Nalcor (and Minister Kennedy) have frequently said that Muskrat Falls will "stabilize electricity rates".
But you decide.
Credibility
Nalcor's own documents show that over the last 8 years Holyrood, during the worst winter months of January, February and March operated on average at only 50% capacity. And over the last 6 years that rate is down to 44% (IN WINTER !). And Nalcor's CEO, Ed Martin, in his Leadership blog on April 27, 2012 (response section) stated that "In 2011, the plant provided approximately 12% of the island's electricity load. Hydro did not operate the plant at capacity (in 2011) ...". ....... Not needed to operate 'at capacity' at any time during the year ---- not even in winter.
Nevertheless, on May 3rd, 2012, in the House of Assembly, Minister Kennedy (the Minister responsible for Muskrat Falls) said
"When Holyrood gets to its full rate of capacity, Mr. Speaker, it burns
18,000 barrels of oil a day. Holyrood is used at its full rate of capacity in
the wintertime."
Now, when the Minister says in the House that Holyrood "is used at its full rate of capacity in the wintertime" --- when Nalcor itself --- the facts, prove otherwise --- how can his statement that Muskrat Falls will "stabilize" electricity rates be given ANY credibility?
Electricity rate estimates
Nalcor's 'take or pay' contract requires that rates for island ratepayers increase at the rate of inflation (effectively imposing an 'escalator' clause on Newfoundlanders --- but not on Nova Scotians). For rate forecasting purposes, Nalcor uses an annual inflation rate of 2% per year. But historically, inflation has averaged more than 4% annually. I am advised therefore that that could mean that electricity rates in the last decades of Nalcor's proposed 'take or pay' contract could increase about four times more than Nalcor is now forecasting.
Also, Nalcor's forecast electricity rates are based on its 'forecast' (not the island's ACTUAL) island demand --- and as seen previously, Nalcor's demand forecasts have historically been significantly IN ERROR. If the demand is not there, Nalcor will still need the same revenue to meet it's BILLIONS in debt servicing and operating costs ---- either through higher electricity rates or transfers from government (higher taxes).
Furthermore, rates currently being forecast by Nalcor and Minister Kennedy are based on Decision Gate 2 (DG2) cost estimates, which we expect to increase once DG3 estimates are released. This will further INCREASE rates.
Also, current electricity rate estimates do not include cost overruns (which could be 50% or more) and do not include increases in borrowing costs (interest rate increases could be very significant in future), especially given the very long 50 year debt servicing period. (click image below to increase size)
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Is this really then --- "rate stabilization"? Is this the kind of rate stabilization that our children and grandchildren expect us to leave them --- after WE sanction Muskrat Falls?
If the Muskrat Falls project were under the watchful eye of our Public Utilities Board, it would have to be paid for (mortgaged) the way it should be --- using the industry standard --- 'cost of service', rather than Nalcor's 'take or pay' approach, and then Muskrat Falls energy costs for our children and grandchildren would only be about 2 cents/KWh.
BUT, that would mean that WE ourselves would have to pay the TRUE cost of Muskrat Falls, instead of forcing our children and grandchildren to pay LATER.
In the early years of Nalcor's "take or pay" contract, electricity rates are made low enough to market/sell this project to today's island ratepayers/taxpayers ---- all in the guise of a "forecast" island need for Muskrat Falls power --- a need that does not exist.
The ONLY NEED is to keep rates high, very high, in later years --- so that Nalcor can show the positive 'cashflow' needed to finance an UNNEEDED project (see below).
Please note that the "MILLIONS" shown on the right side of the above graph refers to millions of dollars PER YEAR
In effect, Muskrat Falls is a hidden form of taxing or shifting BILLIONS of dollars from island ratepayers to government or to Nalcor (government's proxy). Nalcor's documents show that over the 50 year 'take or pay' contract period the cumulative 'cashflow' amount comes to about $35 Billion.
