Cost of power to become clearer with Nalcor numbers

Ashley
Ashley Fitzpatrick
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Annual general meeting comes with promise of Lower Churchill update

By the end of June, according to Nalcor Energy president and CEO Ed Martin, the people of Newfoundland and Labrador will have an update to the estimated total cost of the Lower Churchill Project.

Ed Martin, president and CEO of Nalcor Energy, said at the company’s annual general meeting in St. John’s Wednesday it needs “to get the facts out there” to residents of Newfoundland and Labrador. — Photo by Rhonda Hayward/The telegram

Nalcor has been the target of criticism for not making the amount available before now, given the project’s importance to the province.

“There’s two or three more pieces I’d like to have, but I’m finding that it’s probably not material enough to wait on. We need to tell the people what’s happening. We need to get the facts out there,” Martin said, speaking to reporters during a break in Nalcor's annual general meeting at the Holiday Inn in St. John's Wednesday.

In addition to basic cost figures, information being prepared for release will include details of a power purchase agreement with Newfoundland and Labrador Hydro, Martin said, providing more information on the cost recovery.

Costs are set to start affecting provincial power bills as the new power plant at Muskrat Falls and associated transmission lines come online in 2017.

However, the project is not the only thing poised to drive up power rates.

As reported, Newfoundland and Labrador Hydro is spending $120 million on a new backup turbine for the island power system, there is a $300-million power line to be built from Bay d’Espoir to the Avalon Peninsula and another $300-million line to be built from the Churchill Falls power plant to Labrador West.

Hydro has also planned to significantly increase its yearly spending on the existing system, for maintenance and upgrades.

Nalcor CFO Derrick Sturge said Hydro’s spending is expected to run about $245 million in 2014. He said Hydro has not issued debt in the capital markets since 2006, but in the next five years costs will be covered through a mix of equity and debt financing.

The rising costs relating to the provision of power will be recovered from power bills.

Both Nalcor and the province have said higher power bills were coming with or without construction at Muskrat Falls, but little has been said so far about the anticipated effect of those rising costs on the people of the province.

Martin said any type of relief or subsidy introduced as relief to ratepayers, if required, would have to come from the government.

“We would have to be directed to do that. Legislatively, we don’t have the ability to make those types of decisions. We have to identify what’s right, and then we have to make sure that we get the recovery from the ratepayer for that and we would proceed on that basis,” he said.

Nalcor is looking at the big picture and that view includes the promise of significant returns ahead for the Newfoundland and Labrador government, as power exports and oil sector investments start to pay off. The Crown corporation is already in the process of staffing its own energy marketing company, providing an in-house team to handle power sales outside the province.

Ken Marshall, chair of the Crown corporation’s board of directors, said the plans are constantly being challenged.

“As the board of directors, our role is to provide guidance and direction as the business continues to grow. We have a great deal of respect and trust in the competency and the expertise at Nalcor and we work hand in hand with senior executives to plan for the company’s future, manage levels of risk and ensure our business operations benefit the economic security of current and future generations,” he said.

Notably, Nalcor’s overall revenues were up in 2013 over 2012, to $785 million from $726 million. Those numbers are up from the 2006 total of $548 million.

Net income was $96 million in 2013, up $3 million from the year prior and higher than the $70 million recorded in 2006.

Total assets in 2013 reached $9.5 billion, including $5 billion coming from the Lower Churchill Project debt issue. That’s up from $3.4 billion in 2012 and $2.2 billion in

2006.

The Q&A segment of Nalcor’s annual general meeting lasted about three hours. Questions from audience members touched on operations at the Bay d’Espoir hydroelectric plant, oil used at the Holyrood power plant, reliability of the island power system leading into the coming winter, the acquisition of seismic data to encourage offshore oil exploration and the ultimate cost of Muskrat Falls development to ratepayers — to name just a few topics.

Martin responded to every question. He also promised to see answers to questions submitted online posted to the Crown corporation’s website.

 

afitzpatrick@thetelegram.com

Organizations: Newfoundland and Labrador Hydro, Holiday Inn

Geographic location: Falls, St. John's, Newfoundland and Labrador Holyrood

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Recent comments

  • Charles Murphy
    June 06, 2014 - 16:36

    I can tell you what's going to happen. People won't be able to pay their light bill, when left with no other choice, power will be cut to their homes. bring us back in time, to wood stove's and oil lamps. all because of muskrat falls. take notice to your neighborhood, you'll see more and more people is almost there now,

  • Jon Smith
    June 06, 2014 - 07:55

    It appears that the increased capacity at Holyrood and the new third transmission line is really to provide the supply to Nova Scotia to cover the delays ( to be announced later) in finishing the project. The damaging subsidy to NS for this project will effect local consumers much longer and much harder than the Upper Churchill lost opportunity ever did.

  • Maurice E. Adams
    June 05, 2014 - 13:26

    DarkNL has made it clear that at most what we have is a"peaking problem" --- which lasts for a few hours in some winters. Even then, properly maintained systems, last winter we should have had about 50% more of a generation capacity buffer than the 10% which Nalcor says is the industry standard. On top of that we will now increase Holyrood's capacity with another 100+ MW turbine. So that will give us a buffer of about twice the industry standard. ........... Now total island peak demand over the last 10 years has increased on average only 5 MW per year. So that new turbine will be able to take us up to 2034. Add to that that we will have a third line from Bay d'Espoir ---- all for a capital cost of about $300-400 million ---- which can get us to pre-1041. So there is no justification for Muskrat. Muskrat is not least cost. Time to re-assess.

  • Doug Long
    June 05, 2014 - 11:16

    In heaven's name, can anyone please tell me why that incompetent man (Martin) is still running Nalcor? After the scathing report after the the enquiry into the Blackouts this past winter, I do not understand why he is still there. He was responsible for Nalcor during the years when many horribly wrong decisions were made that resulted in the blackouts. His incompetence delayed required scheduled maintenance that helped cause the blackouts and will now cost us all (in our power bills), when the destroyed equipment has to be replaced! This is like a Bad Joke! What does that man have to do to get fired?! How could he do any worse?!!

  • Uncle Dolf
    June 05, 2014 - 10:05

    Hell of a way to find out what this 7 - 10 billion dollar job will actually cost. Martin & company should all be tarred & feathered. Add Dunderdale and Kennedy to the list.

  • W Bagg
    June 05, 2014 - 08:10

    Increased power rates will single handedly kill the economy. With the highest electricity rates in the Country if not the continent. The cost of labour will increase, it has to for people to survive, and hence business has to pay more for labour.

    • Fred
      June 05, 2014 - 10:38

      This is total baloney. Read this and learn... http://www.hydroquebec.com/publications/en/comparison_prices/pdf/comp_2012_en.pdf

    • W Bagg
      June 05, 2014 - 12:33

      What';s baloney about it. Even your document indicates we have 12.55 cents/Kwh as opposed to the next highest in NS of 15 cents/Kwh and Nalcor has already told us we are in for an increase with MF, so we could easilt add 5 cents onto it and then we are at 17-18 cents Kwh and that is the most expensive in the country. It also assumes MF only adds 5 cents per Kwh.