The political fall-out of Furey's deal
What Furey gets from last week's news will not be as good as he hopes.
On her way to the hospital in labour with the future actor, Judith Love Cohen took a printout of a problem she was working on to see if she could figure it out between contractions. She called the office later in the day with the solution to the problem and the news she’d given birth to a boy.
Cohen was one of hundreds of thousands of men and women - 400,000 at peak – who worked together to land humans on the moon and bring them back alive.
The project required complex mathematics to get the spacecraft into Earth orbit, out of it on the way to the moon, hit the tiny moon in the midst of infinite space, drop two men to the lunar surface, hook them back up with another spaceship that stayed orbiting the moon, then bring them back safely to Earth. They did it using computers, but the engineers frequently did their sums using a slide rule.
In the Apollo Saturn V rocket, there were more than six million parts. NASA allowed that 600,000 of them could fail and the mission could still work. The Saturn V was the heaviest, tallest, and most powerful rocket humans have built so far.
At the drop of a hat, anyone working on the project could take a piece of chalk and drawn a simple diagram that showed the route to the moon and back. They could show the way the Saturn V disassembled along the way from launch to splash down. Any kid who was alive in 1969 could have done the same thing.
Paying for Muskrat Falls without wrecking Newfoundland and Labrador is a complex problem with lots of moving parts.
But it isn’t Apollo spaceship to the moon complicated.
So, it stands out that, when asked to explain how his rate mitigation plan worked, Premier Andrew Furey couldn’t do it. Nor did Furey’s buddy Brendan Paddick at the briefing for reporters the day before. You can see a short interview Furey did with NTV’s Dave Salter from Thursday’s Carter File. He never answered the simple question. Never even tried.
This is a big deal because the total amount of cash needed to pay off Muskrat Falls as it stands right now is something on the order of 42 billion dollars. NALCOR - that is, the provincial government and NL Hydro - will need $844 million each year for the next 50 years to cover the project’s costs. The math is easy on that one. You have a calculator on your phone, tablet, watch, or desktop computer to do the job thanks in large part to those half a million people who sent men to the moon and back.
Explaining how you will pay for Muskrat Falls should be easy even if the details are complicated. The amount of money needed each year to pay for Muskrat Falls consists of probably four or five separate piles. There is an army of accountants at NALCOR who can group them together nicely and tell you how much is in each pile.
To mitigate Muskrat Falls’ effect on electricity rates you need to find some other way to pay for Muskrat Falls than rates. That’s the simple definition of mitigation. So, you just list off all the piles of cash you have to cover those amounts. Start with $844 million. Then you take away all the cash you have. The Liberals promised that they would find money to pay for Muskrat Falls without increasing rates so the number at the end of their list would be zero.
The fact that neither Furey nor NALCOR jersey-boy Paddick could show anyone a list like that tells you they don’t know how they will mitigate Muskrat Falls. At the rate they are going, odds are they won’t have an answer in January either since key parts of Muskrat Falls - like the transmission line to the island – are not close to finished.
If you don’t know what your costs are, then you cannot know how much money you need to pay off the bill.
Pretty simple stuff.
So here we are six months before Muskrat Falls comes online – nudge, nudge, wink, wink – and no one in the provincial government knows how they will stop electricity rates from climbing. They say they have a scheme, but we have heard that half a dozen times at least since 2010. None worked.
That’s the single biggest question we have, which is not good since Andrew Furey claimed he had a plan. But that isn’t the only question.
The second biggest question is what the new base rate will be. On Wednesday, Furey and the NALCOR-jersey boy said it would 14.7 cents a kilowatt hour. On Thursday – after some people pointed out this would be more like 18% above the current rate - Furey told NTV the rate would be lower because 10% is the threshold for rate shock. That’s when people start to shift to other forms of energy.
Now rate shock is only an issue if the provincial government plans to have people pay for Muskrat Falls through their electricity rates. It shows that Furey and Paddick were aware of the threshold for sticker shock when they put the number out there. Since the Liberals promised they wouldn’t do that, Furey’s comment on Thursday shows that they still plan to have people pay for Muskrat Falls through their rates, somehow.
