NALCOR spills millions

Chronic bungling costs taxpayers billions

Photo by Shelby Bauman on Unsplash

In 2023, NALCOR spilled water in the island generating system that could have been used to make almost 800 gigawatt hours of electricity. NALCOR spilled the water - one type of fuel used to make electricity - because there was no need for it on the island and “system” deficiencies made export impossibles. The biggest spill came in December, which was a relatively mild month with lots of rain.

The information is in the December edition of monthly energy supply report that NALCOR sends to the Public Utilities Board. There’s a table showing how much NALCOR spilled in December alone and also what the total for the year was.

You’d never see this with any other fuel used to make electricity but water is considered a throw-away item. There’s no environmental damage - unless you count flooding or drowning - and the stuff comes for free from the sky. Hence, the complacency.

But water is valuable. 800 gigawatt hours is roughly 10% of what the province uses annually in electricity. That much electricity would have been worth about $116 million, all included, if sold on the island at the rate in 2023. On the export market, just the electricity without transportation cost, would have been worth about $40 million.

This sort of thing happened before there were links to the mainland because there wasn’t any possibility of export. Muskrat Falls was supposed to change that with not one but two routes off the island. Cathy Bennett once said there were “multiple, interlocking business cases” for Muskrat Falls, one of which was exports. Muskrateers played up the idea of exporting electricity through Nova Scotia and when some of the critics pointed out we were giving Nova Scotia a free block, they pointed to the export right as one of the reasons the claim of free juice was wrong. When asked once about giving Nova Scotians free electricity under the Danny Williams/Ed Martin 2010 give-away, Martin talked up the interconnected pool. He said that where the electricity came from didn’t matter. NALCOR’s pool of electricity for all its generating sources in the province would get used to meet its demands for whatever client. Where specific electrons came from wouldn’t matter.

And the truth is that doesn’t matter. It’s actually easier and financially more sensible for NALCOR to ship electricity out of the huge Bay d’Espoir complex on the island than to send electricity from Muskrat to St. John’s and then back to another set of changes and lines to Nova Scotia.

The other truth is there were multiple rationalizations and excuses for Muskrat Falls, which is not really the same thing as the rational, well-researched thing a business case is supposed to be. NALCOR’s failure to meet its own claims about exports and links to the mainland from the island are why it matters that last year and especially in December, NALCOR couldn’t deliver yet again on a promise. Sure, this water spillage in 2023 is relatively small compared to what NALCOR spilled in Labrador in 2022 and has been spilling in Labrador regularly since 2015. But what we need to notice is that the spillage in this case points to bigger issues, namely those “system” deficiencies.

One of the deficiencies is the Maritime Link. There’s room to get a bit more electricity through it than Nova Scotia takes for free or for less than cost but so far we haven;t shipped any export electricity beyond Nova Scotia. That’s because the transmission grid in Nova Scotia cannot handle exports from Newfoundland and Labrador through to New Brunswick and beyond. It’s not clear if NALCOR and the provincial government knew about the shortfall in 2010 when they announced the deal to link to Nova Scotia. The rest of us found out about that in 2015. That’s when the Nova Scotia energy regulator blocked needed upgrades and in 2023 the regulator is still holding up applications to upgrade the transmission lines out of Nova Scotia to protect Nova Scotia consumers and - let’s be honest - squeeze NALCOR for its pattern of promising one thing but not delivering.

Another of the deficiencies is apparently the Labrador-Island Link, which also couldn’t handle a transmission out of Newfoundland to Labrador for use in Labrador or to displace generation on the Churchill River for Quebec.

That might not be just a matter of capacity like in Nova Scotia, which leads us to the third deficiency, namely, NALCOR’s inability to manage the entire provincial electricity supply system in the way Ed Martin assured us would be the case back when all of this Muskrat stuff was a golden dream and not an endless nightmare. To be fair, it’s actually not just what Martin promised. Managing the supply of electricity is supposed to be NALCOR’s job, handed off to it from the Public Utilities Board since the mid-1990s and despite what the law says is supposed to happen. So really, NALCOR’s failing here is way bigger than just not delivering what Ed Martin promised. We are used to just *that*.

