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PAT CULLEN: The shock of Muskrat Falls

The Muskrat Falls site in Labrador.
The Muskrat Falls site in Labrador. - SaltWire Network

Our electricity bills are around 11 cents a kilowatt hour now, but this will skyrocket to roughly 20 cents when Muskrat Falls produces full power in 2020, according to Stan Marshall, president and chief executive officer with Nalcor Energy, the Crown corporation which manages the province’s energy resources.

How will these shocking rates affect our most vulnerable, those who find it next-to-impossible to keep warm, as is, and are forced to choose between heat and food or heat and medication? Unfortunately, I don’t think anyone has given a thought to them. We, the 300,000 or so ratepayers in Newfoundland will be on the hook for a $12.7-billion project that many of us didn’t want or were too ill-informed to say we didn’t.

If, as the province’s consumer advocate Dennis Browne says most island ratepayers will find it “an impossibility” to pay for this massive hydroelectric project, then these costs could be passed along to government to subsidize so rates can be lowered.

If that happens, the provincial taxpayer will foot the bill. This includes the Labradorian who has concerns about methylmercury poisoning in their food chain, is skeptical about the safety of the North Spur dam and fears that the legacy of Muskrat Falls will be the annihilation of the Indigenous way of life. They may just end up helping to pay for what some feel is their own destruction.

As Deanne Fisher, manager of corporate communications with Nalcor explained, “I don’t know that government would be able to say OK, it’s only Newfoundlanders (that) are going to pay. If government subsidizes it, then it’s all the people of the province.” Labradorians also won’t use the power produced by Muskrat Falls.

At present, we, the ratepayers of Newfoundland will pay hundreds of millions of dollars a year through our electricity bills to cover the cost of the 35-and 50-year loans used to construct the project as well as the operational and maintenance costs associated with it, according to Marshall and Fisher.

Should the provincial government subsidize it, it will take $60 to $70 million yearly to reduce rates by one cent, Marshall said, adding that government subsidization means an increase in taxes or the province assuming a higher debt load. He put it quite bluntly, “If government subsidizes it, they’ve got to raise taxes or go further in debt.” About 70 per cent of Newfoundlanders heat their homes with electricity, according to Dennis Browne.

What would happen if many, unable to pay these bills, switched to alternate forms of energy? Stan Marshall has conceded that electricity usage is down on the island. At what point would conditions become so bad that government, would have to step in? And which government? The province or the feds? The choice between higher taxes and higher debt is not something any of us want to contemplate-especially those who rely solely on government-funded services in a province which has one of, if not, the oldest and sickest populations in Canada. If social services and health care costs start to climb, what will the stance on rate mitigation be then?

Nalcor and its fully owned subsidiary Newfoundland and Labrador Hydro plan to use the new transmission system to bring in cheaper power from the Upper Churchill, sell it to customers at existing prices and then place the savings in a deferral account which could, according to Marshall, “be close to $200 million between now and the time that Muskrat comes on-stream fully.” The $200 million or so would, he said, be used to “help phase in the increase in rates, over two-or-three years.”

But when asked if there was any way to prevent electricity bills from rising dramatically when Muskrat Falls produces full power in two years, he replied: “No. You cannot change the big picture. You cannot. If you’ve invested $13 billion and you’ve got legislation in place that says the Newfoundland consumer has to bear that, then the Newfoundland consumer has to bear that. If the Newfoundland consumer doesn’t bear that, then the Newfoundland taxpayer has to bear that.” He may have added the Labrador taxpayer as well.

Muskrat comes on-stream, he said, we will pay some of the highest electricity bills in Canada.

We don’t know conclusively what the rates will be in 2020. At present, the Nalcor prognostication is around 20 cents a kilowatt hour. But Newfoundland Power filed for a 1.2 per cent increase with the Public Utilities Board a couple of weeks ago. That’s in addition to the 16.9 per cent increase Hydro is looking for. But these Hydro increases, or at least some of them, are supposed to be held in reserve for us.

Natural Resources Minister Siobhan Coady assured in an email that a Rate Management Committee has been established to study ways costs to ratepayers can be reduced. The committee includes “officials” from her department, finance, as well as Nalcor and Hydro. The frequently repeated phrase ensuring a commitment that our electricity rates will be “…competitive with other Atlantic provinces” is in there as well as a further assurance that the government is committed to giving us “…a stable and secure power supply at the lowest cost possible.”

But the email and interviews have given little comfort. For I am still unsure as to what people who have no resources other than a social-benefits cheque will do. As rates rise, so too will the price of food and other commodities. Everything is passed along to the consumer and these vulnerable consumers will be the hardest hit. If there are rises in taxes or the province needs to borrow further to stay afloat, more services will be cut with those who can least afford it on the receiving end.

The Nalcor CEO has already said nothing can be done to prevent heavy-rate increases in 2020. The best we can hope for is rate mitigation in the short-term and some economists argue this is not feasible, given the financial state of the province.

It is a bleak picture for many of us. For those at the bottom, it is hellish.

Pat Cullen is a journalist who lives in Carbonear. She can be reached at 596-1505 or cullen.pat1@gmail.com.

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