The federal government is again saying it will take steps to make Newfoundland and Labrador’s Muskrat Falls hydroelectric project financially stable — including waiving immediate payments due from Crown corporation Nalcor Energy — but there are few exact details on how the project will affect the province’s ratepayers.
Prime Minister Justin Trudeau and Newfoundland and Labrador Premier Andrew Furey made the announcement Thursday morning in a live press conference on the prime minister’s official Twitter account “to help ensure that the Lower Churchill projects are financially sustainable,” according to a press release.
Debt and financing payments owed by Nalcor, which operates the Lower Churchill project, will be delayed. Since the project isn’t yet regularly producing power, Ottawa has temporarily waived the payment obligations to “help reduce immediate financial pressures on Newfoundland and Labrador,” reads the release.
The province would have been on the hook to pay $844 million, $780 million of which would have been due by the end of December and added to the provincial debt, Furey said.
Furey said negotiations starting Thursday with Ottawa are a step to “right the direction of Muskrat Falls” and address a financially strained project “that has been like an anchor” for people of the province. Specifics on what taxpayers can expect weren’t outlined in Thursday’s announcement.
As of September, it is expected the project will be completed by mid-2021.
The next phase will be talks on restructuring the finances of the project to lower hydro rates, but Furey said an agreement will be in place by the time Muskrat Falls is commissioned. He expects it will be drafted in the spring of 2021.
It’s possible the federal government may take an equity stake in the project, Furey said.
‘There’s more to be done’
Trudeau said Ottawa is committed to working with the province to ensure the project “remains on stable financial footing,” appointing Serge Dupont as senior executive advisor working on negotiations for finance on the Atlantic Loop.
“Serge provides advice to clients in the public and private sectors on matters related to public policy and governance. Before joining Bennett Jones in 2018, he was a senior executive in the Government of Canada with 35 years of experience in economic and financial policy.”
The Atlantic Loop came up in the speech from the throne in September as a plan “that will connect surplus clean power to regions transitioning away from coal.”
That concept is to upgrade transmission capacity to allow hydroelectric power from Labrador and Quebec to displace coal use in the Maritimes.
Trudeau started his statements by citing last week’s announcement of Ottawa’s strategy to dramatically reduce greenhouse gas emissions by 2030 and the $2.5 billion earmarked for clean power.
“There’s more to be done,” Trudeau said, adding that the federal and provincial government “need to keep working to ensure a sustainable financial future for Muskrat Falls.”
Watch live: PM Justin Trudeau makes an announcement with the Premier of Newfoundland and Labrador, Andrew Furey. <a href=”https://t.co/INQZUIU3lj”>https://t.co/INQZUIU3lj</a>
The long, winding, expensive road to first power
The Muskrat Falls project has long been a source of debate and controversy in the province, as it has been mired in delays and financial overruns in the billions of dollars since it was sanctioned in 2012.
It’s a constant topic of political discussion, and with Newfoundland and Labrador heading to the polls in 2021, it will remain in the public discourse for some time.
Furey took over as premier in August, and under provincial legislation, an election must be called within a year of a new premier being sworn in, although the opposition is pushing to delay an election until at least October.
Delays caused by the COVID-19 pandemic are the latest in a series of hindrances in the Lower Churchill saga. It delayed first power by 10 months, while adding another $400 million to the project’s cost.
The release Thursday calls the project “an important part of Atlantic Canada’s clean energy future” that will provide a reliable, long-term source of clean power for the region.
In February, then-premier Dwight Ball and Natural Resources Minister Seamus O’Regan announced the federal and provincial governments had agreed on a plan for Muskrat Falls, aimed at keeping electricity rates affordable. But the finer points of accounting for a $30-billion funding gap over the coming decades have yet to be formalized.
The agreement was replaced earlier this year with a traditional cost-of-service agreement expected to cut $34 billion — down from $74 billion — in costs over 45 years that would be passed on to ratepayers. To keep rates stable at around 13.5 cents per kilowatt hour, the province will have to cover a $4.8-billion shortfall over the next two decades.
The details of that agreement were expected to be worked out in the months following the February announcement, but were delayed when the COVID-19 pandemic took hold in Canada in March.
First pitched in 2010
In 2010, former Progressive Conservative premier Danny Williams pitched Muskrat Falls as a $6.2-billion green energy solution that would bring Labrador power to the island of Newfoundland and into Nova Scotia through a series of subsea cables.
By the time the project was sanctioned in 2012 by Williams’s successor, Kathy Dunderdale, the cost estimate had risen to $7.7 billion.
In September, when Muskrat Falls delivered its first power to the Labrador grid, the project’s price tag had grown to $12.7 billion. Nalcor CEO Stan Marshall said earlier this year the project could tip the scales into the $13-billion range by the time it’s completed in mid-2021.
The COVID-19 pandemic has been cited as the reason for delays implementing sweeping recommendations made by an extensive inquiry into the Muskrat Falls project. Of the 17 recommendations, only three have been implemented, and none of the seven key recommendations have been adopted.