VISION 2041

February 2012
Written Submission
to the Public Utilities Board of Newfoundland and Labrador
with respect to
the Least-cost Analysis and Review
of the Proposed Muskrat Falls and Labrador/Island Transmission Link
Hydro Electric Project
http://www.pub.nf.ca/applications/muskratfalls2011/files/comments/13-MA-2012-02-28.pdf

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                                                                                                 2013
19 June 2013

The New Chinese Connection (from The Sir Robert Bond Papers)
http://bondpapers.blogspot.ca/2013/06/the-new-chinese-connection-nlpoli.html

17 June 2013

From today's Telegram:-

"Jeers: to the left hand meeting the right hand. And not in applause, either. While provincial government energy projections insist we’ll need more electricity for more home heating (cue Muskrat Falls), provincial government climate projections released last week now forecast warmer weather that will reduce the number of days we need to use home and industry heating by 12 per cent. The new forecast is also pointing towards a five per cent increase in precipitation in both the fall and winter — good news for the province’s existing on-island hydroelectric reservoirs. Quick! Warn Nalcor and Ed Martin!"

and my posted comment on the above:--

Maurice E. Adams- June 17, 2013 at 08:38:13
"If a 5% increase in wintertime precipitation is anywhere close to increasing the island's hydro by 5%, then that could mean a 41% DECREASE in the need for Holyrood (a reduction of Holyrood's 870 GWh for 2012 to about 520 GWh)...... On top of that, add on a further reduction due to about 4 weeks less "frost days" (heating days) due to temperature increase, especially in winter when Holyrood is used most, and the reason for Muskrat Falls (a so-called need to replace Holyrood) evaporates.............. Result? Virtually free power for Labrador's (and Danny's) mining companies --- courtesy of BILLIONS of dollars from island ratepayers...... On top of that, the mining industry (with the new Mining Industry Advisory Committee and Government-Mining Industry Working Groups), perhaps headed up by our proxy Premiers (Danny Williams and Ed Martin) will now be our Government by Proxy."

15 June 2013

Nothwithstanding that Holyrood's share of the island's energy production has decreased from 29% in 2002 to 10.5% in 2012 (see below, as well the Holyrood page), Nalcor has touted high fuel prices for Holyrood as a key reason (if not 'the') biggest reason why Muskrat Falls should proceed (in other words, pure economics).

Before buying into such a misleading point of view, readers should be aware that it is NOT HIGH OIL PRICES that pose a risk to the province's economy, government coffers, or to ratepayers/taxpayers ----- IT IS LOW OIL PRICES (for every 1 dollar increase in oil prices, the province gets approx. an additional $25 million annually in revenue, while fuel costs for Holyrood increases by only about $1 million ---- 25 times less).

Low oil prices therefore are about 25 times as much of a risk to the province (and to taxpayers) as high (Holyrood) oil prices.

Who in their right mind would borrow BILLIONS of dollars, increase our provincial debt by BILLIONS of dollars, lock ratepayers (their children and children's children) into a 50-year 'take or must pay' contract, for power they don't need, for an unsubstantiated RISK that oil prices MIGHT go up costing an additional $1 million for every dollar increase ---- WHEN REVENUES WILL, AT THE SAME TIME, ALSO ALL GO UP -- 25 times as much?

Multi-billions in unneeded expenditures for an unjustified RISK that oil prices MAY go up, when, even if they did, it would be 25 times the benefit to the province's taxpayers.

1/3rd of government revenues come from our non-renewable oil resources (WE THEREFORE NEED HIGH OIL PRICES).

If oil and gas prices are LOW, where will the money come from (especially with Muskrat Falls coming on stream) to pay off our ever increasing provincial debt? ---- It will have to come from ratepayers or taxpayers ---- through either increased electricity rates (a HIDDEN tax ----- PRIMARILY ON ORDINARY RATEPAYERS ONLY ---- NOT ON MULTI-BILLION DOLLAR MINING COMPANIES ---- and therefore a key reason government supports Muskrat Falls), or it will have to come from increased taxes (which, for political reasons, government would prefer to avoid).

High oil prices affect our electricity rates only marginally (Holyrood supplies only 10% of our needs) . And as oil and gas prices go down, so do rates.

Not so with Muskrat Falls, where we (not the mining companies) are stuck with a 50-year multi-billion dollar debt and rates that will increase 2% (at least) EVERY YEAR for 50 years (that is, on average, about a $12 million INCREASE every year). If oil and gas prices or demand goes down, with Muskrat Falls, electricity rates or tax rates will have to go up EVEN MORE ---- WAY UP.

Where else will government and Nalcor get the money to pay our debt?

Accordingly, this is not the time to be increasing our debt --- to the tune of BILLIONS OF DOLLARS.

Below are a few very relevant excerpts from today's G & M:--

"Shale oil and gas production in the United States is soaring and American oil imports are falling fast. Oil and gas prices are down and the forecasts are bearish, a remarkable turnaround from 2007 and 2008, when $200 (U.S.) a barrel oil seemed somewhere between possible and likely (the benchmark Brent price is now about $104). The shale revolution is about to hit Britain and other parts of Europe.,,,,,,,,,,,,

Thanks to the shale-drilling bonanza, U.S. crude oil production grew by more than one million barrels a day – equivalent to 14 per cent of output – in 2012, the biggest increase ever, ..............

Surging oil and gas production has allowed the United States to reduce oil imports to 7.5 million barrels a day from a peak of 12.5 million. The International Energy Agency predicted the United States will become the world’s biggest oil producer by 2020, overtaking Saudi Arabia and Russia. The American gas glut could soon turn the United States into a liquefied natural gas (LNG) exporter and the American trucking industry, probably the world’s biggest single consumer of diesel fuel, is talking about converting its fleet to natural gas.................

According to the Energy Economist, Mexican oil exports to the United States have decreased to 972,000 barrels a day in 2012 from a peak of 1.6 million in 2004. The United States is importing almost 700,000 fewer barrels a day of Nigerian oil than it did in 2007"

http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/the-repercussions-of-a-shale-revolution-on-oil-exporting-nations/article12579566/

                                        So "PURE ECONOMICS" says --- "stop Muskrat Falls NOW"

14 June 2013

86% of the island's energy production is from the island's existing hydro sites (Source: Nalcor's 2010 Telegram article). A 25% reduction in frost days during the winter combined with a 5% increase in wintertime precipitation (see below) could mean that Holyrood's share of the island's energy production is reduced from 29% in 2002 (down to 10.5 % by 2012), and to less than 5% in future years--- virtually negating in total any need for Nalcor's high cost, unaffordable Muskrat Falls power.

13 June 2013
Important :---- It is well known that to the extent that there is an increased energy need (if any) on the island, it is for "peaking" power during the winter time only.

Now Nalcor says Muskrat Falls is viable because it has forecast an average demand increase on the island of 0.8% annually ---- FOR THE NEXT 50 YEARS.

However, the province has just released a new study (by MUN) that predicts that over the next 50 years (the same time period that Nalcor relies on for the viability of Muskrat Falls), that concludes that "During the winter season, average daily temperature is expected to rise by about 3ºC in all regions on the island" http://www.turnbackthetide.ca/whatsnew/NL%20Climate%20Change%20Projections%20-%20Summary%20Presentation.pdf

The report goes on to state that "Temperature rise will result in fewer “heating degree days”, meaning less demand for energy to heat buildings .... Frost days can be used as a proxy for winter length and severity. The number of days with frost is expected to decline by between 25 (3.5 weeks) and 32 (4.5 weeks) on the island .... The average amount of precipitation per precipitation event is expected to increase by about 5% across all seasons and all regions of the island. The absolute level of precipitation is expected to increase the most during the winter months and during the fall months for the Avalon Peninsula"

Accordingly, the island's winter time energy needs will decrease and the island's existing hydro sites will provide more power IN WINTER --- when it is needed most, thereby reducing the need for Holyrood (and Muskrat Falls).

What will that do to Nalcor's forecast 0.8% yearly increase in energy demand -------- keeping in mind that the National Energy Board has previously concluded that if demand is low, Muskrat Falls is NOT the lowest possible cost option?

