Lack of regulator scrutiny means a big Muskrat burden: energy consultant

It's a question we may never get an answer to, butit's one that still troubles energy consultant Philip Raphals.

What if Newfoundland and Labrador's public utilities board had been given a free hand to explore all options for the province's future electricity needs?Hire the experts it needed?With the full resources of the utility regulator and more at its disposal?

Raphals believes it's very possible Muskrat Falls might never have been sanctioned if all that had happened.

"I'm afraid that your province has a problem on its hands," Raphalstold CBC News Friday, following two days of testimony before the Muskrat Falls inquiry.

'Enormous economic burden'

That problem, said Raphals, is the Muskrat Falls hydroelectric project, which is billions of dollars over budget and years behind schedule. Also of concern isa power purchase agreement that requires Newfoundlandratepayersto foot the megaproject's bill.

It certainly looks like an enormous economic burden that will fall on the shoulders of Newfoundland consumers as soon as the project is in service.- Philip Raphals

"It certainly looks like an enormous economic burden that will fall on the shoulders of Newfoundland consumers as soon as the project is in service," Raphals said.

Raphals is with the not-for-profit Helios Centre in Montreal. He was hired by the Grand Riverkeepers group to review Muskrat, and he raised issues with the project prior to its sanction in 2012.

"I have to say, I don't think it was a good idea," he said again on Friday.

No careful analysis

After several years of intense public debate, the public utilities board was asked to determinethe least-cost option for this province's power needs, but that review was limited to two options Muskrat Falls, or maintaining the oil-fired plant in Holyrood, also known as the isolated island system.

But the board never reached a conclusion, saying itdidn't have enough information, and the project went on to be sanctioned by then-premier Kathy Dunderdale in late 2012.

Raphals said tying the hands of the PUB was a mistake.

"We've never really seen a careful analysis of what the other choices are," Raphalsadded.

"It remains possible that if one did that, we'd see roadblocks everywhere and that there aren't any choices."

Years later, Raphalssaid another options has emergeddeveloping wind power and slowly phasing out Holyrood, though NalcorEnergy has repeated dismissed wind as a credible option.

Raphalssaid the technology to store electricity is slowly being developed, which would make wind power more viable.

"Electricity storage is very rapidly becoming cost-effective," he said.

'Extreme impact' on electricity users

Instead, he said, the province now has to cope with a project that has seen all-in costs soar from $6.2 billion in 2010, when a term sheet was first signed with Nova Scotia's Emera, to $12.7 billion.

Even at the original cost, Raphalshad concerns about Muskrat Falls.

"My concern was even at that cost, and given the financing arrangement that has been put in place, that there would be very extreme rate impacts for island consumers.

"That is certainly even more the case now given the cost overruns that we all know about."

Island electricity rates are forecasted to double tomore than 23 cents per kilowatt hour by 2021.

A doubling of power costs, or even 50 per cent or 60 per cent, is a very severe impact, both for individuals and for businesses.- Philip Raphals

Premier Dwight Ball has said he will not allow that to happen, but has yet to lay out a clear plan as to how he plans to accomplish that.

It's a massive challenge, and Raphalssaid hopes of offsetting the burden with power sales to other provinces and the United States won't help much because "it doesn't appear they'll be very substantial."

"You know in most jurisdictions, electricity rate increases of a few per cent are problematic, and of 10 or 20 per cent are seen as dramatic. It appears that what you're looking at here is much more severe than that. It may be that a rabbit gets pulled out of a hat that solves the problem.

"A doubling of power costs, or even 50 per cent or 60 per cent, is a very severe impact, both for individuals and for businesses," he said.

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