Muskrat Falls is like the plant from Harry Potter and the Philosopher’s Stone.
Devil’s Snare.
Struggle and it will only wind tighter until it kills you.
Relax and it will release you.
Except that this real version of the Devil’s Snare doesn’t let go when you relax in its embrace, which is why everyone has simply relaxed and accepted Muskrat Falls as inevitable and yet it still threatens to strangle them all.
We now have the umpteenth “mitigation” plan from one version or another of the crowd running the place. None of them worked, really and today we’ll explain what the problems are more clearly than Friday’s rant with this latest scheme of the scam.
Incidentally, Friday’s column went to bed Thursday long before Newfoundland Power issued a news release that explained in words that the lawyers, accountants, and engineers responsible for it no doubt thought was practically perfect, spit spot only to find that on Friday morning *all* of the headlines about the rate mitigation plan were some variation on “Newfoundland Power promises your electricity rates will go up 10% at least this summer and beyond regardless of the cap.”
And on social media, like The FaceBox, people took a break from the latest outbreak of the meme that involves making ridiculous declarations about their copyright control of things they have no control over to tell Newfoundland Power folks they were all greedy scum.
Not a good look for a company that had nothing to do with Muskrat Falls at all and that will get nothing from the crowd at NALCOR or the government for stepping in front of the freight train of public anger that will now target Newfoundland Power. Maybe a grimace at the carnage. Maybe a crack about how that’s gotta hurt. Gonna leave a mark. But not even a thank you.
Make no mistake. The Newfoundland Power release *was* practically perfect. Factually accurate. Inescapably true. But also very much of the age in which we all used to live in the last century of quiet sleepy electricity regulation and orderly management. If Newfoundland Power has a strategy it isn’t obvious and whatever they are doing doesn’t reflect the world since 2012 in Newfoundland and Labrador, which is chaotic and ugly and political and where we are all strangling inside the Devil’s Snare.
As we have learned time and again since 2010, it will take more than Ron, Harry, and Hermione in one version or another or Mary Poppins or Peter Pan and Wendy to sort these problems. It will take the thing that kills Devil’s Snare.
Daylight.
We have to open a few windows and let the sun do its work.
Do not expect any sunshine from the crowd on the hill. They are too busy blowing sunshine up their own arses and that sunshine is just a flashlight without batteries anyway so there’s no good in it.
Thursday the current guvmint started pumping out self-praise about this glorious rate mitigation thingy. The social media accounts carrying Premier Andrew Furey’s name were proud of the $740 million his Furey Government was spending to save us from the evil Muskrat dem Pea Seas unleashed. All conveniently ignored the part the Liberals played in giving you the mess, including acknowledging that - as Dwight Ball himself knows - he and most other people in the party backed this moronic scheme from the start despite the obvious problems with it from the start. And they did nothing to get the mess under control or lower the final costs. Nothing.
The official Party accounts - branded Liberal Party of Newfoundland and Labrador - talked about something branded “Your Furey Government” thereby defeating the purpose of rebranding to distance themselves from the crowd up along called Liberals. Any time any pundit, commentator, reporter, or common-as-muck political hack says anything about the Great Furey Rebranding Strategy know instantly that the person is 100% FOS.
But more importantly, thise accounts whined about the $740 million “investment” as the Furey account put it, saying they could buy 1200 fire trucks a year if not for dem evil Pea Seas. Dem Evil Pea Seas just made wicked jokes at the Furey-ous Liberals out of the comparison, which is really all you can do since no one wants to buy 1200 fire trucks a year. The obvious comparisons - doctors, nurses, teachers - escaped them as did another one, like lower taxes to help people fight the cost of living. Some of the social media guff did get at that, sort of, but not very effectively.
Finance minister Siobhan Coady’s social media tried for instance. At least some of her arguments got a bit closer to better ones:
The CBC headline says it all. "N.L. government to subsidize power rates — to the tune of $740M per year until 2030" In order to ensure electricity rates do not double and impact the cost of living, the Furey Government will have to subsidize power rates. If that wasn't needed, imagine the investments that could be made in education, health, housing or lower taxes.
Think of this as an all or nothing strategy: the problem with all of the furious Liberal Not-Liberal messaging is that none of it is true.
For starters, as Coady should know, the government is not spending a penny to do anything with rates. Not investing - the GovSpeak for what normal people call spending - and certainly not subsidizing. Whatever money is involved here is not an investment in something worthwhile. It is a weight around everyone’s neck that can only be removed by paying for it.
