Remember when we were told that Muskrat Falls was needed to stabilise electricity rates?
Now, it’s pretty clear that it is destabilising them —- in a frightening fashion.
Unions representing Hydro-Quebec employees are oppose to a plan to install so-called smart meters in Quebec homes. According to the Montreal Gazette:
One week before the Régie de l’énergie is to begin hearings on the controversial venture, the Syndicate des employés de techniques professionnels et de bureau d’Hydro-Québec denounced the move at a media conference.
The union has submitted an economic analysis of the project to the energy board that contends Hydro-Québec would lose $104 million over 20 years, while the new network would wipe out about 1,000 direct and indirect jobs.
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In Quebec, Arcelor Mittal mines is looking to hang onto its industrial discount electricity rate of 4.5 cents per kilowatt hour even though the company didn’t delivered on its commitment to build a second pellet plant in the province.
The Parti Quebecois wants to make sure that the company processes as much of the ore it mines in Quebec rather than take it out of the province with a minimum of processing.
For those who may have missed it, this is where Churchill Falls electricity goes: discount electricity inside Quebec for residential and industrial consumers.
Ontario Power Generation will spend $600 million to have a consortium including SNC Lavalin refurbish Ontario’s nuclear generating stations.
In addition, the province has more than 2,000 MW of electricity from wind power either in production or in development.
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Around this time of year the country’s major banks issue their economic assessments of the current year and their forecasts of the coming one.
Royal Bank issued the most recent one. Not surprisingly, the bank’s economists are forecasting that the provinces that are most heavily dependent on natural resources will do quite well. Saskatchewan and Alberta will lead the country in economic growth, with Newfoundland and Labrador in fourth place.
RBC’s forecast for 2012 and 2013 has Newfoundland and Labrador in the same relative position. Natural resource prices and capital construction are driving things. Over the next couple of years, new mineral developments will offset declines in oil production, according to RBC. While their reasons may be slightly different, BMO and Scotiabank’s forecasts are all generally similar to RBC’s view.
There’s nothing surprising about any of that. Newfoundland and Labrador has enjoyed phenomenal economic growth for most of the last 15 years. In 2002, for example, the provincial gross domestic product grew 8.2% and in 1998 and 1999, the province led the country in economic growth for two years in a row.
There’s also nothing about the current economic growth that has anything to do with the party currently in power either. Some people would like you to believe otherwise. A great many people in the province believe otherwise. But they are wrong.
What you really need to do when looking at these economic projections is go beyond the short-term and the superficial.
Like oil prices. Current thinking is that oil should be $100 a barrel on average. In 2011, oil prices operated within a pretty narrow band, so if things stay like that, the world should be fine.
But…
The biggest, and more bullish, tail risk is of heightened turmoil in the Middle East and north Africa and, increasingly, in Russia, the world’s second-largest oil producer. An attack by Israel on Iran, for example, could push oil prices briefly towards $250 a barrel, according to some estimates.
Now with production in this province forecast to drop by 20-odd% from 2011, that might get a few people really excited. Russia could be Kathy Dunderdale’s best friend, someone quipped. Oil at $250 a barrel for any length of time would deliver a pretty sweet financial reward into the provincial treasury. Some people might even use it as an “I told ya” moment to justify Muskrat Falls.
Just consider the cost of living with oil at around $100 a barrel, as it is now. Look at the cost of living in all sorts of places, including Labrador West where housing prices are already at crisis levels for a great many families.
Now think of what it would be like with prices driven up by the costs of shipping just about all major consumer goods into the province.
Not pretty, eh?
And for those people who imagine the Americans desperate for cheap hydroelectricity at that point, well, the picture is even less rosy for them.
ExxonMobil produced an interesting energy forecast recently that looks at what the energy world might look like out to about 2040. Electricity demand will grow globally. But in the United States, expect to see more electricity produced by natural gas. There’s plenty of it and new natural gas plants are much more efficient at producing electricity than existing methods.
