More debt and electric cars could reduce your power bill — for now — says PUB report
Interim report from the Public Utilities Board, released Tuesday, says no single approach to cutting rates
Power users in Newfoundland and Labrador will see their hydro bills double by 2021 unless a number of wide-ranging recommendations are followed, says an interim report released Tuesday by the Board of Commissioners of Public Utilities.
Natural Resources Minister Siobhan Coady says the Ball government is open to all of those options, which align with "the work we are already doing."
Recommendations include widespread adoption of electric cars to increase electricity demand, fat-cutting at Nalcor and taking on more debt to decrease payments in the short-term.
"We are cleaning up Muskrat Falls," Coady said, citing a new federal loan guarantee and increased oversight.
"We will solve how to pay for Muskrat Falls. It is challenging, but it is not impossible."
The $12.7-billion project is leaving ratepayers on the hook for about 23 cents per kilowatt hour — nearly twice the current rate. The province will need to come up with $744 million each year to keep rates at current levels, the report says.
Officials tasked the independent PUB with figuring out a rate mitigation plan in September. The utilities board in turn asked two analyst firms to lay out the government's options. The final report is due January 2020.
On Tuesday, Coady reiterated what Premier Dwight Ball said last fall: neither electricity rates nor taxes will increase to pay for Muskrat Falls.
"Getting this project under control is our legacy," Ball said then.
Tripartite approach
There are three overall strategies to mitigating rate increases contained in Tuesday's report: cutting costs, increasing revenue and refinancing the project.
The analysis suggested there might be money to be found at Nalcor, once the company declares any duplication within its organization, which the PUB expects in coming months.
Electrification, which would bring in money from heat and transportation sources now being spent on oil, and exporting the energy outside the province were also offered as a partial solutions, although there are currently no deals in place with neighbouring markets who want to buy Muskrat Falls power.
Finally, extending the loan likely means going back to Ottawa to renegotiate a repayment plan, the terms of which provincial officials are still discussing, Coady said.
Recommendations won't work, analyst says
Not everyone shares the government's optimism over Tuesday's update.
The report, which Ball requested from the PUB last September, doesn't actually say anything new — and more importantly, the math still doesn't add up, says Ed Hollett, senior research fellow for the Atlantic Institute of Market Studies.
"Your electricity rates will still go up," Hollett said. "You have to completely change the structure of this ... Unfortunately the PUB wasn't asked to look at that. They were asked to look at it doing the impossible."
Hollett said there might be solutions to keeping rates at the current level, but they aren't contained in Tuesday's report.
For one, he said, N.L.'s population would need to double for the "electrification" option to have any chance at keeping rates down. At the moment, even if widespread adoption of electric cars and heating systems happened overnight, it still wouldn't take a bite out of Muskrat's price tag, he said.
Even added to other sources of cost cutting and revenue boosting, he said the money just isn't there, and simply refinancing the mortgage will only lead to inflated costs down the line.
History repeats?
That line of thinking has already landed the province in trouble, Hollett said.
"Frankly, that's how we got into this problem in the first place," he said, referring to government decisions in 2010, when officials at the time were "so concerned about the plan to double electricity rates, that they said 'We'll just pay for some of it later' ... if we continue to do that, the project costs just go up and up and up."
He said repeated loan extensions and reliance on generating revenue from Muskrat Falls signal only one thing, and it's not a solution.
"Politicians have absolutely no idea what to do. So they keep waiting around hoping that magic will happen."
Coady maintained Tuesday that all options will be examined and stressed that no single approach would work by itself to mitigate rates.
A preliminary plan to reduce electricity rates will be in place by the end of 2019, Coady said.