As it is, Coady knows she has to borrow $2.0 billion now - the single largest source of her budget’s income - just to fuel whatever spending she’s proud of and actually doing. So what’s another $740 million in new debt for all those fire trucks or what have you if you already don’t care how much the debt grows in order to buy them? Anyway, the money to pay for Muskrat Falls for the next six years is coming from electricity ratepayers for the most part, which is exactly what Danny Williams and his gang of bureaucrats and politicians decided in April 2010. No one else would buy it so first Williams and now every one of his successors will force the locals to pay for it. The bulk of the money in the long run comes from existing electricity rates as well as new increases for consumers. A new increase, plus guaranteed increases in the future. So much for real help with the cost of living.
There’s a trifling bit in the Thursday version of the Muskrat scheme from export sales, whether from Quebec or New England. Nothing is coming from Nova Scotia, which gets electricity for free. We the ratepayers are actually paying Emera for sending the electricity to them free of charge as well as paying Emera for the electricity we send to ourselves over the line to Labrador that doesn’t work.
The rest of the money is coming from Uncle Ottawa. But that runs out in 2030 under the deal the Furey-ous Not Liberal Lib’ral Guvmint signed with Justin Trudeau in 2021 and so this latest “mitigation” scheme lasts only until the federal cash runs out. Then it stops. How we will pay for Muskrat Falls from 2031 until the last of the bills is cleared 40-odd years after that is anyone’s guess. That’s *another* way all the Furey Guvmint messaging is totally false. We do not even need to mention that they want credit for spending and whine about the spending at the same time.
There is no subsidy of power rates either, no benefit to ratepayers from this scheme. They are really the only ones paying as regular readers know. Nothing the government has done will “mitigate” the impact of Muskrat Falls either. In 2019, Bond Papers offered a way to lessen the impact the project has had and will have on ratepayers, electricity rates, and on electricity regulation.
The basic idea of a real mitigation scheme would be to figure out first what you needed to pay for and what you could chop. In that second option, there was stuff like the government’s return on equity - essentially a massive new tax - that is completely unnecessary and unjustified.
Another thing to cut the cost to consumers would be to take out the back-loaded repayments. This was an early “mitigation” idea but it actually made the project more expensive in the long run. You see, ordinarily, you borrow money and agree to pay back the money you borrow plus interest. Borrow $100 at 10 percent interest and you’d pay back $110. Simple. If you agreed to pay it back so much at a time, the payments would usually be a combination of the original amount - called principal - and the interest. You’d pay the same amount back every week or month or year but the person who loaned you the money would take back more of the principal out of that amount rather than the interest.
That’s the usual way to pay for something like Muskrat Falls and while there’d be a big jump in rates at the front end, the amount for Muskrat would stay the same over the 50 years or so you had to pay it back. In the pretty picture government produced in 2021, that’s the green line, which they labelled cost of service.
Problem is, in order to lower the front end payment, someone thought they’d delay repayment of the principal. That would work but it meant you’d have to pay more and more with a bigger payment at the back end. That’s why rates would have to go up every year, not merely for inflation but also to meet the payment schedules that assume you pay so much this time but next time you pay that plus a bit more inclouding extra interest. That’s the red line in the picture.
In 2019, the BP suggestion also divided up who would pay what in the even amounts every year. Consumers in Newfoundland and Labrador would pay only for the portions of the Muskrat Falls project, including operations and maintenance, that supplies electricity to those same consumers at rates set by a new energy regulator.
The provincial government would payback the loans it gave NALCOR as “equity” and give up its demand for ratepayers to repay the loans and interest as well as a return on equity, too. That would really lower the amount to be paid back each year. Whatever was left would come from NALCOR’s oil and gas and electricity sales.
There was an extra idea: add a new tax on electricity of one cent a kilowatt hour. Make it payable by the buyer not the generator. That would give you about $450 million a year. While the new tax would add a tiny bit to provincial power bills, the bulk of the new tax’s haul - close to $400 million of it roughly - would be paid by Emera and Hydro-Quebec, both of which currently profit through the two existing deals.
What the provincial government announced on Thursday actually looks a bit like that approach from 2019 but they clearly have not gone through the job of cutting down on everything they could cut. They certainly have not started plans to change the way electricity rates are set. They just did the bit that says Muskrat Falls would come from ratepayer money, some NALCOR money, and cash from Uncle Ottawa. Then they claimed credit for what three others were doing.