As for price, well, take a gander at this forecast of the cost of producing electricity in 2030:
Electricity produced from natural gas will be less than half the cost of Muskrat Falls electricity.
Forget about those export sales, gang.
But just imagine carrying the huge debt from Muskrat Falls, paying the electricity prices in this province because the provincial government forced you to pay for it and trying to cope with all the other increased costs coming because oil is more than double what it is today.
You really need to take all this talk of wonder and glory with just a grain of salt. Things are good these days, better than they have ever been. But if we make mistakes today, if we don’t look at the big picture, we can be paying for them tomorrow.
Big time.
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Kathy Dunderdale, Ed Martin and their supporters have a basic problem.
In 30 seconds, opponents of the multi-billion project can give a simple, coherent, and unassailable reason why they oppose the project.
In 30 minutes or 30 days or 30 weeks or even 30 months, the provincial Conservatives and Nalcor haven’t been able to provide a thorough, coherent argument why people should back their deal.
Take the consumer price for electricity as a case in point.
Your humble e-scribbler opposes Muskrat Falls because the people who own the resource should not have to pay the full price for development plus a profit for the companies involved while customers outside the province will get the electricity at a discount.
Then-natural resources minister Kathy Dunderdale put the cost of Muskrat Falls power on the table this time last year - November 22, 2010 - and your humble e-scribbler put it right there so people would not forget it:
…in terms of when we bring that on in 2017 that’s the cost in 2017, $165, or excuse me it’s $143 a megawatt hour.
That works out to a range of between 14.3 cents per kilowatt hour and 16.5 cents per kwh.
That’s not the final consumer price, incidentally. That’s the cost to generate electricity from Muskrat Falls. What consumers in this province will pay on the electricity bills will be something higher than that.
Last April, now-premier Kathy Dunderdale confirmed that Muskrat power would cost taxpayers in Newfoundland and Labrador at least 14.3 cents per kilowatt hour. And then she added the point about exports:
Mr. Speaker, Nova Scotia needs power. They need power and they can provide it to themselves for 10 cents or 11 cents a kilowatt hour. They are not going to buy it from us, Mr. Speaker, for 14.3, so we have to go into the market and sell at what the market can bear
Nova Scotians weren’t going to pay that much for electricity in April and that is still their position.
On Wednesday, local news media reported comments by Emera officials to the Nova Scotia legislature’s natural resources committee on October.
Andrew Younger (Lib. Dartmouth East): You undoubtedly are aware that people are talking 14, 15, 16 cents a kilowatt hour, and I do understand that doesn’t mean that’s what you pay on the bill because there are lots of other things and it averages in with the other sources but is that the sort of . . .
Chris Huskilson, CEO, Emera: Well that won’t make it. That kind of number won’t make it.
MR. YOUNGER: Why?
MR. HUSKILSON: It’s too high, so it has to be lower than those kinds of numbers.
MR. YOUNGER: That’s good.
MR. HUSKILSON: We won’t bring forward something that is not going to make it.
Huskilson knows he won;t have to worry about those sort of prices. The working agreement between Nalcor and Emera guarantees Emera a 35 year supply of electricity in exchange for the $1.2 billion cost of a transmission line from Newfoundland to Cape Breton.
Former Premier Roger Grimes has called that free electricity and, in essence, it is. Even if you spread that $1.2 billion over the 35 years, the cost to Nova Scotia – even though it is entirely notional – works out to something like 3.5 cents per kilowatt hour.
Emera can buy electricity beyond that base amount. They will pay around nine cents per kilowatt hour for it under the working agreement. Even with the anticipated inflation escalators, Emera wouldn’t pay anything close to the real cost of Muskrat electricity ever.
Ever.
This is a sweet deal for Emera. They get to do business in Newfoundland and Labrador, with a profit guaranteed by the province’s public utilities board.
But on top of that, Emera will get what Chris Huskilson told the legislative committee a couple of times: 35 years of electricity at a fixed price.
No escalator.
Fixed.
Emera officials used that term quite a bit:
Nova Scotians have a fixed price for 35 years. That’s almost as good as Quebec scored on Churchill Falls in 1969.
