Nova Scotia regulator approves Muskrat Falls, with a condition on price


 

HALIFAX – Nova Scotia’s Utility and Review Board gave conditional approval Monday to a proposed subsea cable that would ship hydroelectricity from Muskrat Falls in Labrador to Nova Scotia, saying the Maritime Link edges out other energy alternatives for the province.

The board made its decision conditional on the project getting the best price for surplus electricity from Nalcor Energy based on market conditions, a change that the Newfoundland and Labrador Crown utility company wouldn’t commit to.

Emera Inc. (TSX:EMA), the company behind the link, said it needed time to study the implications of the board’s decision on the project known as the Maritime Link, while Nalcor said its obligation is to get the best value for its excess power because the Muskrat Falls project is being built first and foremost for the benefit of ratepayers in Newfoundland and Labrador.

Nalcor president Ed Martin said the utility is still reviewing the decision and Emera is free to get additional power from other sources.

“Nalcor is one option for providing some additional power,” he told a news conference in St. John’s.

Martin’s comments appeared to shed doubt on Nalcor’s willingness to negotiate a new deal with Emera to meet the board’s condition, although Nova Scotia Energy Minister Charlie Parker didn’t give any indication that the project could be derailed by the board’s decision.

“The board has outlined what Emera must do to ensure the best deal for the province and like all Nova Scotians, we expect Emera will do the work required to follow those recommendations,” he said in a statement.

Under the 35-year deal, Emera subsidiary NSP Maritime Link Inc. gets access to 20 per cent of the energy from the first phase of Nalcor’s hydroelectric development on the Lower Churchill River in exchange for paying 20 per cent of the capital and operating costs of the $7.7-billion venture.

Some opponents of the deal have questioned how much it will cost NSP Maritime Link to buy energy from Muskrat Falls if it wants to exceed the 20-per-cent block for which it has negotiated an annual contracted price.

The board appears to share those reservations.

“The board concludes that the availability of market-priced energy is crucial to the viability of the ML project proposal as against the other alternatives,” it says. “More importantly, the board finds that without some enforceable covenant about the availability of the market-priced energy, the ML project does not represent the lowest long-term cost alternative for electricity ratepayers in Nova Scotia.”

For those reasons, it says it attached the condition that the project obtain from Nalcor the right to access market-priced energy or provide some other way of getting energy at that rate.

“In the board’s opinion, such a condition should not create any practical difficulty because it would simply codify what NSPML (NSP Maritime Link Inc.) asserts is the effect of the arrangement in any case,” the decision says.

The board says the 170-kilometre cable represents the lowest long-term cost alternative for electricity ratepayers in Nova Scotia on the balance of probabilities, but it is only the cheapest option by a narrow margin.

“While the board finds that the ML (Maritime Link) project is the lowest long-term cost alternative, it is not on an overwhelming basis,” the decision says. “There are various scenarios, within a range of reasonable assumptions that perform almost on an equivalent basis, or even better in a few cases, than the ML project.”

During hearings earlier this year, consumer and small business advocates in Nova Scotia as well as an alliance of industrial customers that included Michelin and Imperial Oil (TSX:IMO) questioned whether the Maritime Link would benefit electricity customers, who would foot the bill for the $1.5-billion project.

Opponents also doubted assertions from Emera and Premier Darrell Dexter that the project would stabilize electricity rates in the future.

Nova Scotia’s NDP government is in the last year of its mandate and the opposition parties have tried to make electricity rates charged by Nova Scotia Power a ballot box issue for voters, with Opposition Liberal Leader Stephen McNeil arguing Monday that power rates have jumped by 30 per cent over the past four years.

McNeil said the utility and review board decision shows the Maritime Link deal as it is currently written means Muskrat Falls isn’t the cheapest energy option for the province.

“The regulator has confirmed that the deal is not acceptable, unless it is significantly amended to be more favourable for Nova Scotia Power ratepayers,” he said in a news release.

Emera president Chris Huskilson said the company will take the time it needs to do an analysis of the board’s decision.

“In the meantime we continue to refine final construction estimates and work continues on the project,” Huskilson, who was not made available for interviews, said in a statement.

Emera has argued that Muskrat Falls would serve about 10 per cent of Nova Scotia’s power needs and give it a new source of clean energy.

Construction of Muskrat Falls is underway in Labrador with the project scheduled to generate power by 2017.

Jamie Baillie, leader of the Nova Scotia Progressive Conservative party, said the board’s ruling backs his argument that the Maritime Link deal still needs work.

“Despite today’s decision, we still do not know how much electricity from Muskrat Falls will cost or what it will do to our power rates,” he said in a statement.


 
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Nova Scotia regulator approves Muskrat Falls, with a condition on price

  1. I hope NL had the foresight to build in excess capacity on the transmission lines. It would be nice to have the option to cut Quebec completely out of the loop & reroute Churchill Falls power when the ridiculous contract with Quebec finally comes to an end, if Quebec tries to push another one-sided deal.