Thursday, 31 August 2017

PUB SHOULD TREAT HYDRO'S RATE HIKE HARSHLY

When government agencies engage in self-aggrandizing claims, they really should try to support them with something more than rhetoric.

The public awaits PUB approval of a NL Hydro sponsored electricity rate increase of 6.6% in 2018 and another 6.4% in 2019. The PUB has adequate reason to reject at least a part of the request.

Hydro’s Rate Application (Vol. I, page 3.5) reads that the rates increases are necessary because: 

Hydro has prudently increased investment in its capital program. In 2016, Hydro spent approximately $204 million on capital work (infrastructure). In 2017, Hydro plans to spend $370 million. These investments, including the new transmission line TL267 from Bay d’Espoir to Western Avalon, are necessary to secure the long-term reliability of the system for Hydro’s customers. (bold added)  

On its face, the reader might think that the Crown’s “regulated utility” as distinct from Nalcor, which is not subject to PUB rules has carefully looked after the public interest. An independent review of Hydro suggests that Hydro behaves no differently than its parent as far as prudence is concerned.

How do we know that? 




Because the PUB had the Liberty Consulting Group conduct an independent review of Hydro's management, planning and forecasting history, and maintenance records. The analysis was something pretty darn close to a forensic audit (which didn't shut down the operation, as Stan Marshall asserts about auditing the Muskrat Falls project).

The Liberty Group confirmed that DarkNL and other outages occurred because NL Hydro was incompetently managed.

Liberty cited failures in the “operation of key transmission equipment”, including a failure to replace “transformers” and maintain “major circuit breakers”.

The Report reads: “... shortage of generation capacity... raises questions about Hydro’s operation” that it “did not complete recommended maintenance activities on the equipment that failed…”

Now, let's return to Hydro's assertion that prudence underscored the proposed rate increases.

The Application notes that, between 2015 and 2019, Hydro will spend an average of $210 million per year on capital works (page 3.43) and, from 2017 to 2021, an average of $194 million annually.

To pay for these expenditures, 2018 billings required from NL Power customers will grow to $452.8 million from $412.7 million in 2017, representing an increase of 6.6%.

In 2019, NL Power will need to increase the billing to ratepayers again (raising the sum necessary to service Hydro’s fast-growing debt and NL Power’s operating costs, subsidize industrial users and remote rural customers using diesel) to $498.5 million; hence, the second increase of 6.4%. Taken together, the increases represent a rate in 2019 of 12.03 cents per kWh plus HST, or 13.83 cents per kWh.

The reader should bear in mind that this rate does not include the cost of the Muskrat Falls project. NL Hydro has spent capital to beef up the Island system to accommodate Muskrat power which bolstered the need for higher rates, too.

The capital works also involve a multiplicity of upgrades throughout the island grid system that were deferred by Hydro. Taken together, they are putting upward pressure on power rates which, alone, destroy the thesis that the original cost estimates on Muskrat on a blended basis could be absorbed by ratepayers.

The third transmission line to the Avalon from Bay d’Espoir is also financed in these numbers.


On the issue of prudence, by Hydro’s own admission, the third TL was needed several years ago due to the growth in electrical demand on the northeast Avalon, and because it would reduce fuel consumption at Holyrood. When first pursued, oil prices were much higher than they are at present, giving the investment an immediate imperative. 

But NL Hydro repeatedly delayed the Application to the PUB possibly fearing that the equivalent of 176MW being spilled in Central Newfoundland would weaken the justification for sanction of the Muskrat Falls project.

Formally, an Application arrived in the offices of the PUB in 2011, just prior to its submission of Muskrat.  Preferring that the PUB hear the Muskrat Application first, Nalcor withdrew the request for the Bay d’Espoir TL upgrade. 

Back then, Hydro estimated the capital cost of the TL at $204 million.

What is the cost of the TL now, you ask?

The new number is $292 million (source: page 3.5 of Hydro’s Rate Application). The figure represents a difference of $88 million to be tacked on to the rate base which the public will be expected to pay for, even though there is no evidence that the delay was a prudent measure. 

The scheme to favour Muskrat shows up in a multitude of places. The extra $88 million is in addition to the equivalent of millions of dollars of spilled water which occurred as Nalcor froze up the political and regulatory process with its own mind-numbing falsified plan for Muskrat.