It is time to put a hold on further expenditures at Muskrat Falls.

Full technical Report

11 June 2013   (a MUST READ)

NALCOR ANNUAL GENERAL MEETING, 2013

By TONY ROCKEL

"Intrigued as I am by the secrecy and urgency surrounding the Muskrat Falls project, I took time out this weekend to view the video of Nalcor’s 2013 annual general meeting.

I had hoped to learn something—perhaps to understand the need for this urgency—to understand Premier Dunderdale’s almost religious fervor for a project that I could only see as doomed from the start.

I had already looked at Nalcor’s fantastic figures from previous presentations, and wondered if I might be missing something, especially in light of Aaron Levenstein’s comment that “statistics are like bikinis: what they reveal is suggestive, but what they conceal is vital.”

As it turns out, there was not a statistic to be seen at the AGM: the presentation was more like Salome’s legendary dance of the seven veils, except that all of the veils remained firmly in place throughout the entire performance. Nothing of importance could be revealed, and every cause for concern was immediately dismissed.

The other major difference I can see between this dance and the original performance is that it’s not the head of John the Baptist that’s on the platter—it is the head of the Provincial Taxpayer. I leave it to readers to determine who it is that’s playing Herod.

Especially alarming was Ed Martin’s glib dismissal of serious concerns about the instability of the North Spur. You only have to watch the video of the 1978 quick-clay landslide at Rissa, Norway to see that this is a catastrophe in the making. Anyone who has viewed Cabot Martin’s in depth presentation on this topic will appreciate my anxiety.

“Oh, but we’ve already worked those problems out”, Ed assures us. If so, then why does the job description for the engineer hired by SNC Lavalin include “geotechnical investigations” and “experience with deep cut-off walls”—the latter being code-talk for another huge dam?

Are we really to believe that drilling down through 270 metres of marine clay and sand to reach bedrock, then locking a 1 KM wide dam into that bedrock would be a piece of cake? Who is Ed Martin kidding when he tells us that this part of the project has already been factored into the total cost?

Throughout the meeting, Mr. Martin kept repeating “the least cost option” like a mantra that would somehow make it so, and “we can’t afford not to do this” – like someone in a post-hypnotic trance. I soon began to wonder if I was watching a remake of The Manchurian Candidate.

Ed Martin seems totally unaware of what’s already happening in the world of distributed energy technology. He admits that he has not read the Edison Electric Institute’s report on disruptive technologies and their threat to megaprojects like Muskrat Falls. Instead, he refers darkly to THE ALTERNATIVE-- an unthinkable alternative universe into which we’ll all be plunged unless we start work immediately on Muskrat Falls.

Strangely enough, he did talk about wind power—only to dismiss it at the beginning of the meeting, but then, almost at the end of the meeting, he spoke about the 5000 megawatts of wind power we could develop “incrementally”—but only after we’ve developed the 850 megawatts of hydro power at Muskrat Falls.

Mr. Martin apparently envisages no significant departure from our present day energy technologies over the next 30 or 40 years—he actually spoke in terms of a hundred years of hydroelectric generation from Muskrat Falls.

This was how the whaling captains thought, just before whale oil was replaced almost overnight by kerosene for lanterns. This was how blacksmiths and buggy manufacturers thought, while people like Gottleib Daimler and Karl Benz were working feverishly to develop the internal combustion automobile engine.

Similar sentiments might have occupied the mind of your average dinosaur on that fine day, some 60 million years ago, when the Earth, in her serene passage around the sun, was moments away from her encounter with an asteroid six miles wide."

                                                            ***
Tony Rockel

Note to readers:-   Summary information and a link to Cabot Martin's North Spur presentation (as well as a link to the Rissa, Norway 1978 landslide video is available HERE.)

09 June 2013

A "plunge in oil prices?"
Below are excerpts from the June 8, 2013 Globe & Mail article --- "OPEC’s slipping grasp on the world’s oil market" http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/opecs-slipping-grasp-on-the-worlds-oil-market/article12431746/

"...a nightmare scenario for the (OPEC) group. China, Russia and other countries are taking early steps to emulate the North American unconventional oil boom of recent years, which has the U.S. on track to overtake Saudi Arabia as the world’s largest oil producer...The risk is that such a scenario leads to cutthroat competition and a flood of oil in global markets, triggering a plunge in prices ....

There’s a storm brewing on the horizon,” said Greg Priddy, an analyst with Eurasia Group, a Washington-based political risk firm, “You are looking a year or two out before it becomes acute. But that is the direction we are headed.”

The coming ‘supply shock’
In its May Medium-Term Oil Market Report, the International Energy Agency referred to growth in U.S. light oil, along with the Canadian oil sands, as a “supply shock” that will be “as transformative to the market over the next five years as was the rise of Chinese demand over the last 15.... Driven by the boom in oil production from regions such as the North Dakota Bakken and Eagle Ford in Texas, the United States is now on track to be the world’s largest oil producer in the next decade, according to some forecasts.

“As the U.S. draws less on globally traded crudes, those crudes will then be looking for a home and that’s where the pressure comes – competition among non-North American internationally traded crudes of which OPEC is a big part, but there are others,”

Failure by the cartel to respond (cut production) would leave the world awash in crude, and threaten to send global prices sharply lower."

05 June 2013

To understand what is happening in NL, see the almost identical parallel catastrophic, outdated vision(?) that has occurred in Manitoba (pushed for the benefit of government and their hydro company ---- and to the detriment and at the expense of RATEPAYERS).

Link to "Dam-Nation" by Graham Lane, sponsored by the Frontier Centre for Public Policy (FCPP), which is a private think tank headed by Peter Holle.
http://www.fcpp.org/files/5/PS153_DamNation_JN04F2.pdf

And his Speaking Notes (below):

Good afternoon, my presentation highlights matters more fully addressed in a written brief, to be provided as you leave and posted on Frontier Centre’s website.

Slide 1 & 2

First, a quick primer on Manitoba Hydro and utilities.in general.

On rates

Hydro's low rates are not due to efficiency, far from it;
Rates are based on historical cost, not export prices;
Most of Hydro's plant is old, with annual depreciation based on historic cost and estimated service life;
Accounting embellishes Hydro's annual net income, one third of Hydro’s operating costs has been deferred, moving costs and higher rates into the future;
Increased demand drives plant construction, pushes up costs, levies by government and rates;
New demand comes from exports and domestic growth;
Industry demand growth has been slow, with major retrenchments;
Current rates assume export profits, despite losses on exports since 2008

Deferred costs related to Hydro's capital plans include large levies made on Hydro by the government for capital tax and debt guarantee fees, levies taken into government's revenue when received.

Government's revenues from Hydro increase with every dollar spent on capital and every dollar borrowed.

The most recent 8% rate hike will bring in an extra $80 million a year for Hydro, representing a present value very close to the $1.8 billion cost of Wuskwatim dam

Slide 2

A continuation of the primer:

Generally, public utilities are monopolies, customers have no choice

The high cost of entry into the industry, and assumed economies of scale have justified the provision of monopolies.

private stock and Crown corporations operate monopolies
Rate-setting is generally delegated to a regulator, to isolate government from responsibility for rate hikes
The main basis for rates is costs, supposed to be prudent and necessary, allowable costs can differ from actual costs
On top of allowed costs is a regulated rate of return for private firms
Instead of a return on a private firm's investment, Crown corporations are allowed reasonable reserves.

While allowable costs are supposed to be reasonable costs, in the case of Manitoba Hydro, the test for reasonableness applied to private utilities is lacking -

PUB has no jurisdiction over capital costs, and lacks benchmarks to assess Hydro's operating costs.

The main risks for investors in a private utility - either costs disallowed or having the rate of return set too low, and the party at ultimate risk for private firms is their shareholders.

For Crown Corporations - it is the utility's ratepayers.

For privately owned utilities, shareholders lose when things go wrong.

Crown Corporations can look only to their ratepayers.

The Province hasn’t a dollar of capital in Hydro.

