Capping power rate hikes due to Muskrat Falls will cost $3.5B by 2030, says N.L. Hydro report

Capping power rate increases due to the vastly over budget Muskrat Falls project will cost more than $3.5 billion between now and 2030, according to the latest forecast prepared by Newfoundland and Labrador Hydro.

Last May, the provincial government instructed the Crown corporation to cap rate increases for island customers at 2.25 per cent per year until 2030, despite the monumental cost overruns at the hydroelectric dam and its transmission system.

A letter submitted to the Public Utilities Board last month reveals that the full cost of doing so will be between $483- and $569-million a year from now until the end of the decade.

Most of the money will come from what the document calls "internally generated funding" — a mixture of revenue from N.L. Hydro and its numerous subsidiaries, including from export sales, revenue from customers within the province and oil and gas profits.

N.L. Hydro will also forego all dividends from Muskrat Falls.

"This results in a diversion of funds, which would have otherwise been paid as dividends to the province," said N.L. Hydro spokesperson Deanne Fisher in an email.

The Crown corporation will also make use of a $1-billion convertible debenture from the federal government — a bond from which it can draw about up to $150 million a year. The debenture is part of a $5.2 billion Muskrat Falls bailout announced by the province and Ottawa in 2022.

"We are not deferring maintenance or capital projects," said Fisher. "Hydro must ensure we maintain reliable supply for customers and to ensure we can fully optimize our grid for excess energy for sale."

Newfoundland Power requests own increase

While the Crown corporation — the province's main electricity producer — has committed to capping increases at 2.25 per cent a year, Newfoundland Power has sought its own rate increases over and above that threshold. The company is the island's main electricity distributor.

The Fortis-owned private utility has already requested a 5.5 per cent increase to island rates as of July 2025.

Newfoundland Power CEO Gary Murray said Nov. 5 that the private utility plans to do about $800 million in capital work in the next five years, costs which could ultimately be passed on to its 276,000 customers. 

More money needed beyond 2030

While the current rate mitigation plan runs out in 2030, the letter to the PUB notes that "the [provincial] government has committed publicly to rate mitigation post-2030 and keeping customer rates affordable for the people of the province."

That means the current $3.5 billion price tag for capping rate increases will almost certainly grow.

"Hydro will work with the government in advance of 2030 on future rate mitigation requirements," the letter reads.

Last May, when the rate mitigation plan was finalized, N.L. Hydro CEO Jennifer Williams said the Crown corporation has worked to cut costs, and that through rate mitigation customers pay only 10 per cent of the annual cost of Muskrat Falls.

Sanctioned by the provincial government in 2012 with a projected cost of $7.4 billion, construction costs at Muskrat Falls quickly ballooned, reaching $13.5 billion in June 2023.

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