The people paying electricity rates are left hanging in the meantime. This scheme won’t last beyond 2030, at best. Public reaction has been completely negative, especially to the idea of continuing rate increases and while Andrew Parsons did say on Thursday future rate increases will be bigger than 2.25%, the reality is no one heard him. Same goes for Newfoundland Power. What the NP news release said was accurate. It’s just not news people heard: they think rates are capped at 2.25%. The chance of 10% increases freaks them out and rightly so.
The result is that there is a huge political risk tied to rates both for ratepayers and for others, like Newfoundland Power. The government has the power to do lots of things and because there is no generally accepted or understood set of rules about setting rates, almost anything could happen. Government has the power to tell the public utilities board what goes into making rates, which also means they can tell the board what cannot go into rates. They can change the rate of return for NALCOR and Newfoundland Power. Last time, it went up handsomely. It can just as easily go down.
A crowd that feels so politically desperate and that is so out of touch with reality they are - at the same time - happy and unhappy about doing something they are not really doing, can just as easily decide to cap all electricity rates at a flat rate or really limit everyone’s increase to an amount below what’s needed to keep the lights and heat on as they are to stumble into a good decision. Remember what caused DarkNL or why we have to replace Holyrood because the original replacement - Muskrat Falls - does not work properly. The same thinking still rules NALCOR and government.
To be sure, notice that just last week, the Premier saw a half-arsed CBC story about teachers and without knowing anything about what was going on immediately called the head of the teachers union to promise he would reimagine the reimagining of education reimagining he had already started to stop whatever was making the union guy call CBC.
Last week, the Premier also added another 34,000 new patients to the long list of people lined up for breast cancer screening. The reimagined system cannot deal with the existing demand from people with mammaries already in line to check for troublesome lumps in time to do something about it. And those people are at much higher likelihood of having cancer than the new ones coming along. Yet they got added to the pile because there something in the news about it.
Sure, a local cancer researcher told CBC there has been a higher rate of breast and colon cancer turning up in younger people lately. She said “incidence” meaning rates but CBC transcribed it as incidents, meaning raw numbers, but that doesn’t mean anything if there was a very low rate before and the current rate is only very slightly higher. For argument’s sake, if there was one new case for every 100,000 people before and there are two now, that would mean a doubling of the rate or incidence - 100% higher and looking really scary - but really only 10 new individual cases or incidents versus five before. That’s basic math and math matters even if two out of three people in Newfoundland and Labrador cannot understand and apply math at a level needed to succeed in modern society.
Rather than build false hope, burden the system, risk delaying tests for people who need it or - more likely - pissing off the 34,000 because they are such a low priority they won’t get checked for two or 10 years anyway, use evidence to guide what government is doing. After all, the reimagined health care this crowd is pushing supposedly puts weight on the social determinants of health, which is all about preventing disease.
Rather than build up false hope and more demand for more spending we do not have the money for, tell people to do what they ought to do anyway: check for lumps. Take better care of themselves. Eat better. Sleep more. Drink less alcohol. Lay off the smokes. Whatever. Get more family doctors working efficiently in private practice so they can screen patients under age 50. Get people likely to have actual disease into the system rather than randomly check everyone. After all, screening people starting at 40 does not prevent new disease. It just copes with the symptoms. And it does not even do that if you cannot actually screen all those people in a timely way, which we can't.
In health, education, and electricity, last week was for the government bunch about treating political symptoms not curing policy disease. Guvmint’s social media minders spewed their fog of lit candles, pyramid power, crystals, and tarot reading while dressed up as the Easter Bunny or Santa Claus.
This is the Devil’s Snare not just of Muskrat Falls but of Newfoundland and Labrador politics for the past 20 years. No magic will get us out of it. Not now. Not ever. We need sunshine and these days there is that much fog around the sun cannot possibly burn through.
Hi Ed,
Question:
Can we bounce the payments on the our debt servicing, MF debt included? Actually stop payments, and trigger the subsequent action by debtors? What specific actions would/could our debtors take after this occurred?
If the fallout was local politicians no longer having say in how we spent money, I don't think that is necessarily a bad thing. In fact, it might be the best solution long term.
Good day Ed
Civil disobedience looms, I fear.
If we all paid our power bills at the amount we paid, say in 2015, and not include any of the increases, the whole system, which requires a continuous influx of cash, would collapse and be reworked. Of course it would require complete participation. They couldn't cut everyone off for arrears, and as long as people paid something each month there is little they could do. 200000 court actions? The lawyers would love it.
I practice energy conservation, wear sweaters, turn out my LED lights, as a necessity and can live comfortably with a monthly bill that is now what it was in 2015 in spite of higher rates. Be cold or broke.
Electricity is not a right. It is a convenient utility which it is incumbent on the user to use wisely.