Slide 3

Objectives of my presentation– to support the following views:

An independent expert review is needed, not a sham NFAT Review;
Hydro's capital plan is based on estimates, estimates of capital costs, export volumes and prices, and operating costs – consistently wrong;
Hydro has spent a billion or two ahead of a proper review, wrong thinking;
Manitobans cannot afford to gamble, both the Province’s and Hydro's balance sheet position are weak, equity is overstated, a write-down is warranted;
Corrected, Hydro’s debt to equity ratio is 95-5 at best, while private utilities require a 60-40 ratio to be able to borrow on the market;
Hydro’s opaqueness has been deliberate, calculated and not in the public interest;
Much cheaper options to the build plan are available, but wouldn’t provide the revenue generation for government that comes with building high cost dams and transmission;
Nor would lower cost approaches meet the government’s ideologically driven goals;
It is folly to proceed with plans that were conceived before the global credit crisis, the recession, reduced industrial demand, the rise of the Canadian dollar, shale gas production and low natural gas prices, the failure to secure a premium price for electricity through a tax on carbon, and America's move for energy security;
And, despite Hydro and government being aware of the risk, a higher rate for new or expanded energy intensive industry demand remains absent;
Current ratepayers will subsidize new and expanded power hog industries, such as server farms, pipelines and electrochemical plant expansions;
Audits are warranted – for at least the $250 million of Hydro’s expenses to gain First Nation support for its development plan
At least for Hydro’s business dealings through the 2002-04 drought, when the Utility lost $660 million having run down water reserves ahead of the drought for export sales that brought low revenue;
At least for the whistleblower’s allegations, which deserve a real examination;
Major governance and oversight improvements are required to protect ratepayers from obvious conflicts of interest.

Slide 4

Hydro, is an over-weight Elephant

Controlled by government, Hydro is Manitoba's largest company and utility; a monopoly, electricity and natural gas, with 550,000 electric and 250,000 gas accounts - everyone is affected.

The Utility follows the government's direction.

Objective number one was once having the lowest rates possible, second fiddle now.

Hydro has no cash reserves, and its retained earnings are swollen by $200 million a year of deferring and capitalizing costs rather than expensing them.

Hydro has a swollen personnel complement, hence benchmarking is avoided by Hydro

The government borrows for Hydro, now one-third of overall government debt, hydro debt will be more than half of the Province's debt soon, that is, if the government can rein in its own deficits.

The days of no rate increases, which was the experience between 1992 and 2004, are long gone.

Also gone is Hydro’s old pledge not to charge current ratepayers for benefits expected to be realized in the future.

Hydro is now fully reliant on rate increases and questionable accounting to stay in the black.

American utilities are subsidized by Manitoba ratepayers, with no end in sight.

Hydro’s latest forecast of $33 billion of capital expenditures is up an amazing 60% over the 2010 forecast, underscoring a long history of understating cost forecasts.

It should come as no surprise that Hydro over-paid for both Centra Gas and Winnipeg Hydro.

Pointe de Bois, acquired in the acquisition of Winnipeg Hydro, now requires $2.4 billion to refurbish, more than the price Hydro paid for the whole company.

Hydro’s plans involve risky export contract commitments to be satisfied by hydro generation, no diversification of supply is planned, with First Nations partnerships are supported by questionable terms and accounting.

Slide 5

History – Mistakes and Debacles

History is marked by past government boondoggles.

No surprise that an overly long-toothed government believes it has a mandate to do as it pleases, and is now embarking on a new boondoggles - one ratepayers will pay for
Slide 6

Choices and Options

Hydro has options, so does the government, their choices are questionable

To refurbish and expand its hydro generation by 40%, Hydro plans to spend $33 billion, which is three times Hydro’s present balance sheet.

In supporting Hydro's plans, government takes the largest gamble in the Province's history, but with government's Hydro-generated revenues assured, it is ratepayers that are covering the bet.

Regardless of how the gamble works out, government gains:

capital tax, water rentals, and debt guarantee fees will bring in higher revenue for government, adding to the price paid by ratepayers in their bills, and then there is provincial sales tax on it all

Hydro's expenditures and commitments are occurring ahead of a proper review - a billion and more perhaps wasted, with more to come.

$250 million or more has bee spent on negotiations with First Nations alone.

What was involved? We don’t know - the Ombudsman backed Hydro’s refusal to provide the Taxpayer Federation the details it sought, and neither PUB nor the Auditor General has even asked

While Hydro's negotiation, legal, training and other development expenditures need a truly independent audit, the Auditor General has not acted, recusing herself from Hydro matters.

The options to the government plans have major advantages –

energy efficiency measures are more environmentally-friendly, while
gas generation is not only less costly, but reduces Hydro’s financial risks in a drought, reducing Hydro’s need to import higher cost American coal-based generation. .

Slide 7

Wuskwatim Disaster

The Wuskwatim project was 'sold' on the basis of a projected cost of $900 million, with the production to be sold on the export market at a price of 8 cents per kWHr or more;

Wuskwatim's actual cost $1.8 billion, spot export prices, actual 3.3 cents, an economic loss of $100 million a year for years to come;

The deal with First Nation NCN (Nisichawayasihk Cree Nation) provides for the transfer of up to one-third ownership for a contribution largely borrowed from Hydro, with annual payments to NCN even in "loss years";

And, the partnership vehicle employed to divide net income between NCN and Hydro does not involve full cost allocations against the partnership;

With losses not profits being realized, Hydro is moving to ‘cover up’ the failure by asserting Wuskwatim built for domestic demand – which is simply not true;

With losses ahead for years, and the partnership is in trouble, Hydro has entered into negotiations towards a revised contract with NCN (there being no prospect of return to NCN, despite no full cost allocations, under current contract);

Hydro and government have asserted that NCN deal is an ideal template for a deal with Tataskweyak Cree Nation (TCN) with respect to Keeyask - some template.

Given the disaster the dam is, no surprise that government has directed that PUB not look at the Wuskwatim experience and ignore a needed revIew of First Nation contracts when iPUB holds its fatally flawed NFAT hearing.

An independent forensic audit of the Wuskwatim experience needs to occur, before the partnership is amended, before the TCN deal is cemented

Lessons need to be learned before more mistakes are made.

Slide 8

Winners and Losers

The main winner: Government.

More government-induced economic activity (new dams and transmission - generating tax revenues and political talking points ahead of the next election);
Every dollar borrowed by Hydro generates more fees, debt guarantee fee and capital tax alone will bring in billions for the government's accounts, before Hydro even expenses the costs in its books and seeks rate increases to cover it;
Every megawatt produced through water flow provides government additional water rental fees, as the same water runs through a series of dams
And, every rate increases brings more PST income to the government as well, as if putting the current 7% levy on the heating and lighting bills of consumers isn’t enough, that tax to go up by 14 pc come July 1

Benefits also accrue to other parties:

Hydro and contractor personnel complements increase, more jobs;
Employment, contracts, economic activity and partnerships for First Nations;
Profits for contractors and other businesses during build phase;
American utilities get cheap power to back up their wind generation;
New and expanded energy intensive power hogs, driving the advancement of new supply, will be subsidized by existing customers in the absence of a new rate meeting marginal costs.

Losers

Hydro's existing ratepayers - their rates already rising ahead of the full build, and with every dollar spent on capital, borrowed or deferred government earns more;
Lower income households and all households depending on electric heat are at particular risk;
Taxpayers can also lose big - there is a risk of both major losses and credit downgrades on provincial debt, and a downgrade would affect more than Hydro, but also core services
With no diversity of supply, a drought could devastate Hydro's already weak finances
Economy - the loss of the so-called 'Manitoba Advantage' reduces the attractiveness of Manitoba to industry (long term loss of jobs).

Hydro’s bookkeeping defers costs out two decades, this is so rate increases can be feathered in, in the hope that ratepayers won’t notice until too late.

Slide 9

What Can Go Wrong? Virtually every element of the plan.

Construction cost estimates can be too low – which has been the general experience for Hydro - When was the last time a Hydro cost forecast proved accurate?

