Nfld. & Labrador

Nalcor told to look at Muskrat Falls cost overruns like a 'laser beam'

Tom Johnson says while he's disappointed that the Muskrat Falls is 10 per cent over budget, he said some perspective needs to be kept about the megaproject.
The province's consumer advocate, Tom Johnson, spoke with Here & Now about the latest cost overruns on the Muskrat Falls hydro project. (CBC)

Newfoundland and Labrador's consumer advocate says while he's disappointed that the Muskrat Falls hydro project is 10 per cent over budget, he said some perspective needs to be kept about the long-term project.

"Obviously that's not the type of development that we want to see happening there. That's a fairly big increase, it's 10 per cent over where it was a year or so ago," Tom Johnson told Here & Now

On Tuesday, Nalcor CEO Ed Martin admitted that the construction cost for the project is now forecast at $7.65-billion, and there could be more cost overruns in the future.

But the megaproject is not only over budget, it's also running late. Nalcor officials say the project won't be operational until sometime in 2018, nearly a year later than projected.

"I think the people of the province want Nalcor to focus on this like a laser beam, to make sure there are no more untoward happenings coming out of that project."

Potential revenue streams

Johnson said he doesn't understand why there wasn't more pre-planning to avoid such a cost overrun. 

"Why this wasn't ferreted out prior to now, I don't know. One would think at this stage we would not be running into those, if the pre-planning had looked at all those contingencies," he said.

"If this project is having cost overruns, there's going to be potential revenue coming from excess sales outside of the province ... there's going to be potential for those to be plowed back in to mitigate rate impacts," he said.

"It would also seem to me that Hydro can adjust the amount it's seeking by way of a return in equity."

Muskrat Falls, the site of the Lower Churchill hydro project, is pictured in this undated file photograph. (CBC)

Johnson said with current low interest rates and a federal loan guarantee, those are factors that augur in favour of the long-term benefits of the project.

"So it's not like a situation where you are tied up with vagaries of oil. Who knows what that's going to cost next year," said Johnson.

"There will be generations and generations of Newfoundlanders who will be getting their power through this source. I can say this — the province and the taxpayers of the province are expected to reap benefits. Mr. Martin was indicating a return of about $50-billion to the province over the long-haul."

Nalcor estimates the average electric bill will now increase by about $7 per customer, per month.

Johnson said he wasn't sure what the specifics are behind those numbers.

"I have no reason to doubt them, it's about a hundred dollars more a year," said Johnson.

"It's a hundred dollars we were wishing to avoid, quite frankly. But you know, it's a hundred dollars. People say 'I'd just as soon have it in my pocket as someone else's.'"

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