincial government will be establishing a committee of senior public servants to co-ordinate information on Muskrat Falls for cabinet.
VOCM faithfully reported Premier Tom Marshall’s comments to reporters outside the House of Assembly. The people want more, says Tom, so the Conservatives are going to give the public more oversight. The new committee will receive monthly project updates and quarterly financial updates from Nalcor, according to the VOCM story. The committee will issue an annual report.
All new stuff supposedly.
Except it isn’t.
by JM and EGH
The BBC online news magazine carried an article on March 10 that should be of interest to all those following the Muskrat Falls debate.
“Do massive dams ever make sense?” summarizes the work of researchers at Oxford University. They studied more than 245 large dams completed between 1934 and 2007.
A large dam is one with a wall height of more than 15 metres. Muskrat Falls would meet the study criteria
The researchers found that dams ran 96% over their approved budgets, on average. One Brazilian dam went 240% over budget. With few exceptions, the researchers found that the dams were not economically viable.
Nalcor Energy is running the Muskrat Falls project without any independent oversight from the provincial government.
In two interviews with the Telegram’s James McLeod natural resources minister Derrick Dalley identified Nalcor boss Ed Martin as the government’s chief source of information on the project. According to Dalley, Martin passes information to the deputy minister of natural resources who passes it to Dalley.
Additionally, noted Dalley’s communications director in an e-mail sent between the two interviews, the “Departments of Finance and Natural Resources work in close collaboration with Nalcor Energy and have regular meetings and exchanges of information…”.
McLeod asked Dalley repeatedly about any use by the provincial government of its own independent sources to vet Nalcor’s work. Dalley replied that the department didn’t have the expertise to duplicate that of Nalcor. What’s more, Daley asked rhetorically, “why would we duplicate within the department [of natural resources]” the work going on . . . → Read More: The Sir Robert Bond Papers: Nalcor running own show on Muskrat Falls #nlpoli
From the Chronicle Herald:
In its letter, the board also points out that parts of the project have been delayed. That includes a 10-month change in the timeline for the transition to start-up and operations. Commissioning of the 180-kilometre cable is slated to be completed by October 2017 rather than December 2016. [emphasis added]
Two separate e-mails plunked the same article in the SRBP inbox on Friday.
Both highlighted the same quote from this National Post story on Muskrat Falls financing:
“The benefit of the guarantee was that no one had to look at the merits of the underlying project,” says Steve Halliday, managing director and head of global credit trading and distribution at TD.
So the investors bought into the project without looking at the merits of the project.
How many ways can that be bad for the people who will be stuck paying for it?