Examples of flawed estimates

Wuskwatim $1.8B not $900 million;
Pointe de Bois, from no estimate to $2.4B;
BiPole III from $1.9B to $3.3B or more;
Conawapa from $5B to $10B;
Keeyask from $3.7B to $5.2B;
Total for the major projects from $9.7B to close to $25B

Can any Hydro estimate be relied on?

Export demand and prices can be lower than projected; and current contracts may not be renewed, while dams are built for a hundred years, contracts extend only a decade or so at best

Domestic demand can be lower than projected; there has been no new industry in over ten years, with none on the horizon

Smelter, refinery and plant closures have or will occur with HudBay, Vale and Tembec.

Another drought is a statistical certainty, 15 of the last 17 years have had median or above water flow, statistically a drought lies ahead

In Hydro’s rather short history there has been a five year drought and a seven year drought..

Higher interest rates, eventually inevitable.
Credit downgrade a looming possibility..
Plant, transmission and distribution failures, always possible, and
The original Hydro plans were based on a 85 cent dollar.

No one can predict the unknowable, a Black Swan event, the unknowable –

could be technology related (for example the cost of solar panels have plummeted,
the cost effectiveness of new wind turbines have increased,
energy efficiency measures are improving,
carbon sequestering for coal plants in the U.S. may end-up working.

Slide 10

Implications - Results will fail to meet Hydro forecasts

Hydro rates will rise more than the 4% now, punishing ratepayers

Yet, Government’s revenues will soar with Hydro's spending,

Better still for government, it doesn’t have to wait for its money, the levies on Hydro go straight into current year revenue, while Hydro defers the costs of the capital and debt taxes until new plant is in service and before ratepayers really pay through their rates – a cynic might call this kiting.

American utilities will continue being subsidized by Manitoba generation;

First Nations will gain regardless of Hydro actual economic results, the partnership places only ratepayers at risk

Lower income households, and rural and northern populations without gas service, will suffer more than anyone else as the consumer bills explode;

Any new or expanded power hogs will be subsidized by other customers - as would have been the case with Facebook, and is the case with pipelines and electrochemical industry

20-years from now, think residential rates at 20 cents, or more, three times current level – a rural home dependent on electricity for heat could incur an average monthly bill of $480, up from $160 - a major test awaits

Ratepayers, particularly lower income and those living outside the gas distribution network will struggle, again, while government’s own revenue stream from Hydro will quadruple;

Remember, Government gains, regardless of whether Hydro’s expansion meets its targets or not.

What would be the prospects if low cost and reliable power for domestic customers returned as the primary objective?

What would today's rate be if the gamble had not been put in motion?

Neither government nor MH will say: too embarrassing!

Slide 11

Timing is Crucial, the boat was also missed

Governments’ plans for Hydro were developed pre-2008, a view affected by a grandiose vision; "hydro is Manitoba's oil". What were they smoking?

Government expected that:
Natural gas prices would stay high and increase;
There would be a price on carbon, a premium price for hydro;
Industrial demand growth;
Higher spot and fixed export prices, and stable construction costs;
An eastern route for BiPole III, save a billion in costs, reduce risks;
A lower Canadian dollar; and
The lives and economies of northern First Nations would improve.

while Reality is much different!Strategy unfolding:remains -

Spend and defer the expenditures, rig the overdue review;
The Result would be: rates begin to climb;
Defer costs for the future;
Much higher rates, think 20 cents, of course after the next election.

Who backstops the risk? Ratepayers.
Who protects ratepayers? Not the government.
Slide 12

Unanswered Questions, while spending intensifies

What are the provisions in the export contracts, including renewal clauses - dams are built for a century, and export customers are not tethered to MH for life.
If Keeyask or Conawapa are not built, what is rate impact for BiPole III alone?
What is the value of diversification?
What about a re-think of the rate model, consider aggressive energy efficiency measures, have the rate model to recognize more than historical cost, marginal rates for new or expanded major industry?
What is the present value cost to non-First Nation ratepayers of contracts with FNs?
What will be the bond market’s reaction if Hydro's equity goes negative?
Hydro failed to file regulator-ordered risk reports, including those of the 'whistleblower', which didn't surface until the whistleblower blew - what other reports have been buried or left in draft form?
How much has Hydro spent already on BiPole III, Keeyask, Conawapa, First Nation negotiations?
What should be the write-down for Wuskwatim and Pointe de Bois?
Why no Energy Intensive Industry rate?
If future Hydro rate increases were held to no more than inflation, how would Hydro's 20-year financial forecasts look?
What is the estimate for the government’s annual revenue stream related to Hydro, twenty years from now, with the dams and BiPole III built, compared to today?
How much revenue will the government have booked ahead of Hydro expensing the costs and seeking reimbursement through rates, how extensive is the kiting?
Hundreds of relevant questions need to be asked/responded to.

Slide 13

Protectors, Conspirators and the Rest: Who Protects Ratepayers? Taxpayers?

It seems that no one can stop the elephant in its charge!

Legislature, a majority government
Government – conflict of interests, constant propaganda;
Crown Corporation Council -opaque
Auditor General – self-recused, on the sidelines, was a Board member of Hydro, ignored both the whistleblower and a filed complaint about Hydro's northern lobbying spending;
Public Utilities Board – pulled into the fray by agreeing to hold a sham NFAT Hearing (made useless by restrictions on what can be reviewed)
Ombudsman - limited jurisdiction, lacks expertise in the area, ignored whistleblower;
Board of Directors, MH - appointed by government, and following governments’ directions, would they be there if they expressed doubts;
Media - lacks expertise, constant government propaganda buying ads
Lobbyists – conflicts of interest, some too tied to Hydro

Slide 14

And Meanwhile, the Overall Context of this Drama

Government incurring large annual deficits, structural deficit is evident, over ten years of three times inflation core cost increases;
Government debt-borrowings increasing sharply, costs moved into the future;
Government's gross debt approaches $30 billion and could more than double as further deficits are recorded and Hydro's capital expenditure plans are realized - Greece in Canada?;
Any loss incurred by a Crown Corporation will be met by higher rates for ratepayers, government has no capacity to meet Crown losses;
High tax environment, an uncompetitive jurisdiction. Recently worsened with a hike in PST after last year's broadening of its application – simply not competitive, what large industry would pick Manitoba over Saskatchewan or Alberta?
Highest annual inflation rate - driven by government tax and fee increases;
Opaque Crowns, failing to provide benchmarking data, options and contracts, making regulation an expensive and futile exercise;
History of under-estimating construction costs - from Hydro's head office to Wuskwatim;
History of poor risk management;
Low wage environment, large number of lower income households, and significant rural and northern population that has no natural gas service;
Manitoba - a state-dominated economy, using the Crowns to serve its own political and financial objectives, leaving ratepayers to absorb the costs.
Does borrowing tens of billions on a risky proposition, on top of existing financial weakness, make sense?

Slide 15

Remedial Actions Needed - What to Do?

Slow down the 'bus';
Truly consider alternatives - look for them, compare risks;
Return Hydro's emphasis to servicing domestic ratepayers;
Have a truly independent expert review of the plans, with all options on the table;
Change the selection process for Hydro's Board and the Public Utilities Board: require a competition based on credentials, vet and appoint by an All Party Committee of the Legislature;
Direct the Auditor General to review Hydro's expenditures and contracts with and related to First Nations, investigate the whistleblower's allegations of fraud and major errors, review Hydro's contracts with American utilities from the perspective of protecting domestic ratepayers, and review Hydro's contractual and other actions through the 2002-2004 drought period.
Don’t wait for the current self-admitted conflicted auditor to retire;
Direct Hydro to prepare projections taking a probability perspective; produce a range of possible outcomes, best to the worst;
Direct Hydro to benchmark its’ operations, prepare and release an asset condition report, assess the condition of ex-Winnipeg Hydro assets, re-evaluate the price of Winnipeg Hydro and Centra Gas;
Direct Hydro to clean up its books, write-down its intangible and deferred assets, write-down Wuskwatim, write off coal and single cycle turbine assets, write down assets purchased from Winnipeg Hydro, and record its pension plan underfunding and the present value of its First Nations commitments;
Put revenue recognition and expense recognition in synch between Hydro and government;
Direct Hydro to take an aggressive approach to producing energy efficiency, and to implement a new and higher rate for energy intensive industry - reduce the risk of server farms, electrochemical plants and pipelines being subsidized by existing customers;
Bring back openness, recognize the real owners, the ratepayers, and;
Return Hydro to a focus on the domestic market, lowest cost and least risk.