Therefore, when Hydro (or its parent) makes any claim about prudence, you should know that that attribution lost any appeal to the truth a very long time ago.
___________________________________________________________________________
Related:
Troubled Waters: Nalcor Spills Millions
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What is the point of recounting Hydro's culpability?

The PUB has the right under the Electrical Control Act to refuse any costs Hydro wants added to the rate-base found to be neither legitimate nor reasonable. In this context, costs generated as a result of incompetence, wilful neglect, or conflicts of interest warrant a similar response. Notably, for the very first time based upon the findings of the Liberty Report the PUB refused Hydro some such costs last year for reasons of imprudence”. 
Hopefully, the Board has not lost its resolve to hold Hydro to account.

Two more points are worth noting: First, Premier Ball is telling people that he can’t let rates go above 17 cents per kWh. It is a false promise. The difference between 13.83 per kWh the rate that will be imposed in 2019 and Ball's 17.0 per kWh figure leaves an amount that is essentially a rounding error on the rate increase needed to finance Muskrat.

The galloping increases in capital expenditures by NL Hydro combined with the cost of Muskrat make the Premier's claims transparently unattainable. The Premier is not telling the truth.

Secondly, Hydro wants the PUB to create a “Deferral Fund” into which monies saved from fuel consumption at Holyrood from “off-island” sources (i.e. Upper Churchill Recall power) to “mitigate” post-Muskrat power rates.

Of course, the PUB has no obligation to accommodate either Hydro or Nalcor in this case. The request is simply inappropriate and unwarranted. 

The PUB is still under an Exemption Order on the Muskrat Falls project.

In fact, the Board recently completed a lengthy process at the end of which upon Nalcor’s repeated intercession and insistence the Grand River Keepers of Labrador were refused inclusion of a possibly unstable North Spur and a defeated Water Management Agreement. The PUB felt compelled to say that those matters were not within the scope of its Hearings into the issue of supply and the reliability of power on the Island.

Nalcor with the government’s approval shook off the scrutiny of the PUB following its decision not to approve the Muskrat Falls project in 2011. But the company still wants the PUB out of its hair; its independence a nuisance when accountability is sought.

Nalcor wants the convenience of Hydro’s “regulated” status AND to evade the scrutiny it abhors.

In short, the public should not let Nalcor pick their pockets without the obligation of first exposing its sordid history of abuse of authority, its litany of falsification for the purpose of obtaining sanction and its waste of public money. 

At a minimum, the Government should be forced to rescind the Exemption Order and allow rate applications on Muskrat to be adjudicated through the “front door”.

That is the battle for which the Consumer Advocate should now be girding. 

But, like the last one, the current Consumer Advocate leaves little doubt to whose tune he dances.

It will be worth watching if he falls in line with the wishes of Nalcor and the Liberal Government that appointed him, Dennis Browne having already capitulated to their dismissal of the call for an immediate forensic audit.

24 comments:

  1. Good to see the Uncle was not overwhelmed by the Chase the Ace Madness (reports of 100,000 lined up for the gamble), and addresses the issue of Prudence, and the pending power rate hikes before the PUB
    Nfld Hydro citing prudence (to satisfy `residents wanting` more reliability of power......this is laughable as reliability of power is a mandatory requirement of the power companies), when in fact Nfld Hydro`s imprudence led to DarkNL....lack of maintenance and delaying the 3 rd line to the Avalon,...all to advance the great Satan of all imprudence ....Muskrat.
    If memory serves, Liberty used the word imprudence some 70 times to describe Nfld Hydro operations, and their culture of non transparency and accountability.
    On the issue of the need for the 3rd line, Ed Martin, at a public session stated the existence of a third line would have had absolutely no impact during DARKNL. I managed to question that statement in real time via email, to which he acklnowledged an error, but then dismissed it by saying that it would have made very little difference.
    The Liberty report later cited this impact as a added loss of 35 MW by overloading the one line then operating. When Hydro was telling customers to turn down the heat thermostats, as every MW counted, 35MW of extra loss from this was very significant. Such was the integrity and honesty of Honest ED.
    Now we spend 88 million more to built this line that was necessary years earlier, and the cost of wasted fuel at Holyrood can be added to that.
    So,also, ..... should bonuses be paid to Nfld Hydro officials for current prudence that only partially offsets recent recent imprudence, or should those bonuses also be dismissed by the PUB.
    Winston Adams

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  2. The media's coverage of, and participation in, the Chase the Ace nonsense, is embarrasing.