So, we don’t how the plan will work, and we don’t know the starting price for rates. We also don’t know who will set rates in the future. Back in April, Furey said the public utilities board would have the job. But twice last week Furey promised what the rates would be. Well, Andrew Furey can only keep that promise if he plans to have politicians set rates.
In other words, all the strategic problems Muskrat Falls caused will continue unchanged according to Andrew Furey. That is a massive policy problem which spawns its own political problems. But that’s not the only bunch of problems.
You see, Mike and Heather on Flower Hill in downtown St. John’s or their relations the Adeys or Snelgroves or Yetmans or Carews in Anytown freaked them out in 2017 when Stan Marshall told them Muskrat Falls would double their electricity rates.
The politicians and bureaucrats behind Muskrat Falls knew from the beginning people would balk at their electricity rates with Muskrat Falls even when it would do far less than double them. That’s why they have been trying to make the starting price for Muskrat Falls electricity high as they need it to get enough money and at the same time low enough so that people don’t freak. Danny Williams started it in 2010 and Andrew Furey is still at it in 2021.
The politicians and bureaucrats wearing the NALCOR jerseys know electricity prices are such a sensitive issue that they even invented an imaginary price for electricity so people cannot easily tell what Muskrat Falls will do to electricity prices. Last week, we saw the same old NALCOR talk about how Muskrat Falls wouldn’t double your electricity prices anyway. All the Muskrateers like Jerome! Kennedy used to claim Muskrat Falls will never double your electricity costs. Ed Martin used to say Muskrat Falls would only change your monthly bill by seven dollars. Now Andrew Furey is reciting the lines. Nothing has changed.
Forget the numbers NALCOR uses. Just look at your electricity bill every month. There’s a line that shows the Energy Charge set by the public utilities board. That’s how much it costs to make electricity and deliver it to your house. Yes, there’s another flat charge - $15 bucks a month – but with 70% of the province using electric heat that flat charge doesn’t matter a row of beans when it comes to sorting out how much electricity costs.
Everyone pays the flat charge. Everyone pays the same rate for electricity: 12.52 cents for every kilowatt hour as of July. The big difference for each of us is how much electricity we use. But basically, if you were paying 300 bucks for electricity without Muskrat Falls, the PUB price for electricity would make that number 600 bucks or damn close to it. Plus 15 bucks.
So, when Andrew Furey said 14.7 cents, and then said it won’t even be that the simple truth is that no one knows what rates will be. The numbers provincial government officials used last week are made up. It isn’t real but it isn’t supposed to be. The made-up electricity price masks are supposed to mask what is going on. They are deliberately deceptive, which is not a surprise given what Justice Richard LeBlanc found in his inquiry.
The political problem for Andrew Furey, though, is that many people will believe what he said last week. People won’t give a tinker’s damn what electricity prices might have been. They will know what it is when that first bill hits six months from now. And unless it is pretty much what they are paying today, they will not be happy. The more beyond the current rate it is, the worse the political problem for Furey and his party.
That’s just the start of the problems in this part of the Muskrat Falls mess. If the rate is too high, then people will switch from electric heat. That will mean electricity rates will have to go higher, which means more people will switch. That’s the death spiral everyone has heard about.
If it is too low, then Andrew Furey will have to suck money from somewhere else – like health care or education – and people won’t like that either.
As it is, and even if it all somehow manages to work out as announced, Andrew Furey’s plan will cause financial problems for the province in the future. Finance officials counted on that rate of return to cover future spending. Giving up the four and a half points in his scheme will raise the deficit by that amount in next year’s budget. So that means either more debt or more cuts.
The Liberals will have political problems because Furey hasn’t told people about the knock-on costs of his scheme. If Furey tries to control prices, he will have complaints every time the rates need to go up. The smart thing to do would have been for Furey to let the PUB sort out rates. But as it is, Furey and his brain trust thought they were smarter than everyone else, just like Danny, and Kathy, and Jerome!, and Dwight did.
You can see where this is going.
Danny Williams and Ed Martin have generated more federal transfers for Newfoundland and Labrador than Jack Pickersgill and Joe Smallwood ever did.
Saying one thing and doing something else is a politician’s nightmare. Sometimes you have to do it. Things change. New information turns up.
