Should electricity consumers in Nova Scotia begin paying the full $1.7 billion cost to build the Maritime Link before the full amount of hydroelectricity from Muskrat Falls has been delivered?
Evidence given Tuesday by Nova Scotia Power executives in front of the Utility and Review Board (UARB) indicates only 19% of the renewable energy that was ordered was actually delivered over the subsea cable between August 15 and November 30. And those deliveries from Labrador began almost four years later than the power company forecast when the UARB gave the green light back in 2013.
UARB chair Peter Gurnham questioned whether the current hearing should even have gone ahead since “the original bargain” established in 2013 was that ratepayers would begin paying for the cable once the entire amount of low-cost hydroelectricity was flowing. To date, Consumer Advocate Bill Mahody estimates ratepayers have paid $450 million toward the cost of the Maritime Link and received only $17.4 million in benefits.
Rick Janega, the CEO of Nova Scotia Power Maritime Link (NSPML, a subsidiary of Nova Scotia Power created to build and finance the subsea cable) stated “the extent of the under-deliveries” was greater than what the company anticipated. In fact, Nova Scotia Power is still unable to predict with any certainty when Nalcor Energy, the company overseeing the Muskrat Falls project, will deliver the full amount of power. The end of March is the earliest possible date but that’s still an estimate.
Software problems with Labrador Transmission System
The repeated delays are because of ongoing problems associated with General Electric software that controls the transmission system known as the Labrador Island Link (LIL).
The Labrador Island Link transfers hydroelectricity produced from the four generating units at Muskrat Falls in Labrador to the island of Newfoundland. The Maritime Link cable then carries the renewable electricity across the Cabot Strait to Cape Breton.
The most recent version of the software is still undergoing testing.
Both CEO Janega and David Landrigan, Nova Scotia Power’s vice-president of Commercial, said the ongoing uncertainty associated with the LIL was the catalyst for negotiating an Accelerator Agreement signed with Nalcor last summer.
That agreement acknowledges there will be more delays while the software is being commissioned. But it guarantees that all “under-delivered” renewable energy will be made up as soon as possible, hopefully by the end of 2022, when Nova Scotia Power must meet legislated standards to generate 40% of its electricity from renewable sources.
Another worry for citizens here is how power bills may be impacted by having to pay for more expensive energy to replace what hasn’t flowed from Muskrat Falls. One coal-fired unit in Cape Breton should have come offline by now but instead it’s still running. Consumer Advocate Bill Mahody and Small Business Advocate Nelson Blackburn have requested Nova Scotia Power provide a calculation for the cost of having to replace the anticipated hydro from Labrador.
Essentially, the Muskrat Falls hydro we don’t receive will be “banked” for the near future. The agreement also means Nalcor Energy can’t make contracts with any other buyers until Nova Scotia gets its contracted share (about 10% of what is needed today to power homes and businesses) and additional supplemental purchases at market prices (up to another 10% ).
That agreement came into force on August 15.
As part of the negotiations with Nalcor, NSPML agreed to pay for $18 million in disputed costs. Those unforeseen costs were incurred after the Department of Fisheries and Oceans sanctioned a redfish fishery in the same area as the Maritime Link. This led to an operational decision to bury the cable to keep it protected from fishing boats.
Putting lipstick on a pig?
NSPML’s Rick Janega insists the Accelerator Agreement makes a bad situation better. But putting lipstick on a pig (my phrase, not Janega’s) didn’t prevent the vice-chairman of the Utility and Review Board from asking some pointed questions.
“The basis of your submission that the ‘original bargain’ has been honoured is the premise that the banked deliveries are going to happen?” asked Roland Deveau.
“Yes, it is,” replied Rick Janega. “On the basis of the contractual reasons behind it and what I hope will be the advancement of the Lower Churchill projects… we are thankful we were able to reach the Acceleration Agreement as opposed to continuing to wait. We believe it is a better position than what we had.”
“But it still requires the completion of the Labrador Island Link and there’s no completion date included in that Acceleration Agreement,” persisted Deveau. “What it does is start the clock in terms of banking energy deliveries. It doesn’t secure delivery of that energy in a known timeline. Why should ratepayers now pay for something they are not receiving and haven’t received over the course of the last few years?”
Good question. Nova Scotia Power is asking for $169 million to be included in power rates starting in 2022.
Other topics of discussion brought forward by the lawyer for the UARB, Bruce Outhouse, centred around whether NSPML had been thorough enough in verifying the insulation properties of the subsea cable to resist temperature variations. The company promised to table more information on this point as well as on another issue relating to the lifespan of the transmission system.
NSPML predicts the Maritime Link should be in service for 50 years, 15 years after the company turns over its ownership to Nalcor Energy. One consultant’s report predicts some fibre optics and other components will need replaced after 25 -35 years, so more discussion will continue.
The hearing moved behind closed doors during the afternoon to discuss matters described as commercially sensitive. It continues today.