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    1. So true.

      When rate shock hits and the masses get riled up, the media will pounce. They'll be there to cover the demonstrations, being sympathetic to the publics outcry, and vying for interviews with culprits we now only know too well. They'll lead the dumbfounded charge to get answers – about how such fiasco could ever happen? The irony will be they were a big part of why it happened. They should try a little EXTRA EXTRA hard to unravel what Ball and Coady and Bennett and Browne and many others are so eager to cover-up.

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    2. What more can you expect from a bunch of Giggle masters at NTV and CBC?

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  3. Thank you David Vardy, for your enlightenment interview this AM on Vancouver CBC. The similarities between the need for public, (PUB) scrutiny of mega power dam projects in BC and the Muskrat are remarkable. We await the new government's findings from a quick review of the Site C project. Just as in NL. the Power Corp in BC is running ahead of energy demand, without well constructed "Road to Renewables" and energy conservation measures. Our domestic power rates are climbing steeply and approaching Canadian average rates; (12 cts/KWH).

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  4. CCPC submission for Economic Review of Economics of Site C, to PUB

    https://www.policyalternatives.ca/publications/reports/revisiting-economic-case-site-c.

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  5. I have stated on this blog before that we, as a people are incapable of governing ourselves, that was proven in 1934, and will be proven again with a 30$ billion debt and climbing for this province of half million people. What UG has shown in this posting is we are incapable as a province in managing our power needs. Why, there are not enough honest people running the power needs of this province, and HONEST Eddie is a prime example, how many others can be lumped into this bundle. Premiers, cabinets, MHAs, deputy ministers, managers, consumer advocate, and some John Does. Along with honesty, there is lack of prudence, in competency, political motivations, personal moviatations, you name it, it exist. The fishery is on it's last legs, mostly because we gave it away to Ottawa to manage without fireing a shot, we have gone from rags to riches, to rages again in a decade in managing the offshore oil royalties, then there is the net debt of 15$ And climbing, and muskrat 15$ billion, which may become a white elephant, not to mention, the north spur. We still have no fixed link to the mainland, interconnected ferries to the mainland and provincial ferries spirialing out of control, and on and on. You could not make this shit up. And no peter rabbit the sky is not falling in, and Texas will recover, and the universe is unfolding as it should, but, by God if there is a more inhept bunch of people gathered together than in this island let the gods destroy them before given the opportunity to destroy themselves. Again, my personal opinion, as I am entitled to and allowed to express. Amen.

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    1. I don't believe for a minute it is incompetence. It's all by design, fuelled by GREED. There are many in this province, & outside, who saw this "project" as an opportunity to be personally 'set for life'. Who cares how much it spirals out of control, they say. We'll be alright. We have our cream. Meanwhile, the rest of us poor beggars struggle to keep up with the ever increasing power bills. Not to worry - Dwight & Coady will save us all & reduce those nasty bills with increased taxes from your other pocket. Unable to manage the debt of 30 Billion, NL will have no choice but relinquish control of the Upper Churchill to Hydro Quebec, which will in turn initiate a takeover of Emera. Then they can phone Danny & say one word - 'Checkmate'.

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    2. And all those honorable members who have secret shares in emera being held in their wives/sons/daughters/brothers/sisters names will smile from ear to ear like the cat that got the cream when the share value sky rockets.

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  6. From National Observer one of Canada's best investagative journalism sources,this is interesting to say the least.

    After all the rhetoric, Site C’s real purpose emerges

    As others had suspected, the real reason for Site C likely isn't about powering 450,000 homes, which the BC Hydro public relations department – and the former BC Liberal government – has incessantly said it was.

    And it probably never was.

    I believe the reason the Independent Contractors and Businesses Association is doing PR for the dam is because Site C is being built to power their baby, the “unconventional” gas industry (“unconventional gas” is another term for methane derived from fracking), and it's possible they don’t want to throw their baby out with the spilled water from Site C.


    http://www.nationalobserver.com/2017/08/29/opinion/site-c-cant-be-built-and-ma-murrays-former-newspaper-reveals-why

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    1. Thanks for your reference to this fine article and good journalism. NL desperately needs its own Ma Murray in these times of obfuscation by the "Leaders".