Slide 16

A Worse Case Scenario - As things stand, the Likely Scenario

Hydro builds BiPole III;
Commits to long-term exports;
Buys its FN partnerships;
Builds Keeyask, Conawapa, and rebuilds Pointe de Bois;
Keeps deferring costs, including government levies that government books in current income;
Rate increases end up double the current 20-year forecast;
Triple the current rate;
Eventually, Hydro bills will take another $1.5 billion a year out of Manitoba economy, much more than now, $2.5-$3 billion a year;
A crisis develops for lower income households and rural customers – European energy poverty here in Manitoba;
Perhaps a crisis for the economy, for industry, as well.

Meanwhile, the government’s coffers will swell through the build and borrowing phase,

With the government's swollen Hydro revenues not offset in Hydro’s books; the Utility deferring the costs until after the assets – BiPole III included – are in service.

The spin will continue,

Government will continue to claim the new dams are needed now for domestic purposes, ignoring the full cost implications for ratepayers.

Government will claim exports and FN contracts are beneficial for ratepayers.

The damage will be incalculable and irrevocable if the gamble ‘goes bad’.

Ratepayers not government will take the immediate hit, eventually even the government’s position will be jeopardized.

Slide 17

Take Home Points

Innumerable mistakes have already occurred, costing consumers dearly;
Openness and transparency are absent;
Motivation for the plans, more political than economic;
Government gains revenue up front, before Hydro expenses it;
The rate model needs a good work-over;
Without cooperation, PUB simply serves as Manitoba’s version of London's Hyde Park;
Hydro’s forecasts of costs, revenues and rates can’t be trusted;
The “betting of the farm” proceeds;
A sorry looking provincial balance sheet in the long haul;

Not to forget - other major challenges and problems exist beyond the Utility
A federal transfer slowdown is likely.

Major reform is needed, with broad involvement by ratepayer community.

Questions?

03 June 2013

Many readers will recall that I have often referred to Muskrat Falls as a "dinosaur" of a project. The report (see link) from the Edison Electric Institute (Disruptive Challenges) helps show how such projects are out of sync with the paradigm shift that is occurring in the electrical generation industry. http://www.eei.org/ourissues/finance/Documents/disruptivechallenges.pdf

Forbes, also writes about the above-noted EEI report and states that "...locked in the regulated utility paradigm of the past 100 years – most utilities do not even appear to be asking the right question" (see below)

This from Forbes:-

Relentless And Disruptive Innovation Will Shortly Affect US Electric Utilities

The Edison Electric Institute recently released a report entitled Disruptive Challenges: Financial Implications and Strategic Responses to a Changing Retail Electric Business. The report highlights some of the trends likely to affect U.S. electric utilities in the near future:

“Recent technological and economic changes are expected to challenge and transform the electric utility industry. These changes (or “disruptive challenges”) arise due to a convergence of factors, including: falling costs of distributed generation and other distributed energy resources (DER); an enhanced focus on development of new DER technologies; increasing customer, regulatory, and political interest in demand side management technologies (DSM); government programs to incentivize selected technologies; the declining price of natural gas; slowing economic growth trends; and rising electricity prices in certain areas of the country. Taken together, these factors are potential “game changers” to the U.S. electric utility industry, and are likely to dramatically impact customers, employees, investors, and the availability of capital to fund future investment. The timing of such transformative changes is unclear, but with the potential for technological innovation (e.g., solar photovoltaic or PV) becoming economically viable due to this confluence of forces, the industry and its stakeholders must proactively assess the impacts and alternatives available to address disruptive challenges in a timely manner.”

The piece asserts that the financial industry is not yet aware of this disruptive potential, and notes that of the major actors in other industries which underwent regulatory restructuring (airlines and telephone companies) few of them still exist today. It further suggests that with the advent of demand response, distributed generation – such as behind-the-meter solar, storage, electric vehicles, and increased end use efficiencies, revenues may fall and new tariff structures may become necessary. If tariffs for capacity or kilowatt-hours are raised to compensate for declining volumes, the effect may be to drive customers from the grid (especially if storage becomes cost-effective).

The report notes that the industry would benefit from “proactive assessment and planning to address disruptive challenges” and highlights some interesting statistics that reflect the dynamic of disruption. Among them:

1)    PV panels have fallen in price from $3.80 per watt to .86 per watt in just four years, from 2008 to mid-2012.

2)    PV solar is now grid-competitive in 16% of the US retail market (higher on-peak time-of-use rates reinforce that dynamic).

It also notes a projection from Bloomberg that PV solar will grow by 22% annually through 2020, with 4.5 gigawatt-hours (4,500 megawatt-hours) coming from on-site solar. This would equal 10% of existing generating capacity in some key markets. With the corresponding decline in revenues, this could also lead to a 20% increase in rates for ratepayers burdened with continuing to support the utility infrastructure. If prices of solar fall still further – and they will – estimates are that the addressable market can increase by 500%. Rates go higher, more people leave the grid, forcing the rates higher. That sounds like a potential long-term death spiral.

The Edison report is interesting, because it looks at existing technologies. But it is only a limited snapshot of what is really going on out there beyond the borders of the utility kingdom, where the horde of innovators continue to develop more technologies and where the nature of innovation itself is changing.

To get a sense of how innovation is morphing, it is instructive to read the recently published Harvard Business Review (HBR) article on the topic. The established model of innovation from Clayton Christensen was that new competitors emerged and challenged industries with cheap substitutes. As these were adopted by customers at scale, new entrants could swim upstream, develop higher quality products, and drive out the more established players.

To some extent, that has changed. The HBR article suggests that in today’s world, the disruptive innovators often don’t even come from the same industry. They can develop products to enter the market quickly. Large numbers of customers can switch in extremely short timeframes – resulting in what they call “Big Bang” disruption.

Much of this disruption lives in the information ecosystem, with pervasive computing and mobile phones. The early innovators – eBays, the Amazons, the IOSs and Androids – rule the platform kingdom (for now) while the next generation of innovators works to build their apps to fit this new and evolving world.

The HBR piece warns “Big bang disrupters may not even see you as the competition. They don’t share your approach to solving customer needs. And they’re not sizing up your product line and figuring out ways to offer slightly better price or performance with hopes of gaining a short-term advantage. Usually, they’re just tossing something shiny in the direction of your customers hoping to attract them…”

If your competition is not gunning for you, but simply creating something new to see how it goes, how will you compete?

What Does That Mean for U.S. Utilities?

This paradigm may happen more slowly in the electric utilities world than in cyberspace. To date, it doesn’t look as if all that much physical change has really happened. But we are in the early days, and poised on the precipice. The innovative forces that have driven change in other industries are hard at work in the electric energy industry as well, and they are coming at it from all angles. The Edison Electric report captures the financial implications of this change, but it really doesn’t come close to describing the seething stew of innovation that is out there right now.

To take just one example, this month, the UtraLight Future Energy Event was held at MIT, sponsored by Shell, and hosted by the MIT Clean Energy Prize. During this event, eight (pre-selected) would-be start-ups had nine minutes each to pitch a start-up concept, answer questions from a panel of VC types, and receive advice. Their technologies included: printable high-efficiency photo-voltaics, zinc-ion pseudo capacitors, fuel cells, software for electric and thermal monitoring, grid-scale storage based on enormous weights and gravity, a glass technology that would concentrate the sun’s rays to the pane’s edge for energy conversion by a solar panel, and a small-scale containerized nuclear reactor.

