Doubling electricity rates no way to pay for Muskrat Falls: MUN economist

People will abandon electric heat if provincial government allows rates to double, says Memorial University economist.

Extending federal loan guarantee makes sense, says Jim Feehan

The Muskrat Falls hydroelectric project is now expected to cost $11.4 billion, including interest. (Derek Doody/Submitted)

A Memorial University economist says Newfoundlanders and Labradorians will abandon electric heat if the provincial government does not prevent rates from doubling.

MUN's Jim Feehan, a longtime opponent of the project, said in the face of delays and cost overruns with the hydroelectric project — now forecast to cost $11.4 billion — the provincial government needs an extension of the federal loan guarantee signed in 2012.

"The province is in a very difficult financial position, due in no small part to Muskrat Falls in the first place, which was a project that was really never well justified," Feehan told CBC's Central Morning Show on Tuesday, following a Globe and Mail story that said the provincial government has asked Ottawa to extend the loan guarantee.

"Even with the request in, the province and Nalcor should be looking at the merits of the project, if there's any variation on the project that could be done, some component could be left out. They really do have to look at all the options."

Feehan said the government can't place all the burden of paying for the project on consumers by raising electricity rates; by 2022, consumer electricity prices are forecast to hit 22 cents a kilowatt hour, up from 11.9 cents today.

"First of all, people won't pay that much. You won't see people with electric heat any more," he said.

"They'll be back to wood furnaces, and propane heat. If we go ahead with this project, we have to find some way of paying for it."

Feehan isn't holding out any hope that Newfoundland and Labrador will be able export electricity for a high price to New England or any other export markets.

"The odds are this is just going to be a terrible burden on the people of the province."