Nfld. & Labrador

Muskrat Falls touted as best option, despite $7.4B cost

Newfoundland and Labrador's energy corporation says the Muskrat Falls hydroelectric project should get the green light, despite a projected 24 per cent increase in capital costs in just two years.

Hydro plan recommended, even with 24% estimated jump in price tag

Hydro project to cost $7.4B

10 years ago
Duration 13:41
Muskrat Falls will cost $7.4 billion, N.L. Premier Kathy Dunderdale reveals in St. John's news conference


  • $7.4 billion pegged as revised cost of Lower Churchill project
  • Federal loan guarantee expected to be in place in a couple of weeks
  • Project to be debated in N.L. house of assembly

Newfoundland and Labrador’s energy corporation says the Muskrat Falls hydroelectric project should get the green light, despite a projected 24 per cent increase in capital costs in just two years.

Crown-owned Nalcor Energy says the Labrador plan remains the best option over the next half-century to serve the province’s power needs.

"Now is the time to build on our momentum," Premier Kathy Dunderdale said. "Now is the time to write the next chapter in Newfoundland and Labrador’s story. We have the vision. We have the plan. The next chapter of Newfoundland and Labrador’s story begins with Muskrat Falls."

The overall megaproject — including a subsea cable to Nova Scotia — is now expected to carry a price tag of $7.4 billion.

That figure, however, does not include any increases in the cost of building a planned power link between southwestern Newfoundland and Cape Breton.

Those expenses — previously estimated at $1.2 billion, and included in the total project cost — will be borne by Nova Scotia’s Emera Inc.

Emera will provide updated numbers for that portion of the project when it files with Nova Scotia’s regulatory body.

N.L. ratepayers will bear $6.2 billion

While the overall project is now estimated at $7.4 billion, ratepayers in Newfoundland and Labrador will be on the hook for $6.2 billion. That’s the estimated capital costs of building the dam and power lines within the province.

That compares with $5 billion when the project was announced two years ago.

The increase is due to a number of factors, including "more robust" cables built to withstand wind and ice, greater concrete and excavation costs, and increased labour expenses.

Nalcor previously allowed $1.1 billion in wiggle room for unforeseen expenses.

That’s down in the latest round of numbers, to about $730 million. But the company says it has a better handle on actual costs, because a significant amount of engineering work has since been completed.

"We have 50 per cent engineering done," Nalcor CEO Ed Martin said.

"We have a huge amount of bid information actually in hand. So we know, on all the key pieces of cost exposure over time, we’re very clear in the fact that we have a large amount of certainty around that."

Least-cost option

Nalcor says an updated analysis by Manitoba Hydro International reconfirms its previous conclusion — that Muskrat Falls is the cheapest domestic power option over the long term for Newfoundland’s power needs.

MHI’s previous review found that Muskrat Falls would roughly be $2.2 billion cheaper than the so-called "isolated island" option.

That option would see small-scale hydro dams built in Newfoundland, and the refurbishment of the oil-burning Holyrood generating facility near St. John’s.

The new analysis was even more favourable to Muskrat Falls, concluding that it is $2.4 billion better than the alternative.

The time frame for the analyses was between now and 2067.

Nalcor says the positive impact of a federal loan guarantee for the project are included in the most recent analysis, although officials declined to provide details on precise numbers.

"Until they’re finalized, we’re not going to be public about them," Dunderdale said. "Only when they are finalized — signed, sealed and delivered — will we make a sanction decision."

The guarantee — pledged by Prime Minister Stephen Harper during last year’s federal election campaign — is still not complete.

Other factors that would have favoured the non-Muskrat option — such as lower forecast oil prices — were also included.

Muskrat, officials noted, still came out on top.

Dunderdale rejected calls to send the new set of numbers back to the province's Public Utilities Board for review.

Earlier this year, the PUB said it lacked enough information to pick between the two options it was presented for future power needs.

The new cost estimates clear the way for a pending special debate in Newfoundland and Labrador’s house of assembly.

All parties must come to a consensus on the ground rules for that debate — something that hasn't happened yet.

Dunderdale insisted approval of the project is not a fait accompli.

"It’s not a done deal at this point," the premier said. "It’s not a done deal until it’s a done deal, and we sign on the dotted line."

If Muskrat Falls gets the go-ahead, first power is expected in 2017.

Opposition parties not impressed

The province's two opposition parties slammed the announcement as a public relations stunt.

"Today’s announcement was more about the launch of a government PR exercise than substance," Liberal Leader Dwight Ball said in a statement issued Tuesday afternoon.

"We’ve been waiting for these final numbers on Muskrat Falls for quite some time, but we’re surprised that the premier provided no information on how much energy rates will increase."

He also said there was little information provided on alternatives, such as wind and natural gas, and the federal loan guarantee.

Meanwhile, NDP Leader Lorraine Michael said there are still questions yet to be answered by the Tory government.

"They are asking the people of this province to approve this project without knowing the full costs," Michael said.

Michael also cited the uncompleted federal loan guarantee as an issue, and noted that Emera can still back out of building the maritime link to Nova Scotia.