This is only one of a number of forums run by UltraLight to identify new and promising technologies. What will happen to the utility world if any of these or other nascent technologies develop as quickly as solar has in the past decade? We may well be watching the beginnings of a new – and very complicated – electric ecosystem evolving. With the continued and rapid march of technology, it’s probably only a matter of time. (An insightful view on this comes from a former colleague, Doug Short, on his blog at Exxas Consulting: http://exasconsulting.com/blog/is-your-head-still-in-the-sand-big-bang-disruption-in-the-electric-industry/)

The Incumbent Electric Utilities Need to Pay More Attention; Tweaking the Existing Business Model Is Probably Insufficient

In some overseas markets with high tariffs, the Edison Electric/HBR Big Bang scenario is already here. In Germany, where installed solar power on residential rooftops is much cheaper than in the United States, farmers and private individuals own more than 50% of the solar generation. CEO Peter Terium of RWE – one of Europe’s largest utilities – stated in 2012 “Our core markets are changing remarkably fast.” With 32 gigawatts of solar – 40% of that on residential rooftops – consumers are now both producers and consumers “prosumers.” In addition, Terium stated “Almost no other industry is currently undergoing such dynamic change as the energy sector…The success of this transformation of the energy industry will be decided at the local level.” RWE is already living the Edison Electric report scenario. With the advent of solar, as well as increasing end-use efficiencies, the utility now forecasts declining electric sales from now to 2035, with mid-afternoon peak demand falling almost 20% from just over 24,000 MW to 19,000 MW.

Australia is looking at similarly rapid and significant changes, having gone from 20,000 solar rooftops in 2008 to over 1,000,000 as of March this year. Australian utilities are struggling to cope with this change, and looking to find new ways to remain relevant to customers.

NRG’s CEO David Crane is one of the few utility CEO’s in the US who appears to fully appreciate – and publicly articulate – the potential for this coming dynamic. At recent Wall Street Journal ECO:nomics conference, he indicated that solar power and natural gas are coming on strong, and that some customers may soon decide they do not need the electric utility. “If you have gas into your house and say you want to be as green as possible, maybe you’re anti-fracking or something and you have solar panels on your roof, you don’t need to be connected to the grid at all.” He predicted that within a short timeframe, we may see technologies that allow for conversion of gas into electricity at the residential level. If this were to occur, one could expect a significant impact on the value of existing generation companies – especially the ones with large generation fleets (such as Duke – at 57,700 MW of capacity; NRG, at 46,500 MW; Southern at 43,500; and AEP, at 38,000). It would not occur overnight, but the long-term impact would be inexorably downward as sales volumes would begin to decline. Similarly, the value of electric distribution utilities would be affected.

Possible Future Roles

This dynamic change is not only unavoidable, it is accelerating. The utilities need to heed the advice of the Edison report and prepare for a new and disruptive future, starting with some scenario planning. A good place to start is the way Shell Oil’s team has done it for years, as highlighted in Peter Schwarz’s “The Art of the Long View.” That process involves outlining a broad range of potential scenarios and then working backwards to the present, identifying events and milestones that suggest you are moving more quickly towards one scenario rather than another. Of course, within each scenario, you have to have your general strategies mapped out in advance. This is not easy in any company. It takes resources and commitment.

It’s even harder in a regulated world where all utility expenditures must be approved by the regulators. But it is necessary. Utilities should be thinking about how to take advantage of their assets – their revenues and balance sheets – and provide energy services to the customer in new ways – for example, whether they should be the providers of PV and storage solutions. Should they be leasing efficient end-use technologies to customers? Such approaches merit consideration. Germany’s RWE thinks this approach has merit, and has taken steps to develop such an offering.

Utilities should also be considering the increasing flows of information, as this internet-of-things continues to develop and machines increasingly talk to machines. They should be thinking about how to position themselves at the center of the energy information network, supplying the pricing and real-time usage information to the customer and his or her machines.

The full realization of “Smart grid” – that interaction of markets, technologies, and customers – will not and cannot happen without some centralized entity efficiently providing near-instantaneous pricing and usage information. Utilities are a logical choice to assume this role since they have the meter data, and large IT systems. They would need to become more information centric, but they could morph into this and charge a tariff for making the information available. If they don’t assume this role, somebody else will eventually fill the space. There is too much long-term value there to customers and vendors for it to be ignored. And provision of this service could become a stable revenue generator in the years to come.

The Edison report makes it abundantly clear that the game has already changed. Somebody took the old ball and replaced it with a new one. The HBR article suggests that innovators may change the game itself, and without bothering to tell anybody. These looming challenges are no longer avoidable and they may be closer at hand than people think. U.S. utilities are probably about to see what other disrupted markets are already grappling with – declining sales volumes, a need for new revenue streams, and a strategic imperative to stay relevant to the customer.

The problem, admittedly, is that the answers are far from clear. More problematic however, is that – locked in the regulated utility paradigm of the past 100 years – most utilities do not even appear to be asking the right question That will need to change very soon.

02 June 2013

I like this comment regarding the Maritime Link on The Telegram website today:-------

"No priceTags on the Energy Of NL- June 1, 2013 at 22:08:29
I wish I could Hook my house up to another house and get free power by only needing my own extension cord. They'll even pay the cost over runs if it is too pricey. I'll double bill myself then for almost sixty years. They can keep the extension cord after 35 years. I'll be on natural gas then or something almost as cheap."

30 May 2013

Globe and Mail ---- RCMP launches new unit to investigate corruption in federal government
http://www.theglobeandmail.com/news/politics/rcmp-launches-new-unit-to-investigate-corruption-in-federal-government/article12274364/

Quebec Innu appeal federal court ruling
http://www.vocm.com/newsarticle.asp?mn=2&ID=34757

27 May 2013

Muskrat Falls vs. Fish Processing in NL ---- who do you think will win?
http://www.cbc.ca/news/canada/newfoundland-labrador/story/2013/05/27/nl-muskrat-falls-fishery-527.html

Power users reject link
http://thechronicleherald.ca/business/1131108-power-users-reject-link

Also,
John Risley says the Nova Scotia government has not looked at power from Quebec and compared it to Muskrat Falls --- http://thechronicleherald.ca/business/1131541-risley-wants-more-study-of-link-alternatives

Of course, the same applies to NL. As outlined elsewhere on this website, buying power we might need from Quebec could save our children and grand children 10's of BILLIONS of dollars over the next 50 years (and position us well, due to reduced debt payments and better marketing opportunities, for the return of Upper Churchill power in 2041).

14 May 2103

Bloomberg reports 2017 futures price for Brent crude is $90.39 (14% below government's forecast oil price for 2013 of $105) http://www.bloomberg.com/news/2013-05-14/iea-sees-u-s-oil-shockwaves-displacing-opec-as-supply-driver.html

Of course, NL ratepayers will be stuck with Nalcor's high cost Muskrat Falls power.

12 May 2013

It seems that for 2012, Hydro Quebec got only 4.1 cents per KWh for export sales.
Below is an excerpt from an April 27 "Lapresse" article (very poor translation using Google) http://www.lapresse.ca/le-soleil/affaires/actualite-economique

"...Hydro-Québec has concluded in recent years dozens of agreements with private producers for the purchase of electricity it did not need.
Result: Hydro-Quebec says now have 28.5 terawatt hours (TWh) of electricity surplus accumulated by the end of 2020.....

In wind, Hydro-Québec Distribution has signed more than 20 contracts to supply a total of 72 TWh by 2020. ............

But there is more. Because to report $ 99 million more than in 2011 on the export side, Hydro-Québec has used an impressive amount of energy its production, or 30.1 TWh compared to 20.8 TWh (2011) .

Hydro-Québec has collected an average of 4.1 ¢ per kilowatt hour exported.     In 2011, the corporation had received an average of 5.2 cents. ............

The analyst believes Blain Hydro-Québec must now look to new sources of revenue. Large industrial customers (who already pay a special electricity tariff) should pay more, he said.

Hydro-Quebec could also make an offer to the provinces of New Brunswick and Nova Scotia to sell their electricity at prices they could not refuse. A lesser evil when the Crown corporation "liquid" these days its electricity less than 4 cents per kilowatt hour for our southern neighbors."

