Nova Scotia Power keeps consumers in the dark about costs of delayed Muskrat Falls power

Four years after renewable electricity from Muskrat Falls in Labrador was supposed to supply 10% of Nova Scotia’s needs, Nova Scotia Power continues to keep the public in the dark about how much it is costing the company to buy replacement energy. 

It’s an important question because whatever Nova Scotia Power (NSP) has paid will eventually be downloaded on ratepayers and show up on the power bill. 

In a galling display of arrogance, the power company is so far refusing to answer that question raised by Consumer Advocate Bill Mahody during a public hearing earlier this month.

NSP wants the Utility and Review Board (UARB) to approve charging consumers the full $1.7 billion cost of building the Maritime Link — a subsea cable system to deliver hydroelectricity from Newfoundland to Cape Breton — despite Muskrat Falls having delivered only a very small fraction of the contracted amount often referred to as “the NS Block.”

To date, Mahody estimates ratepayers have paid $450 million toward the cost of the Maritime Link but received only $17.4 million in benefits. 

How much ratepayers will have to pay in the future to replace the undelivered hydro from Muskrat Falls with higher-priced coal, natural gas, oil, and other imports remains an unknown, despite the UARB having instructed NSP to file an answer to that question by yesterday.

Here’s the information Mahody requested:

1. NS Power to provide the costs related to non-delivery of the NS Block (base and supplemental) from January 1, 2018, to October 31, 2021, broken down by year.
2. NS Power to provide a breakdown of replacement energy costs for non-delivery of the NS Block from August 15, 2021 to November 30, 2021.

Beginning last August, in the middle of a federal election campaign, some hydro did begin to flow from the dams at Muskrat Falls. However ongoing software problems that control the flow of power along the transmission system between Labrador and Newfoundland resulted in Nova Scotia receiving zero power in October and only 19% of the full amount that should have been delivered between August and November 30 of this year.

But back to the issue at hand. What does NSP estimate it has paid to replace undelivered cheap hydro from Labrador for the past four months and the past four years? 

As you can see from the photograph below, NSP is so far refusing to cough up that information. Here’s a photograph of the power company’s response with the amounts for 2018, 2019, 2020, and 2021 blacked out or redacted.

The additional redactions or “blackouts” further down the page (unlike the ones frequently experienced by customers during bad weather) represent the cost per month of replacing what didn’t arrive since last August when the first power began to flow. 

NSP calculates the replacement cost by multiplying each month the weighted average price of fuels such as coal, natural gas, oil, and imports by the volume of undelivered Muskrat Falls energy.

Consumer advocate protests

Nova Scotia Power’s refusal to comply with the UARB’s instruction to provide the financial information led Consumer Advocate Mahody to fire off a protest to the regulator. 

The Board has the authority to demand an answer, especially when you consider the power company wants its approval to stick ratepayers with $169 million next year for a cable that hasn’t delivered even half the renewable energy the province was counting on since August, let alone the past four years. 

After reviewing NSP’s reply to his questions, Mahody said he “sees no justification for the claimed confidentiality” because the information requested is so broad it would not reveal specific amounts for individual fuel categories.

“The replacement energy costs are presented at a level of aggregation that neither fuel specific generation nor monthly estimates of undelivered NS Block volume can be discerned from the aggregate figures. The redacted information should therefore be placed on the public record,” urged Mahody in an email to the UARB.

“If the Board is persuaded that confidential treatment is appropriate for the annual data, then the Consumer Advocate respectfully requests public disclosure of the total figure for replacement energy costs for the 2018-21 period,” continued Mahody. 

Nancy Rubin, the lawyer representing a group of major business owners commonly referred to as the Industrial Group, also objected to the non-disclosure by NSP.

“I was in the process of preparing a similar request as Mr. Mahody.  I share his concerns and fully support his comments below.”

Other questions NSP doesn’t want to answer

Nova Scotia Power cites confidentiality in its negotiations with the Newfoundland company that developed Muskrat Falls for refusing to make pubic when NSP estimates it will receive delivery of the full amount of hydro in its 35-year contract with Nalcor Energy. Those discussions took place in camera during the public hearing earlier this month.

Nalcor, which has since been absorbed Newfoundland and Labrador Hydro, has committed to making up the shortfall at the front end of the contract as quickly as possible and before selling to other buyers. But no firm timeline has been publicly stated and it appears increasingly unlikely NSP will hit an amended legislated target to generate 40% of its electricity from renewable sources over the period 2020-2022. 

Forty percent represents an average over those three years and with NS Power at 30% or below for the past two years, that means massive amounts of renewable energy would have to be purchased next year to achieve that 40% average. 

The McNeil government extended the original 2020 deadline and ramped up the use of biomass as a “renewable” fuel after it became clear delays at Muskrat Falls would continue. But biomass can make up only 4-5% of the shortfall from Labrador, according to figures supplied by NS Power, and the Houston government has shown no inclination to curtail its use despite evidence that burning it for electricity contributes to global warming. 

How reliable is the Maritime Link cable?

Nova Scotia Power says the sub-sea cable laid between Cape Breton and Newfoundland is expected to be in-service for 50 years. The contract between NSP and Nalcor Energy to deliver fixed-price hydro from Labrador runs for 35 years. 

The deal has been promoted as a key piece of infrastructure to deliver more renewable energy to the Maritimes and help Nova Scotia wean off coal-fired plants, with the shelf-life of Cape Breton’s Lingan 2 generating station already extended another year as a result of delays from Muskrat.

During the public hearing earlier this month, the UARB received duelling evidence from a consultant hired by the board and a consultant hired by the power company about the projected failure rate of the two cables that make up the Maritime Link. 

The consultant hired by the board used industry-wide data to suggest the cables might require repair or replacement after 11 years of service, well before the 35-year contract is set to end.. 

NSP countered saying it had hired a company to do a project specific study of the cables that included potential impacts from ice and fishing activity. In a response filed to the UARB yesterday about a question concerning the integrity of the Maritime Link cables, the company said the latest data from its original cable consultant (Nexans) projects the probability of a cable failure at approximately 20 years after the system goes into use. NS Power notes it has in place a rigorous inspection and maintenance framework to prevent that occurrence:

This framework includes pro-active elements that reduce the probability of a cable fault from occurring (i.e. inspections, operational system monitoring, and 24/7 vessel monitoring) and contingency elements that will improve the response time if a repair is required, including procurement of fault finding equipment and the development of associated procedures (noting that the response time to repair is a critical element to improve availability statistically).

Last but certainly not least, the Utility and Review Board must decide how much ratepayers should absorb when it comes to employee compensation. 

A total of $12.6 million was paid in bonuses and compensation to retain senior managers during the planning and construction of the Maritime Link. The project was completed on time (January 2018) and on budget. It’s a pity the energy it was built to carry has been so slow to flow. And that the power company can get away with keeping consumers in the dark about what that may cost.