Nfld. & Labrador

Staring down Muskrat's 'extraordinary' pressure on N.L. electricity rates

Efforts to keep electricity rates affordable in the Muskrat Falls era have entered the public spotlight, with hearings beginning Thursday in St. John's.

Public hearings commence in St. John's as utility regulator eyes options for mitigation

Darlene Whalen is chair and CEO of Newfoundland and Labrador's public utilities board. (Terry Roberts/CBC)

Efforts to keep electricity rates affordable in the Muskrat Falls era have entered the public spotlight, with hearings hosted by Newfoundland and Labrador's public utilities board beginning Thursday in St. John's.

As expected, the challenge of paying the massive Muskrat mortgage — beginning with an annual bill of $725 million in two years — and balancing that with the interests of electricity ratepayers in the province took centre stage.

The board's chair and CEO, Darlene Whalen, set the tone in her opening remarks, by describing the challenge as "extraordinary."

Without any action, Whalen said, power rates will spike by between nine and 10 cents per kilowatt hour once the controversial hydroelectric project is commissioned in 2021, to just under 23 cents, and grow steadily into the future.

She said this was "not acceptable" and would "cause financial hardship" for domestic and commercial electricity users.

A 'significant policy issue'

The first witnesses to appear were from Liberty Consulting, a group of experts hired by the board to, among other things, identify revenue opportunities that can be used to keep power rates in check.

Liberty's John Antonuk described the rate mitigation options available as "very large in magnitude," with Muskrat Falls dividends to the provincial government and export sales of electricity topping the list.

John Antonuk was the lead presenter for Liberty Consulting at a hearing hosted Thursday by the public utilities board in St. John's. (Terry Roberts/CBC)

"These two sources account for more than two-thirds of total amounts," said Antonuk.

The provincial government borrowed nearly $4 billion to help finance construction of the project, which has seen its all-in budget soar from $7.4 billion to $12.7 billion.

The province is poised to receive a dividend of more than $130 million on that investment within two years, and that will grow to nearly $600 million annually within 20 years.

Liberty is recommending that government direct that money into rate mitigation.

This, combined with revenue from the sale of export power from Muskrat, could reduce rates by six cents per kilowatt hour.

Antonuk described this as the "dominant source" of potential rate reductions, but added that it will also have implications for government because it will have to manage without this revenue. And it could impact government's credit rating, he added.

"Those implications depend on how many dollars government determines can be dedicated to rate mitigation," the Liberty presentation states.

Antonuk described the issue as a "significant policy issue for government to resolve." 

When other potential revenue sources are added, Liberty estimates power rates could be mitigated by up to 12 cents by 2039.

Provincial Consumer Advocate Dennis Browne is scheduled to question the Liberty witnesses on Friday, but told reports Thursday he is encouraged by the company's report.

"We see some hope that there maybe large buckets of dividends and possibilities to assist in the mitigation process," Browne said.

"This is the first day. And we'll see how it goes. But we're off to a very good start."

The Muskrat Falls hydroelectric generating station in Labrador is scheduled to be commissioned in 2021. (Nalcor Energy )

Liberty is also recommending some big changes at government-owned Nalcor, including a cut in staff at the executive level of between five and 10 per cent, or what he described as a "right-sizing" of the corporation.

Antonuk said the number of executives at Nalcor and N.L. Hydro is "out of line" with other corporations he's reviewed in Canada and the United States.

Liberty is also proposing that Nalcor's power supply division be merged with Nalcor's subsidiary, Newfoundland and Labrador Hydro.

The hearings, meanwhile, are taking place at the board's offices on Torbay Road, and a schedule of witness is available on the board's website.

Stan Marshall, Nalcor's president and CEO, will testify on Tuesday, Oct. 8.

The board is scheduled to deliver a final report to government by Jan. 31, 2020.

Read more articles from CBC Newfoundland and Labrador

About the Author

Terry Roberts is a journalist with CBC's bureau in St. John's.

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