The real political damage comes from situations where you knew what was coming and decided to say the wrong thing anyway. And then get caught at it.
Like Dwight Ball with the HST hike in 2015. He criticised it in the spring – after he was warned against doing it - reversed it in the fall, then hiked HST again the following spring.
Or Dwight Ball claiming in the 2019 election he didn’t support Muskrat Falls when his own words in 2012 show he has been an enthusiastic Muskrateer from the beginning.
Or Dwight Ball promising he had a magical scheme so that no one would pay for Muskrat Falls.
Or Dwight Ball saying he didn’t approve Ed Martin’s massive severance package when his text to Kenny Marshall approved giving the guy whatever his contract entitled him to get.
Andrew Furey got himself into lots of those jams last week. Arguably one of the worst ones came with the Innu Nation. Grand Chief Etienne Rich complained loudly that the Innu had been left out of the talks that affected their deal with the provincial government under the New Dawn Agreement.
“The Premier of Newfoundland [and Labrador] is a very dishonest person to the Innu people,” Rich told reporters repeatedly. Not was dishonest in our phone call, like it was a one time thing. But “is a dishonest person”. Furey promised to keep the Innu informed but Rich says he found out about the deal from news media. “It was promised to us we would be informed of any talks with Canada and that didn’t happen. It’s very disrespectful. It’s a slap in the face.”
Furey responded with a nose puller about how some unspecified person had learned lessons from what VOCM called “the rollout of the deal”. Furey promised to make things better next time. Rich will like when he finds out the details, Furey told reporters or words to that effect.
That’s the kind of stuff Dwight Ball used to get on with. What’s worse, it carries on Ball’s litany of shag-ups with Indigenous leaders over Muskrat Falls. The Liberals have made Indigenous reconciliation a big promise for them solely because the federal Liberals are all over it. Andrew Furey is especially keen to be like Justin but really, we are starting to see that Andrew is more like Dwight than Trudeau.
Former federal cabinet minister Peter Penashue represented the Innu Nation at last week’s ceremony. He crashed the media technical briefing and caused a bit of a scene, although local reporters haven’t filed any news stories that mentioned the importance of the confrontation.
Penashue reminded everyone via Twitter and his own media comments that the Innu were interested in Muskrat Falls and Gull Island. Furey, incidentally, talked about Churchill Falls, demonstrating only that he and his advisers missed the point. As SRBP noted last October, the Innu Nation is concerned about their money from Muskrat and what happens next on the Churchill River.
Too many people in this province underestimate the Innu Nation. Innu leaders are politically smart and have smarter lawyers. Screw with them at your peril. Furey screwed with them. Furey needs to pay attention to Rich, not ignore him deliberately as he obviously did in this deal and then bullshit his way through media scrums.
We will see what price Rich extracts for Furey’s dishonesty. The larger problem for Furey is that – in the context of those announcements last week – there are lots of ways Furey looks like his words and actions were not lining up. That could put Furey in the same spot as Ball, who also wound up with a reputation for dishonesty within his first year of taking office.
No one can explain why Andrew Furey rushed an announcement on Muskrat Falls last week when he wasn’t ready for it. Doesn’t matter. It’s over now.
The damage is done.
What isn’t done is waiting for its turn at bat.
And that’s only if you look at what may happen to Andrew Furey and his administration.
If you look at the reaction in the rest of the country to the Muskrat Falls bailout, then Furey may have put Justin Trudeau in a hard spot as well in the upcoming election.
Last week, a few political wits were chewing over the latest episode of the Seamus and Andy show.
“We should bring Danny Williams back to fuck more things up,” one of them offered. “No matter how stupid his mistakes were, there’s no one in St. John’s with enough sense to do something else and there’s always someone in Ottawa stunned enough to make Etobicoke, Lloydminster, and Yarmouth pay for it anyway.”
“Heck,” said another, “if you look at it that way, Danny Williams and Ed Martin have generated more federal transfers for Newfoundland and Labrador than Jack Pickersgill and Joe Smallwood ever did.”
A hush fell over the room and with it came a bit of a chill.
“The ghost of Ray Guy,” said one of da b’ys after a long silence. “You can tell by the chuckling and the faint smell of rum.”