My Comment: If my memory serves correctly, Muskrat Falls (DG2) production costs alone are 22 cents per kilowatthour (plus 14.7 cents for transmission, for a total of 37 cents / KWh). Nalcor comes up with a misleading 7.6 cent production cost figure by shifting real costs to future generations (their escalating supply price, 'take or pay' pricing scheme)........ the difference in the figures show how much our children and grandchildren will be burdened by high cost Muskrat power............... Not only will they have to eventually pay the real 37 cent cost, but it is they who will also have to pay the early year shortfall (the difference between the 37 and 7.6 cent figures), as Nalcor has confirmed that it will not be foregoing its return on equity, but merely deferring it.

So our real Muskrat Falls costs are about 10 times what can be expected from export sales revenue (if any).

Why does Nalcor care?                We pay ------ Nalcor gets revenue --- any revenue.             Do they care?    NL ratepayers are legislated to pay the cost (whatever it is), while Nalcor/government gets whatever revenue it can and others (not NL ratepayers) have well-below-cost power.

Who is government/Nalcor really working for?

10 May 2013

Newsworthy Comment (from electrical engineer Winston Adams re "energy efficiency")

"In regard to your comments on the new Guide for Energy Efficient Homes.

1. The rationale for Muskrat Falls was to meet our growing need for wintertime electric heat, where according to Nalcor and MHI we were approaching "saturation" going forward as to efficiency savings.

2. As you have pointed out elsewhere, efficiency improvements over the last 20 years gave a 17 percent reduction in average house energy usage. That is almost 1 percent per year reduction. According to Nalcor and MHI we could expect little more in efficiency reductions.

3. Yet, now, by the governments own Guide for new construction, there is a 27.2 percent efficiency energy reduction with these new code methods. And that is with using the old inefficient baseboard heaters! Such efficiency benefits have long been known, which disproves the 'Saturation theory"

4. The Guide shows that the cost for this efficient construction is $4736.00 per house. Working the numbers it will give a reduction in the baseboard connected load of about 2.5 kw. At $4736.00 extra construction cost, it gives about $1894.00 per kw of demand reduction. Compare that to the $26,000 per kw for the 300 MW we are supposed to need from MF, or the more than $10,000 per kw for MF average output, and the superior economics of customer efficiency jumps out. And studies support this.

5. And if you add in customer efficient heaters (heatpumps that operate without electric heater backup down to -15C) , this is another low cost efficiency improvement that cuts winter time energy by another 27 percent, at a cost of about $1500.00 per kw reduction. Other jurisdictions are promoting this approach big time, by financially assisting homeowners.

6. What is self evident is the false assertion by Nalcor and MHI that we were approaching saturation in efficiency measures for our houses.

7. There is a mention of the efficient mini split heat pumps in this guide, but not a promotion of them. Given that 90 percent of our housing stock are older houses, this is where the heatpumps can make the biggest dent in our efficiency gains, being very suitable for these older homes.

I submitted data to the PUB from my pilot study, showing 40 percent winter month reduction in an old 55 year old 2 story house. This represents another component for relative low cost alternative to the expensive new generation like Muskrat Falls. The PUB has recently ordered Nfld Power to report on the benefits of these by April 2014." (emphasis added)

09 May 2013

Isn't it interesting --- one of the first things that government's new "Guide to Building Energy Efficient Homes" shows is that the dinosaur age, energy consuming "baseboard electric heater" still meet the new 2012 Building Code   ------- ENOUGH SAID. http://turnbackthetide.ca/at-home/construction-&-renovation/guide_to_building_energy_efficient_homes.pdf

07 May 2013

                                                                                                     HOODWINKED ?
                                                                                         (for whose benefit? and at whose expense ?)

                                                                                                             CLICK TO ENLARGE

Why is Muskrat Falls being built? Why go BILLIONS of dollars in debt for UNNEEDED energy ??

While the Transportation (and Large Industry private sector) produces 73% of the province's greenhouse gas emissions,
Holyrood has NO IMPACT on 92% of the province's emissions (see Holyrood page).

Nalcor claims that residential growth is driving the need for more power. However, government's own two studies confirm that
from 1990 to 2008, while the number of homes increased 19%, residential energy demand
went down 17%.
Furthermore, while an increase in electric heating did occur, it was not due to an increase in overall residential
energy use, but due to electricity displacing residential oil heating (down from 42% to 18% by 2008).

At that rate, saturation of the residential electric heating market can be expected around 2018-2020 (shortly after Muskrat Falls comes on stream). Accordingly,
there is no objective, evidence based grounds for a 50-year, forecast 0.8% increase in demand --- and therefore no objective, evidence based
grounds for Nalcor's and government's claim that Muskrat Falls is in the best interest of ratepayers.

See links to graphs and government studies at DEMAND and Holyrood pages).

Keep in mind that:

a real focus on efficiency improvements (even without conservation), could result (instead of a 0.1% or 0.8% INCREASE in energy use), in an actual energy use DECREASE (and therefore LOWER, not higher, rates for ratepayers) --- up to 25 - 30% lower.

with Muskrat Falls, rates are guaranteed to INCREASE 2% per year, and with lower than forecast energy use rates will then have to INCREASE even moreso (due to Nalcor's 'take or pay' contract),

relatively inexpensive alternatives can virtually eliminate the need for Holyrood.

one (1) of Holyrood's three (3) generators was off line this past winter (1/3rd of Holyrood's generating capacity), proving that a large part of the island's existing capacity is not needed (and UNUSED) -------------- so why Muskrat ? Why an increased debt burden ? Why higher, unaffordable, rates ?

04 May 2013

The Sir Robert bond Papers is reporting that Husky is sizing up natural gas development for possible export by 2025 (see link http://bondpapers.blogspot.ca/ )

Given that:

high cost Muskrat Falls power cannot be exported (except at a monumental loss),
power sales to the mining companies of Labrador can also only be sold at a loss (perhaps as much as 80-90% less than cost),
a request for power has been received from only 1 mining company,
there is virtually no demand on the island (about 80% of Holyrood's maximum 4 terawatts of capacity, and 72% of Holyrood's 3 terawatts of firm capacity, was not used last year),
Holyrood's use has been on a significant downward trend since 2002 (see info-graphic, below), and
only 10.8% of the island's energy needs last year came from Holyrood),

then it is clear that Muskrat Falls is not a needed and not an economically viable project, and requires further and independent evaluation.

02 May 2013

The data used as the basis for the info-graphic (below) is from Nalcor, as published in the Telegram in 2011 (and supplemented by subsequent Nalcor emails). It should also be noted that Nalcor subsequently reduced its Holyrood forecast (shown below, yellow) by 5%.

The Comment below is from Winston Adams (electrical engineer/businessman).

"A picture is worth a thousand words. Your new chart is a critical piece of information showing the declining use of Holyrood production. It must make Nalcor officials cringe. Their, and the government's story, continues to be that Holyrood provides as much as 25 percent of our total needs (which was the case a decade ago in 2003) and will grow further. Then there is the reality: the diverging lines of what they forecast and what is happening. Instead of 25 percent of our needs, Holyrood is now producing only about 10 percent. This divergence can continue with a good Efficiency Conservation Plan, and the isolated option reassessed. There can be a "compelling" argument for this reassessment. This chart will continue to be a reminder to re-examine the forecast, without the blinders on. The Telegram, and Ed Hollett should publish this chart. And it is noteworthy that it shows a decline of oil (thermal) generation at a time when housing size and number of new units have been at an all time high."

Info-graphic prepared by M.E. Adams from Nalcor source data.

It should also be noted that early on, Nalcor argued that at peak capacity Vale's Long Harbour nickel processing plant would place an additional 730 GWh of demand annually on the island system, and that Vale's increased demand would be met by increased thermal production at Holyrood.

However, when questioned by the Public Utilities Board about Nalcor spilling the energy equivalent of 694 GWh of water from the island's existing hydro sites in 2011 alone, Nalcor admitted that it expected to keep spilling water over the island's hydro dams until Vale comes on stream to increase energy demand on the island (thereby confirming not only that the island had excess capacity, but that Holyrood would only be used for a portion of Vale's energy needs).

