ST. JOHN’S, N.L. – Costs for the Muskrat Falls hydro project in Labrador are up another $1 billion, a “boondoggle” the man in charge says is worse than the lopsided Upper Churchill debacle.
Nalcor Energy CEO Stan Marshall said Friday the new price tag is $12.7 billion with financing. That’s up from an estimate last year of $11.7 billion and is about $5 billion higher than when the former Progressive Conservative government approved Muskrat Falls five years ago.
Marshall took over as head of the Crown corporation last year after the governing Liberals criticized oversight. He said at the time the megaproject was a colossal mistake that he’d try to fix.
“I knew this was a boondoggle,” that should never have gone ahead, Marshall reiterated Friday.
“As long as I’m here I’ll do my best,” he added, vowing it can still “finish strong.”
“The only way to have solved this was not to have built it in the first place … It was too late to stop. We couldn’t get a refund.”
Initial cost projections were drastically low-balled, he said: Either intentionally or unintentionally, “the costs were significantly underestimated.”
Marshall blamed the latest budget bloat on contractor disputes, higher operating costs, a leaky cofferdam and delays, including a worksite occupation last fall by demonstrators concerned about methylmercury.
Marshall said 75 per cent of construction is now done, up from 48 per cent last May.
First power is expected in 2019 at an estimated cost of 23.3 cents per kilowatt hour before tax.
That’s up 8.2 cents from when Muskrat Falls was approved and would double recent rates paid by consumers.
Marshall and Premier Dwight Ball have said they’ll look at ways to reduce that hit and cut average monthly bills that could otherwise go up more than $150 per month.
The previous Tory government sanctioned Muskrat Falls in 2012, a joint venture with Nova Scotia utility Emera championed by former premier Danny Williams. It will bring power from Labrador to the island of Newfoundland then on to Nova Scotia using subsea cables and a vast overland transmission network.
Williams hailed Muskrat Falls as the answer to his province’s long-running feud with Hydro-Quebec over transmission access and the Upper Churchill deal. Terms of the 65-year contract did not reflect rising energy rates.
As a result, the Upper Churchill dam and powerhouse in Labrador have so far delivered about $27.5 billion for Hydro-Quebec versus $2 billion for Newfoundland and Labrador. The dispute is once again before the Supreme Court of Canada for a hearing on whether the contract should be reopened.
Marshall said Friday that Muskrat Falls is especially painful because it made the opposite gaffe as supporters gambled that energy values would stay high. They lost, and this time ratepayers on the hook, he said.
Costs could rise again, Marshall added.
“Muskrat Falls has had its surprises. I’m not going to say that there won’t be any more.”
He said Nalcor is working with Labrador aboriginal leaders on methylmercury concerns downstream as land is flooded.
“I’m not looking to do anything that will endanger people.”
Ball said Friday that Muskrat Falls was “ill-conceived and reckless,” but stopped short of calling for a forensic audit.
Such a review now would eat up more cash and could add to delays, he said. Ball said he’s committed to a more in-depth look later on.
He blamed the staggering increases on “neglect” and questioned why Nalcor and the previous Tory government did not act years ago to rein in costs.
On Friday, Ball released a 2013 risk management report by SNC-Lavalin that warned of the fiscal fallout.
Stamped “confidential” and “for internal use only,” it forecast cost overruns of 39 per cent with a potential extra price tag of $2.4 billion when Muskrat Falls was just 20 per cent complete.
Ball said he only received the report Thursday from Nalcor.
Still, Ball continued this week to talk up future Labrador hydro projects. But he stressed that consultation with aboriginal leaders would have to improve and any new developments can’t be “on the backs of ratepayers.”
Former premier Paul Davis, who became official Opposition leader when the Liberals won in 2015, said Friday the Tory government pushed for Muskrat Falls based on information it had at the time. He said he wasn’t aware of the risk management report while in power.
He also challenged Ball to order a forensic audit now if the premier questions those initial estimates.
“We have nothing to hide from the decisions that we made.”
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