Eye-opening forensic audit will kick off 2nd phase of Muskrat Falls inquiry
N.L.'s consumer advocate says money was spent frivolously
The second phase of the Muskrat Falls commission of inquiry will commence Monday with the much-anticipated release of a forensic audit that investigated why the controversial project is so far behind schedule and over budget.
The audit by Grant Thornton has already been released to parties with standing at the inquiry, on the condition that they not disclose any of its contents.
But Newfoundland and Labrador's consumer advocate, Dennis Browne, says the audit will be an eye-opener.
People will be concerned when they hear where their money went and when they hear how frivolously [it] was spent.- Dennis Browne
"I believe people will be concerned when they hear where their money went and when they hear how frivolously their money was spent," Browne said Thursday.
Two weeks in Labrador
Phase 2 of the inquiry will begin with two weeks of public hearings in Happy Valley-Goose Bay, on the doorstep of the power generating station on the lower Churchill River.
One of the authors of the audit, Scott Shaffer of the accounting firm Grant Thornton, is scheduled to testify over a four-day period.
The audit is expected to detail why a public project originally projected to cost $7.4 billion (including interest during construction) has soared to at least $12.7 billion.
It will also probe why first power originally planned for summer 2017 is delayed by at least two years, and full power is at least another two years away.
Was the project managed properly? How were the contractors selected? Were they properly monitored by Nalcor, the province's embattled energy corporation?
These and other questions were explored by the audit.
"We should have a fair idea of what went on during the construction period and where our money went. It's our money," said Browne, a government appointee who represents the interest of electricity ratepayers.
"Was government being properly informed? Did government seek out information? These are all critical questions."
Returning to St. John's March 4
Browne has repeatedly offered blistering criticism of the project, of Nalcor's ability to carry out the job, and of the provincial government's "failure" to keep Nalcor in check.
He continued his onslaught this week.
It's like they had a blank cheque. Here's the first installment, come back for more if you need it.- Dennis Browne
"There was no government oversight established when the money was given to Nalcor. The first roughly $7 billion; they weren't told that was it. That's all we have.
"It's like they had a blank cheque. Here's the first installment, come back for more if you need it."
The inquiry will return to St. John's on March 4, and continue hearings until late June.
Commissioner Richard LeBlanc is scheduled to deliver his report before Dec. 31, 2019.
A list of witnesses has been published on the inquiry's website, and includes a wide array of politicians, current and former Nalcor officials, various experts, Indigenous leaders, and representatives of Astaldi and SNC-Lavalin, two companies that have played significant roles in the project.
Workers to have their say
The unionized workers who are building Muskrat Falls will also be represented by the province's building and construction trades council, since concerns about labour productivity have been raised in the past.
Officials with the trades council will testify, but Browne believes any blame for cost overruns and schedule delays should not be shouldered by the workers.
"I suspect after all is said and done it will come down to planning because there was weak planning at the outset," he said.
The inquiry was announced in November 2017 by Premier Dwight Ball, with the first phase last fall examining what happened leading up to sanctioning of the project in late 2012 by the PC administration led by then-premier Kathy Dunderdale.
Evidence from the first phase revealed Nalcor's appetite for risk on the project, with an aggressive approach to establishing cost estimates and timelines, and how the advice of external experts recommending a more cautious approach was ignored in some cases.
It also became clear that some politicians and bureaucrats in government had a limited understanding about what was happening at Nalcor in the lead up to sanctioning.
Doubling of rates
The soaring cost of Muskrat has raised serious questions about how the project will be paid for, and what it will mean for electricity rates.
It already costs roughly $800 million annually to operate the province's electricity system, and it's estimated that figure will more then double once Muskrat comes online.
"That's the amount of money we're spending on education. That's more than the amount of money that the fishing industry generates. That's more than the amount of money we receive from royalty revenues from the offshore," said David Vardy, a longtime critic of the project and former chair of the province's Public Utilities Board (PUB).
With electricity rates poised to more than double in the coming years, the PUB has been ordered by the provincial government to review options for mitigating the impacts of Muskrat.
Vardy said it won't be an easy task, but he believes one obvious measure is the complete dismantling of Nalcor.
Meanwhile, Vardy believes the cost overruns have not ended.
Astaldi, the Italian company awarded the contract to construct the powerhouse, was expelled from the Muskrat site late last year and replaced by local contractor, Pennecon.
Nalcor has said the current cost and schedule estimates have not changed, but Vardy remains skeptical.
"My expectation is it will go beyond that because you've got a new contractor going in there now taking over work that's been done by somebody else. And they're probably going to want to redo a lot of that work," he said.
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