Furthermore, it has recently been stated (in a Telegram article) that the expected closure of the Duck Pond mining operations will also free up power for Vale.

So, which is it?

Where is the demand --- a demand that justifies an 8 (perhaps even a 10-15) billion dollar expenditure?

27 April 2013

Nalcor advises that for year 2012 Holyrood needed to provide only 10.8% (856 GWh) of the island's energy. The previous low was 10.5%, recorded in 2006.

And 856 GWh is only 28.5% of Holyrood's NET capacity of 2,995 GWh.

That leaves Holyrood with MORE THAN 2 full terawatts of energy not used --- 2 TERAWATTS EQUALS THE 40% OF MUSKRAT FALLS POWER THAT NALCOR SAYS WE URGENTLY NEED.

Over the next 50 years ratepayers will provide Nalcor with a cash flow of approximately $700 million per year (every year) for that so-called 2 terawatts of urgently needed Muskrat Falls power.

The power that we actually needed from Holyrood last year cost approximately $140 million.

However, Muskrat Falls will cost you, your children and grand children 5 times more each and every year for the next 50 years (to replace largely UNUSED Holyrood power).

Where will rates have to go to give Nalcor and government the $14.5 billion (debt servicing and operating costs) and the $20 billion additional "revenue" (TAX GRAB) from Muskrat Falls? --- on average, $700 million per year for 50 years?

Ratepayers do not need (and cannot afford) to pay 5 times more for UNNEEDED electricity (see DEMAND page).

20 April 2013

Government, aboriginal leadership, corporate structures --- interlinked?........... . Nalcor's DG2 forecast rate of increase in peak demand for 2012 was more than 5 times the island's actual increase, and the forecast rate of increase for year 2013 was 1.5 times more......... Millions (billions) up for grabs. All made available by way of an electricity tax grab that is being sold/marketed as a needed Muskrat Falls energy project..... Do we have corruption writ large?

Link to The Telegram article and read how SNC-Lavalin paper trail leads to Mount Pearl:- http://www.thetelegram.com/Opinion/Columns/2013-04-20/article-3223628/Riadh-Ben-Aissa-paper-trail-leads-to-Mount-Pearl/1

19 April 2013

Headline from today's Globe and Mail ---- "N.Y. okays power line from Quebec"

The brief article goes on to say that the NY Public Service Commission has approved a plan to build a $2.2 billion, 1,000 MW transmission line from Quebec to NY City (539 kilometers).

If a 1,000 MW, 539 kilometer line costs $2.2 billion, how can Nalcor build a 1,100 kilometer (900 MW) line under the Strait of Belle Isle and down the Northern Peninsula for $2.1 billion)?

What will be the real cost (paid for lock, stock and barrel by ratepayers/taxpayers)?

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Information (received this weeK) from Nalcor shows that the actual rate of increase in peak demand in 2012 was more than 5 times less than Nalcor's 2010 (DG2) forecast (0.4% vs. 2.1%). For 2013, the actual rate of increase in peak demand was 1.3% vs. a forecast 1.9% increase (more than 30% less).

On average over the 2 years, actual average rate of increase was almost 60% less than Nalcor's DG2 forecast.

18 April 2013

Originally, Nalcor claimed that Vale's Long Harbour plant's high power needs would have to be supplied by increased use (and cost) of operating the Holyrood oil-fired plant. However, when questioned about the high amount of water spilled from the island's hydro plants, Nalcor claimed that it would continue spilling until Vale came on stream to take up the slack (hydro would supply Vale instead of Holyrood). Now a CBC report http://www.cbc.ca/news/canada/newfoundland-labrador/story/2013/04/18/nl-corner-brook-mill-money-418.html is saying that Vale's needs will be met when the Duck Pond mining operations closes. SO where is the increase in demand coming from?

News Headline, CBC TV News ---------- "SNC-Lavelin banned from World Bank projects for 10 years"

12 April 2013

Newfoundland and Labrador Hydro files for decrease in electricity rates through the Rate Stabilization Plan (however, with Muskrat Falls, consumers are locked into a 2% compound increase EVERY YEAR, or about a 10% increase every 4 years).

April 12, 2013 - Newfoundland and Labrador Hydro (Hydro) filed an updated fuel price projection for the Rate Stabilization Plan (RSP) with the Newfoundland and Labrador Board of Commissioners of Public Utilities (PUB) today. This will result in a decrease in electricity rates to Newfoundland Power, and therefore most electricity consumers.

"We adjust rates every year based on the annual amount of water we have for hydroelectric generation and the price of oil used to generate electricity at the Holyrood Thermal Generating Station. This adjustment ensures that rates reflect the actual cost of electricity generation," said Rob Henderson, Vice President, Hydro. “This July, consumers will receive a decrease in electricity rates, which is due to lower than forecast cost of oil for the Holyrood plant and higher production from our hydroelectric generating plants over the past year due to the annual water availability.”

Excluding any rate changes approved by the PUB for Newfoundland Power, the RSP adjustment for most electricity consumers will result in an overall average decrease of about eight per cent, effective July 1, 2013. The actual amount of the rate change will vary, depending on customer category and the amount of electricity used. The amount of water available for hydroelectric generation increased over forecast last year. Thermal production from the Holyrood plant was also down over the last 12 months compared to the previous year. In addition, the fuel price projection used for setting electricity rates dropped from $119 per barrel for the 12 months ending in June this year to $106 per barrel for the next 12 months, beginning in July 2013. Combined, these factors will result in a decrease in rates to consumers.

“While actual fuel prices were lower than projected over the past year, which was beneficial to consumers, the longer-term outlook is continued increases in prices and growing consumption of fuel at Holyrood due to the increasing electricity demand,” said Henderson. “The development of Muskrat Falls will avoid future exposure of growing dependence on fuel and the related increasing and volatile costs for electricity consumers, while at the same time significantly reducing our greenhouse gas emissions." The purpose of the RSP is to adjust consumer rates annually to reflect the price of fuel used in the Holyrood plant and also takes into account the effect on fuel usage due to the annual amount of water available in Hydro's system for hydroelectric generation.

Through the use of the annual RSP, electricity rates for most consumers are adjusted each July to reflect these items. The application is a routine, annual filing with the PUB by Hydro. The cost of oil is a direct pass-through to consumers and neither utility receives any profits or benefits financially from changes in oil prices. “Although electricity prices are not increasing this July through the RSP, we encourage consumers to continue exploring ways to conserve energy and manage their usage and energy costs,” noted Henderson. “One way to do this is through takeCHARGE, our energy efficiency initiative with Newfoundland Power, which provides Newfoundlanders and Labradorians with information, tools and rebate programs to assist them in using energy wisely."

My Telegram website Comment :
A report by the Hatch consulting firm concluded that because Holyrood is used only sparingly (and at a low output level), it is functionally/operationally only about 20 years old. Also, the actual rate of increase in peak demand for 2012 was about 50% less than Nalcor's forecast, Nalcor forecast NO increase in demand from industrial customers past 2015, NL government studies (Climate Change and Energy Efficiency Reports) show that residential energy usage has gone DOWN (not up) 17% over the last 19 years (and targets a further 20% reduction by 2020)...... Muskrat Falls is not needed. Muskrat Falls locks in an annual, compound 2% increase in rates EVERY YEAR. Muskrat Falls' North Spur naturally occurring dam is on marine "quick clay", which is prone to rapid liquefaction and massive land slides (last occurring in 1978). Its mitigation is a potential SINK HOLE for BILLIONS of the provinces oil revenues (and windfall profits for SNC-Lavelin) -- see www.vision2041.com. ---- The Supreme Court has recently handed down a major decision in favour of the Metis aboriginal people and which puts the title to Muskrat Falls (which is within the NunatuKavut land claims area) at risk, ---- and on and on it goes......It is time for government to replace wishful thinking, hubrus, and legacy projects with rational thought and to replace this boondoggle with budgetary measures based on objective evidence and real consultation........... It is time to walk the talk.