In practical terms, even if you accept that 3.5 cents per kwh for the guaranteed block of power, inflation will reduce the cost of Emera’s electricity to almost nothing over time.
Newfoundlanders and Labradorians, on the other hand, will always have to pay to cover the full cost of the project and guarantee a profit besides that for the companies involved.
Their costs will go one way: up.
Go back to that starting comment:
Your humble e-scribbler opposes Muskrat Falls because the people who own the resource should not have to pay the full price for development plus a profit for the companies involved while customers outside the province will get the electricity at a discount.
It won’t even take 30 seconds to read.
The rest is explanation.
Now try and find Nalcor’s explanation of what the people in the province will pay for electricity.
Good luck.
They’ve avoided it like the plague.
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Related:
Craig Welsh is a bastard who used be be from St. John’s. Now he lives in Iqaluit where he spent some time the other day pondering some of the candidates elected recently.
You can find his blog post here: towniebastard.blogspot.com
All of which is a preamble to I'm sure there's a punchline to last night's election results in Quebec, but I've never really got French humour. For example, Ruth Ellen Brosseau won her seat despite:
A. Not living in the riding.
B. Going to Vegas in the middle of the campaign.
C. Her riding is 98% French and she can't really speak it that well.
D. Appears to have not even visited the riding during the election.Yet she got 40% of the vote, won the seat and now gets a $150,000+ a year job, which is a bit of a step up from assistant manager at a pub.
So yes, there's a punchline here somewhere, I just don't get it. Can someone explain French humour to me, please?
A wise man, experienced in the arts of the campaign, once told your humble e-scribbler that a candidate in any given riding is basically worth about 5% of the vote total. Monday’s night result was brutal example of just how true that is. Any hint of scepticism left in this corner is gone.
The other chunk of the candidate votes in any given riding come from voting tradition, that is people who always or usually vote for the same party. The other bit is driven by the campaign itself, usually at the national or provincial level.
Now there are individual candidates who can count for more. We are talking averages here. So quick recap: candidate: a little. Tradition and the campaign: a lot.
Now in Quebec, as in Newfoundland and Labrador, voters also seem to make a distinction between provincial elections and federal ones. They tend to pay less attention to federal campaigns. Take a gander at some statistics on turn-out in federal elections by Memorial University professor Alex Marland and you can see the idea.
People in this province typically don’t turn up in great numbers to vote for their federal representatives. In the 60 years after Confederation, turn-out in the province for a federal election cracked 70% exactly twice. It hit the high 60s a few times but for the most part, turn-out has been less than 60% of eligible voters.
By contrast, provincial elections get turn-outs about 10 percentage points higher.
Marland puts this down to a bunch of factors including literacy levels. That night be part of it, but frankly the one idea that really seems to explain the difference in turn-out over time is proximity or familiarity. Provincial ridings are smaller than federal ones. People may know the local candidate personally and odds are good they will get the chance to shake all the hands of everyone.
The same can’t be said at the federal level. And that is reinforced by the fact Ottawa is so far away both physically and mentally for most people. Think of it as an extreme version of the old saying that all politics is local.
In other words, people don’t seem to see federal members as being as important as their provincial ones when it comes to affecting their lives. It’s hard to come up with a better idea to explain people trooping to the polls to vote for candidates with precious little life experience in some instances, let alone the kind of experience one needs to be an effective political representative in the national legislature.
There’s another notion you can add to this as well: just as people don’t seem to be as personally connected to their federal candidates as they might have been once, the relentless message from the news media is that the individual candidate simply doesn’t have any kind of power and influence. Sure candidates make some promises but you have to wonder if people actually believe that, for argument sake, any of the newly minted parliamentarians will be able to do much now that the Harper gang have a majority.
Did the voters on Flower Hill mark their “x” for Ryan because he promised to relentlessly fight to get a n inquiry into the fishing industry or because Jack Layton promised to deliver more doctors and nurses? Did they even know that Ryan - himself - thinks that is his main job now that he is off to Ottawa to spend more time with the kids?
