Konrad Yakabuski writes at The Globe and Mail about the underlying economic issues behind tense relations between Québec and Newfoundland, in the very low prices of Labrador-generated hydroelectricity sold to Québec.
Ottawa’s decision to extend an additional $2.9-billion loan guarantee to enable Newfoundland to proceed with its ruinous Muskrat Falls hydroelectric project looks a lot more like a bailout than the investment in clean energy infrastructure that Natural Resources Minister Jim Carr likes to call it.
Coming on top of the $5-billion federal guarantee the former Conservative government provided to Muskrat Falls, and on top of a separate $1.3-billion guarantee for an underwater transmission link from Newfoundland to Nova Scotia, the extra backstop rewards Newfoundland for its bet on a project that even the executive now in charge of it concedes is a “boondoggle.”
The guarantee will enable provincial government-owned utility Nalcor to complete construction of an 824-megawatt hydro generating station and undersea transmission line from Labrador to the island of Newfoundland that should never have seen the light of day.
Muskrat Falls is the legacy of former premier Danny Williams’s decision to snub Quebec by going it alone on a $6-billion hydro project – now projected to cost $11.4-billion and rising – that would restore provincial pride, which was still hurting after the 1969 Churchill Falls deal. Under that agreement, Hydro-Québec buys virtually all the power from the 5,400 MW Churchill Falls generating station at 0.2 cents a kilowatt hour and resells it to customers in Quebec and the United States at anywhere from 20 time to 50 times that price.
Newfoundland customers will be paying more than 100 times the Churchill Falls rate for their own electricity – about 21 cents a kw/h – once Muskrat Falls begins producing power in 2021. And that’s provided the project does not face additional delays and cost overruns, which it will considering recent undertakings by the province to address the higher methylmercury levels stemming from the project.