$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?
Most people in Newfoundland and Labrador never think about the electricity into their homes. They don’t know where it comes from and they certainly don’t have any idea how it gets from the generating plants to their fridges, washing machines, and television sets.
People are thinking about those things a lot more these days, in the wake of the recent power supply crisis.
One of the issues you will likely hear a lot more about in upcoming hearings by the public utilities board is about a new power transmission line from the hydro generating station at Bay d’Espoir across the isthmus and on to Holyrood.
Here’s some additional information about the project.
The action of the Soviet Union, Winston Churchill once said, “is a riddle, wrapped in a mystery, inside an enigma.”
Some people in Newfoundland and Labrador likely felt that way after Day Three of Kathy Dunderdale’s one woman crusade to deny that the province is experiencing a crisis.
Most people just cock their heads to one side and mouth the three letters W, T, and F.
It all started on January 3, 2005 and as of today, the Sir Robert Bond Papers is nine years old.
As your humble e-scribbler writes this on Thursday evening, the hang at Nalcor have managed the provincial electrical system so ineffectively that on the coldest night of the year so far, they are forcing people to live for unspecified periods in complete darkness without heat so that Nalcor can cope with the load on the island transmission grid.
These same people are now building a massive hydro-electric project that will produce some of the most expensive electricity in North America (Read more…)
Some of you may have been surprised to find out this weekend that Nalcor has a scheme to import cheap electricity into the province.
A couple of Nalcor officials could barely contain their excitement in an interview with the Telegram’s James McLeod. Here’s the idea in a nutshell:
Essentially, Nalcor would slow down or shut off some of its hydro dams and let the water build up in the reservoir, while buying cheap power from the market. Then later, during peak demand times on the mainland, Nalcor would run the hydro dams flat out and turn a profit.
You are probably scratching your head because the provincial government has always insisted Muskrat Falls was the cheapest way to supply the province with electricity.
Well, now you know they lied.
But that’s really the smallest implication of the weekend story.
In a letter last May to his federal counterpart, economic development minister Keith Hutchings described minimum processing requirements as the “only only policy instrument within provincial jurisdiction that ensures fisheries resources adjacent to the province result in processing jobs in Newfoundland and Labrador.”
For those who do not know what they are, minimum processing requirements are a condition that the provincial government sets on the licenses it gives to companies that process fish in the province. The name says it all: the companies have to process a certain amount of the fish in order to create jobs in fish plants around Newfoundland and Labrador.
There’s been a fairly steady row about processing rules over the past decade as the companies struggle to stay financially viable. There are way too many plants for the amount of fish available and there are way too many people in the province drawing pathetically small . . . → Read More: The Sir Robert Bond Papers: Inertia #nlpoli
1. Nova Scotian customers protected; this province not. (Telegram, December 11, 2013) by Ron Penney and David Vardy
The UARB has been empowered to protect the interests of consumers against their public utility, Nova Scotia Power Inc. (NSPI), a wholly owned subsidiary of Emera. Emera is a publicly traded corporation working in partnership with Nalcor Energy, a non-regulated Crown corporation, to build the Maritime Link. The government of Nova Scotia allowed the UARB to balance the interests of ratepayers and the proponent, a privately owned company, at arm’s length from government.
The government of Newfoundland and Labrador took a divergent course of action. They joined hands with their Crown corporation and made it immune from regulatory control.
They took away the powers of our own PUB, so it could not protect the interests of ratepayers. They sanctioned the Muskrat Falls project prematurely and weakened the ability of Nalcor to negotiate . . . → Read More: The Sir Robert Bond Papers: Friday Foursome #nlpoli
Cost estimates for the Muskrat Falls project have apparently jumped by 16% - $1.0 billion – in the past year. That’s based on information released by the provincial government on Tuesday and the details of the federal loan guarantee.
The new price appears to be $7.2 billion. The Decision Gate 3 estimate, released in October 2012, was $6.2 billion for the Muskrat Falls dam, a tie to Churchill Falls, and the line to Soldier’s Pond on the island of Newfoundland.
The new cost is 44% more than the $5.0 billion cost estimate for the dam and island link components of the project when it was approved in late 2010.
There’s something perverse about the way politicians these days use a memorial to the dead of two world wars in the last century as a backdrop for their own political spectacles.
That’s what Kathy Dunderdale did – yet again – on Tuesday night to tell Newfoundlanders and Labradorians about something she regards as truly wonderful.
“This is one of those occasions we should tell our children about,” said Premier Kathy Dunderdale on province-wide television Tuesday night, “and help them understand how important this moment is for them and their future.”
It will be important to mark this moment in time. We’ll have to help generations of Newfoundlanders and Labradorians not yet even born understand the magnitude of what Dunderdale and her associates have done.
According to a new commentary on the Muskrat Falls project by Memorial University economist James Feehan, legislation passed in December 2012 shields Newfoundland and Labrador Hydro from competition, thereby “reducing efficiency and innovation and preventing wholesale access to American consumers” by violating the open market principles on which the American electricity market is based.
Feehan concludes that potential gains for the province and consumers from unimpeded trade and the development of a competitive market will be blocked.
“Instead, Island ratepayers will be forced to pay for this expensive project, whatever the cost.”