In Newfoundland and Labrador, people have an object lesson [on all this] right in front of them. For the past seven years, local politicians counted for exactly zero compared to the Saviour of the Universe, attended by a raft of disciples who knew he crapped nuggets of pure gold every day, thrice a day. Now whether that is true or not on any level isn’t as important as the fact that some people seemed to believe it.
So if you have people getting this relentless message from politicians and from news media that everything is about Steve and Danny or Michael and Jack, and the local guy is just a placeholder or a bootlicker, you can see why people in Quebec and elsewhere might just look at what colour someone is and cast vote on that basis.
Disagree? In St. John’s South-Mount Pearl, the most visible campaign sign in the riding was a four foot by four foot sign bearing the name of Jack Layton. This was no accident. Nor was it an accident that smiling Jack was everywhere on NDP householders and in television and radio spots. Heck, even Liberals like Scott Andrews are blaming the Liberal loss on the fact that Michael Ignatieff supposedly had no charisma and people didn’t like him compared to Jack and his accordion playing smile.
There are a bunch of different reasons why people vote the way they do. Tradition counts for much of it. The dynamics of the campaign are part of it as well. But increasingly the evidence seems to be that local candidates don’t matter very much at all when it comes to voters making decisions about who gets their vote.
You can vote for a unilingual anglophone bar manager who has never visited your riding because she - or by extension the federal political system - doesn’t count in the ordinary voter’s mind.
Now place-holder candidates aren’t new in politics. England had its rotten borough and Newfoundland still has its seats where the party of choice can run a half-eaten Mary Brown’s snack box and the voters would send it off to St. John’s. It just seems that these days, individual candidates seem to count for less and less.
This also doesn’t mean that everyone who does get elected these days is a previously chewed tater. Politicians are a cross-section of society as a whole. You get your good ones and your not-so-good ones. You get your exceptional people and you get your oxygen thieves.
It’s just that we seem to be in a period where voters sometimes don’t seem to pay much attention to local candidates when they vote. Good, bad or indifferent, local candidates don’t seem to count for much.
And incidentally, for the people on Flower Hill, the New Democrats want to take the tax off home heating fuel. It’s just that they have also promised to back a provincial Conservative plan to make sure that anyone on fixed and low incomes will pay twice as much for electricity, guaranteed, even without taxes, while people outside the province can get the same power for about what you are paying for it now.
Not bad, eh?
The NDP aren’t alone. The Liberals and the Conservatives in your riding promised basically the same thing.
You are forgiven if you missed that bit, though, in all the clips of Jack and the squeeze-box.
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[Proofed, edited to make sentences read more clearly]
Ontario’s new energy plan will see the province’s electricity rates double, but in 20 years, not seven.
[Globe and Mail] This is the government’s second attempt to chart a long-term plan. While the latest version is broadly similar to the document released in 2007, it differs in one key respect: costs for building new power systems are estimated to be 45 per cent higher.
As a result, residential electricity prices will climb to $228 a month by 2030 for the average consumer who uses 800 kilowatt hours a month. This compares with $114 today.
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From the New York Times:
In 2009, some 31,000 households in Rhode Island will have their utilities shut off, and the effort to juggle energy bills and mortgages is helping push some homeowners into foreclosure, said Henry Shelton, director of the George Wiley Center, a consumer advocacy group here. (Here, as in many states, utilities may not disconnect the poor in the winter.)
Since 2000, the cost of heating a home with fuel oil has more than doubled and the cost of heating a home with electricity has risen by one third, outpacing many incomes. The recent surge in unemployment has thrown even more people into energy debt.
High energy prices will hamper any recovery in the United States.
Hindering a recovery of the American economy will screw everyone who depends on exports into the Untied States as a staple of their own economy.
Like say Canada generally and Newfoundland and Labrador in particular.
Any fiscal plan built on perpetually high energy prices is inherently flawed and prone to failure.
Catastrophic failure.
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