Nfld. & Labrador

Nalcor Energy to be no more: Crown corporation being folded into N.L. Hydro

Premier Andrew Furey said the work was already underway and fulfils a promise to taxpayers to save money.

Officials can't give cost savings estimate for the move

Nalcor Energy was created in 2007 to manage Newfoundland and Labrador's energy assets. It will now be incorporated into Newfoundland and Labrador Hydro. (CBC)

Newfoundland and Labrador's Crown corporation Nalcor Energy, the body that oversees the controversial Muskrat Falls hydroelectric project, is being dismantled and folded into Newfoundland and Labrador Hydro.

Premier Andrew Furey made the announcement at a noon media conference Wednesday, joined by N.L. Hydro president, Nalcor interim CEO Jennifer Williams, and Energy Minister Andrew Parsons.

Furey said the work was already underway, and fulfils a promise to taxpayers to save money. No official would give a estimate of cost savings from combining the two entities.

"The reality is there is no set number. There is no set target," said Parsons, adding it is too complex to put a dollar figure on the move, but "there will obviously be savings." Furey said officials believe those savings will be significant.

The move was recommended in the recent report from the premier's economic recovery team led by Moya Greene, as well a 2020 report from the Public Utilities Board. Furey said the move was not being made solely because of the Greene report, and called its recommendation a coincidence.

The elimination of the corporation in charge of the province's energy assets requires legislative changes, said Parsons, and contractual changes may also be needed.

Jennifer Williams, thepresident of Newfoundland and Labrador Hydro as well as the interim CEO of Nalcor Energy, said her dual role shows how cost savings can be achieved in the Nalcor restructuring. (Patrick Butler/CBC)

Nalcor was created in 2007 to handle the province's hydroelectricity and oil and gas assets. The corporation is in the final stages of completing Muskrat Falls, a project first projected to cost  $7.4 billion but which has ballooned to $13.1 billion. Amid its construction it was subject to a public inquiry which produced a scathing report called Muskrat Falls: A Misguided Project.

Furey said Muskrat Falls was not the reason for Wednesday's announcement.

"We've looked to the future of Nalcor Energy beyond Muskrat Falls, and this is the prudent, responsible planning for life after the completion of that project," he said.

He said he didn't think Wednesday's announcement would interfere with talks with the federal government about rate mitigation for taxpayers once Muskrat Falls power comes fully online. Furey said the impending changes show that the provincial government is taking steps to save money.

"These are all appropriate and big signals to the federal government that we're taking our own structural issues seriously," he said.

The Muskrat Falls hydroelectric project, seen here in September, is expected to be fully up and running in the fall at a cost of $13.1 billion. (Nalcor Energy)

No mass layoffs: Parsons

About 1,600 people work at Nalcor. Parsons said there will not be mass layoffs as its operations are streamlined.

"We think there are ways we can do things better, but it does not mean a mass shuffling out of people out of that entity," he said.

Williams said there will be "opportunities for attrition" and there is duplication between the two. Furey pointed to Williams herself — now in the dual role of overseeing both Nalcor and NL Hydro — as one example of savings.

"Me taking this [Nalcor CEO] job is a job lost. There's more of that to come," said Williams, who stepped into the CEO role upon the retirement of former CEO Stan Marshall on June 15.

The volume of expertise built up within Nalcor over the Muskrat Falls era has been "a silver lining" to that project, said Parsons, and if the province wants to pursue future hydroelectric projects those human resources will be needed.

"We have options, we have possibilities, we have ideas," he said. "We have not made decisions on those, but we have huge assets that we can develop if we wish, and if we're going to have that conversation, you're going to need expertise."

While the Muskrat Falls public inquiry report called out particular executives for their actions, no official would say Wednesday what the future holds for individuals.

"We have to be very careful about what we say, so we do not trigger legal consequences," said Parsons.

Energy Minister Andrew Parsons says there will be no mass layoffs, and that the expertise built up within Nalcor needs to be retained. (Patrick Butler/CBC)

How long will it take?

How long the entire dissolution will take is also unknown.

"This is the first of many steps. How many steps is required? Time will tell," said Furey.

The complexity of untangling contracts is one area where time will be needed. Williams said even streamlining Nalcor's actual operations will require care, calling its electricity system "incredibly dangerous."

"We have to be very careful to make sure we're making the right decisions," she said.

The details, such as which buildings might close, are also up in the air. Parsons said Wednesday's announcement was meant to give the public as much notice as possible of impending changes.

"The reality is we knew that we would not have the answers to that today, but we felt it was important to know that direction," he said.

Nalcor lost $90 million in 2020, and continued to bleed cash for the first quarter of 2021, with corporation officials blaming the pandemic and turbulent oil prices.

During question period Wednesday, Opposition leader David Brazil asked Furey if he would direct Parsons to table the analysis used to make the decision to dissolve Nalcor. 

Furey said the governing Liberals will provide the analysis, including the PUB report. 

Brazil also asked why, if the decision was evidence-based, neither Furey nor Parsons provided estimates on cost savings or potential job cuts. Furey said the evidence lies mainly in the fact that there are "significant duplications" within both corporations.

"After Muskrat Falls is complete I'm not sure what the purpose of Nalcor is. We have a utility company, Newfoundland and Labrador Hydro. OilCo is no longer with Nalcor, so what is the purpose?" Furey said.

"We're not prepared to continue to waste money on corporations that don't have any more purpose."

Brazil brought up a 2019 estimate from consumer advocate Dennis Browne that said the province could save roughly $20 million annually by folding Nalcor into Newfoundland and Labrador Hydro. He asked why Furey couldn't provide any estimates on Wednesday when Browne's are two years old. 

"We said we whatever number we would provide would likely be inaccurate. So we're still doing a fulsome analysis of the exact savings," Furey said.

"Likely there will never be an exact determination, prior to folding in, exactly what the savings will be. We'll have an estimate of course, and that's one that we'll make."

Read more from CBC Newfoundland and Labrador


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