This is a bigger problem. Look at it another way: being able to manage the flows like this on a daily or weekly or monthly basis is intimately connected to NALCOR’s ability to tell us what demand will be 10 or 15 or 20 years out. Can’t dodge a wrench, then you can’t dodge a ball to borrow a phrase from Patches O’Houlihan. So all those lovely forecasts of demand that NALCOR has been using to justify billions in new capital projects for NALCOR both on the island and in Labrador are - like Paul’s hexagonal ball in the limerick - worth two-thirds or three-fifths of feck-all.

To really put it all together, consider that 18 months after Premier Andrew Furey accepted whatever his Quebec counterpart was flogging to build Gull Island and expand Churchill Falls proper, they still don’t have a deal. “Show me the money” Furey apparently begged - again - in Nova Scotia last moth at a Premiers’ meeting just as he has been saying now and again since Francois Legault flew to St. John’s and courted his young apprentice at The Rooms.

A decent deal shouldn’t be that hard. After all, Quebec needs the power and the relationship between the two provinces has been since the mid-1970s to split the power from Churchill Falls between the two and pay for it only enough to cover operating costs and repay the lenders. Each partner then resells the power at whatever the market will bear, which in Newfoundland and Labrador is 100% set by government with the public utilities board acting as a beard. As far as the expansion is concerned, for Newfoundland and Labrador, that means the three or four cents Legault offered is good enough. There’s every reason for Newfoundland to lock in at a low price and all they really need to haggle over is the share of the total output each partner takes. That’s not complicated either. Well, it isn’t but apparently it’s beyond whoever is involved in it.

So what’s the hang-up? Well in a likelihood, some variation on the same internal problems that led to a massive water spill last December and that lead to all sorts of other related problems. Actually, those are the problems that got us the Muskrat fiasco in the first place and keep anyone connected to government from figuring out how to make it work let alone pay for it without bankrupting the world. You want to mitigate Muskrat Falls, you are gonna need a way bigger boat than screwing around with rates.

And just to really drive that point home, realize that the same crowd have taken 14 years and still cannot figure out to pay for Muskrat Falls without wrecking the place:

• Scheme 1 (November 2010 ) Only cash comes from electricity rates, which will double at the front end but people don’t to worry about the need to replace Holyrood and keep them steady after that (hopefully)

• Scheme 2 (2011-12): Lower the front end price by backloading repayment of principal (which drives up costs) and make electricity rates go up every year for the following 50 years, guaranteed.

• Scheme 3 (Dwight Ball 1): Freeze rates at 13 cents but no idea how that might work.

• Scheme 4 (Paul Antle By-election variation): I have a magic solution so no one pays anything but I won’t tell you the secret until after you elect me. He didn’t get elected.

• Scheme 5 (Ball 2): Freeze rates at 17 cents but no idea how that would work.

• Scheme 6 (Ball 3): I have a deal with Ottawa for money from Hibernia

• Scheme 7 (Andrew Furey 1): We will mitigate rates somehow.

• Scheme 8 (Furey 2): *I* have a deal with Ottawa for Hibernia money.

• Scheme 9 (Furey 3): Same as the Scheme 2 variation on Scheme 1 but only until 2030 with a bit of financial fiddling, after that no clue what happens, oh yeah and all that federal money from Hibernia goes to something else.

And don’t forget that one of the reasons NALCOR boss Jennifer Williams is touting more generation on the island is… wait for it… as a replacement for Holyrood, which is what Muskrat was supposed to be but Jennifer now also claims we have way more demand coming when we still haven’t hit the demand forecasts used to justify Muskrat Falls.

The water spilling, the lack of deals, the ongoing rate wars at the public utilities board, and all the rest of the electricity gong show across the province make it clear that not no one involved in electricity - public or private sector, bureaucrat or politician - has a clue about how to run the provincial electricity system reliably at the lowest cost for consumers. The millions in lost revenue from spilled water last year on the island is like the pilot light under the boilers at NALCOR, which wind up burning billions upon billions at Holyrood 2, Muskrat, and the future schemes thanks to NALCOR bungling.