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  7. As to the island grid 3rd line that had been delayed, but now nearly complete......
    Our inland generation had 2 lines to the Avalon, one straight to St John`s, the other looped in and out of Holyrood.
    Roughly about 650 MW of island hydro to the Avalon, plus up to 490 MW from Holyrood as needed in winter.
    During DARKNL, Holyrood went down, leaving only 1 line of Hydro generation to St John`s, so serious outages occurred.
    3 hydro lines to the Avalon would have been a great benefit, with much less disruption, and had long been planned.
    However this new 3rd line only goes to the Western Avalon, not Eastern Avalon, where most of our load is.
    It appears to me that this 3rd line should have extended to Holyrood, allowing more island hydro to East Avalon.......maybe another 50-75 million cost,(about 40 miles more) which cost is recoverable from fuel savings and better reliability.
    Instead,it seems this was deleted as we get the Soldiers Pond station, where also the MF DC line terminates.
    If this was DC link was extremely reliable, then the gap of 3 lines from our island hydro may be ok. But MF link is unproven as to reliability, and Holyrood is questionable for backup........
    In such a situation we are still exposed on East Avalon to just the 2 lines from the island as before. Long Hr Inco benefits from the 3 rd line, but that is as far as it goes.
    Perhaps some Hydro or Nalcor engineer or other person could comment on this, .........have I missed something in the plan and arrangement.
    Winston Adams

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  8. For your information Winston;
    http://www.pembina.org/pub/decarbonizing-existing-buildings.

    I am still amazed that NL seems to have no progressive program in this regard.

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  9. Both NTV and CBC TV led yesterday with Chase the Ace stories. The EY report on Muskrat came second. Entertainment is the game plan for TV news.......and they embed themselves into the entertainment stories.I recall CBC`S Jerrmie Eaton`s New Year resolution was to do more so called fun things,as part of his reports, as he jumped off a snow bank for the cameras. Everyone wants to be a RicK Mercer.
    In the Port Nelson boondoggle a century ago, Halifax journalists embedded undercover at the site to get the true story out. The project failed and shut down after 5 years of waste.
    If journalism of the main media is too help us, we are doomed.
    WA

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  10. God Vs Trump.......Hurricane Harvey.
    God`s weapon (or that of Mother Nature, is rain and flood, at 27 trillions gallons on Texas in 5 days, is equal to what goes over Niagara Falls taking 381 days. The main target: the oil industry, with great effect.
    Another Hurricane Erma is header that way and may land on 9-11 .....
    Forecasters say a chance it may go North toward New York , but they hope it veers toward Nfld.......OMG
    Meanwhile Trump sent Pence, backed by Franklin Graham (Billy Grahams son) to Texas for a word of prayer, about the power of Jesus to calm storms, and the Governor actually wrote and signed a proclamation calling for this Sunday as a Day of Prayer for Texas.
    Meanwhile, as the Uncle has used our local Bard for poetry, a new book is out called Bard of the Deal:...the poetry of Donald Trump.
    The author says among poets, there ain`t no grammars, there is only uncencensored truths. The art of the poem will delight, shock and entertain you. The ten billion dollar poetry of the 10 billion dollar bard. This is the art of the poem.
    Consider the grotesque pass Trump dribbled to a female Celebrity Apprentice canidate .....

    TITLE: Hot Little Girl in Highschool.

    I`m a very compassionate person(With a very high IQ)
    Just think, in a couple of year, I`ll be dating you
    It must be a pretty picture, you dropping to your knees
    Come here, I`ll show you how life works. Please.

    Critics say Trump has no empathy.......but a way with words nevertheless.
    Doubtful Jesus would approve. Flood victims say more more than prayer s needed.
    Interesting times.
    PF

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    1. What is most surprising, the overhead video of all those flooded houses, not one seems to have solar panels, and that area so blessed by solar energy.........indeed Trump prefers oil, gas and coal, so lots of CO2, which makes global warming worse.
      A hurricane that deflects to Nfld they call a gutter ball, as in bowling.........

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  11. Very interesting reference to Muskrat development in Globe and Mail eulogy to "Scholar O'Flaherty". Has anybody read his Skeptic's Diary and NL's relationship to the "Big Bully in the Canadian Family"?