The outside sale of power from Muskrat Falls or the sale of power to the mining giants of Labrador can only be sold AT A MAJOR LOSS. There is NO MONEY TO BE MADE THERE. So to show a 'positive' cash flow, Nalcor must keep electricity rates high (very high) for our children and grandchildren (see above) ---- that is where the BILLIONS of dollars will come from --- NOWHERE ELSE.
If Muskrat Falls were costed and electricity rates set in the manner similar to the way the Upper Churchill and our island hydro sites were, Muskrat Falls electricity costs for our children and grandchildren would be VERY LOW (around 2 cents/KWh) --- just as the cost of Upper Churchill power is now very low (about 2/10ths of a cent/KWh).
Ask yourself ----- "Who will benefit from Muskrat Falls?"
Please review once again the graph below, then move to the paragraph and graph below that.
In effect, Muskrat Falls is a hidden form of taxing or shifting BILLIONS of dollars from island ratepayers to government or to Nalcor (government's proxy). Nalcor's documents show that over the 50 year 'take or pay' contract period the cumulative 'cashflow' amount comes to about $35 Billion.
The outside sale of power from Muskrat Falls or the sale of power to the mining giants of Labrador can only be sold AT A MAJOR LOSS. There is NO MONEY TO BE MADE THERE. So to show a 'positive' cash flow, Nalcor must keep electricity rates high (very high) for our children and grandchildren (see above) ---- that is where the BILLIONS of dollars will come from --- NOWHERE ELSE.
If Muskrat Falls were costed and electricity rates set in the manner similar to the way the Upper Churchill and our island hydro sites were, Muskrat Falls electricity costs for our children and grandchildren would be VERY LOW (around 2 cents/KWh) --- just as the cost of Upper Churchill power is now very low (about 2/10ths of a cent/KWh).
Ask yourself ----- "Who will benefit from Muskrat Falls?"
Please review once again the graph below, then move to the paragraph and graph below that.
Even though NEAR-ZERO COST Upper Churchill Power will be available in 2041, Nalcor's Muskrat Falls "take or pay" contract will require (by contract) that our children and grandchildren continue providing Nalcor with an UNNECESSARY $21 BILLION CASH FLOW -------- WHY ? ? ?
SEE BELOW
SEE BELOW
Our Public Utilities Board (PUB) was denied the scope and the time it needed to properly review Muskrat Falls ---- a plan that has been in the works for years -- that is, to shift by stealth BILLIONS of dollars from captive island ratepayers to Nalcor and/or to government..........Nalcor's Muskrat Falls business model is uncannily similar to a cable company business model.
Aspiring Liberal leader (Dean Macdonald) and former premier (Danny Williams) would both be very familiar with a cable company business model ........ that is, ratepayers on the island are effectively CAPTIVE to whatever rate is charged.
If they want the service, ratepayers have no choice but to pay THE HIGHEST RATE THAT THE MARKET WILL BEAR ----- and in the case of Muskrat Falls ---- UNNECESSARILY SO.
In some respects, the Muskrat Falls business model is even worse than that used by the cable companies.
Muskrat Falls has been exempted from our Public Utilities Board regulations and therefore has been TOTALLY removed from any 'regulatory' oversight whatsoever.
The question is ------ WHY?
Click HOLYROOD for next page.
Aspiring Liberal leader (Dean Macdonald) and former premier (Danny Williams) would both be very familiar with a cable company business model ........ that is, ratepayers on the island are effectively CAPTIVE to whatever rate is charged.
If they want the service, ratepayers have no choice but to pay THE HIGHEST RATE THAT THE MARKET WILL BEAR ----- and in the case of Muskrat Falls ---- UNNECESSARILY SO.
In some respects, the Muskrat Falls business model is even worse than that used by the cable companies.
Muskrat Falls has been exempted from our Public Utilities Board regulations and therefore has been TOTALLY removed from any 'regulatory' oversight whatsoever.
The question is ------ WHY?
Click HOLYROOD for next page.