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  12. God (Mother Nature)vs Trump.
    Governor of Texas today says the cost to rebuilt from Katrina was 120 billion, and that Harvey has done twice the damage as Katrina, suggesting 240 billion!
    No indication that Trump changes from his position, yet, on climate change.......saying Texas should be able to rebuild in 6 months.
    His WALL on the border was to cost 25 billion........Harvey has cost perhaps the cost of 10 WALLS.
    As Maxwell Smart would say, God used the old STALL, SIT, and SPIN TRICK to inflict damage on the fossil fuel centre of Houston and Texas, stalling for 5 days. Reported the damage was of biblical proportions, but not really, as those stories suggest a possibility of stall, sit and spin for 40 days, and much more than 52 inches of rain.
    Stupid to underestimate the power of Mother Nature.
    What is Nfld plan to counter climate change..............I forgot........no plan!
    Our Nflder, Dyer, whose syndicated pieces in 45 countries, and in this weekend Telegram says it may take a hit on Miami, Florida to impress Trump.
    PF

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  13. Hebron, costing 14 billion is expected to provide revenue in royalties to Nfld of 2-3 billion dollars......as this field is pumped dry and adding vast amounts of CO2, methane etc to the atmosphere.
    Meanwhile Harvey does some 240 billion dollars damage to the Houston area, requiring vast more fossil fuel energy to rebuilt, a total cost of more than 100 times the benefit to us from Hebron.
    Is there something wrong with this picture.........., for the Planet........not if you deny the effects of climate change........
    And then there is the effect on our oceans in Nfld, the real source of our historic wealth and survival, especially foro rural Nfld...........capelin, cod, crab , scrimp......
    Who is our climate change Minister...........

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  14. Pan Frampton of the Telegram has a good piece : the 6 steps of a boondoggle ( Pam may have been the first to use the word boondoggle as to MF, in 2012.)
    She cites Stan Marshall description........but takes exception, saying we need the step of a public inquiry.........which Marshall avoided.
    And Russell writes of Chase the Ace, admitting the media hyped this, and suggested it should be ended.
    Of course UG long ago spoke out against Chase the Ace.......as it promotes a culture of senseless gamble........or as Danny Willliams said of MF..........lets roll the dice........a 5 billion project now headed for 15 billion.
    Can we blame the 100,000 for lining up to Chase the Ace, when we have leaders so anxious to gamble away our future.
    An inquiry hopefully would Chase the Culprits.....right to the lockup. More likely than not, the big gamblers will avoid justice. Heck, they are still getting bonuses! Marshall 156,000,Gil Bennett 57,000, and the common Joe feels helpless, but resentment grows. I hear it all the time, saying the EY report is not to be trusted, doubting this now 80 percent complete, saying what Nalcor wants to be said.

    Winston Adams

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  15. The media coverage of the EY report was nauseating. Not a question about a two year old study absolving Nalcor of any mismanagement. Any study that evaluates risk that ignores the spur engineering, indeed does not even review the engineering, is an out and out fraud.

    How this can go on and on with the PUB refusing to admit evidence of the spur engineering shortcomings and the WMA into testimony is beyond a disgrace. Although the rate applications should of course "go through the front door" of the PUB one has to wonder how the demonstrated prostration of the PUB to the Nalcor corruption would change anything even in that event.

    As for Dennis Brownnoser, his refusal to demand action now on behalf of the ratepayers would be grounds for a disgraced removal in a functioning democracy. These hacks that disgrace their public duty need to be humiliated and ridiculed for their complicity in the ongoing fraud.

    The time for polite questions is long past. The institutions entrusted to protect the public interest have been willfully destroyed. They need to be turned upside down and the rats need to be sent scurrying.

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  16. When we have the likes of Dorothy Keating from the St. John's Board of Trade trying to deflect attention from the issue of Muskrat Falls by saying the only issue in the municipal election is regulations and taxes, we no longer have any leadership in this province. As one of the biggest proponents of Muskrat falls who stood to gain so much from the construction jobs and contracts, the supply and maintenance contracts and engineering and design part of the Muskrat Falls Dorothy Keating who heads one of Muskrat Falls biggest cheerleading lobbyists groups has some gall by NOT making this an election issue. Taxes (well maybe those associated with Nalcor and the Boondoggle) and regulations (especially the ones that WEREN'T in place to provide the public with information about the Boondoggle) are not what bankrupted this province but the Board of Trade's Idol's legacy project and his ego. What amazes me is how she has the gall to even show her face in public and NOT discuss Muskrat Falls.

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