Electricity users in Newfoundland have started paying for Muskrat Falls
Consumer advocate says cost recovery is appropriate, PC opposition criticizes timing
With their July electricity bill, Newfoundland Power customers have begun paying for Muskrat Falls, though bills haven't significantly increased — yet.
In a July newsletter, Newfoundland Power said electricity bills were set to decrease by 6.4 per cent as part of the annual rate stabilization adjustment, which reflects the cost of electricity generation.
Instead, that decrease has been offset by a 6.1 per cent increase in electricity rates so Newfoundland and Labrador Hydro can begin recovering the cost of Muskrat Falls, the $13-billion hydroelectric megaproject that is billions over budget and years behind schedule.
That means for residential customers, electricity rates will decrease to 12.346 cents per kilowatt-hour, though the basic customer charge will go up slightly from $15.81 to $15.83. According to an N.L. Hydro spokesperson, about six per cent of electricity bills will now go toward what it calls a "rate mitigation fund."
The spokesperson said N.L. Hydro is expecting the rate increase to result in $43 million this year — a tiny fraction of the project's cost.
N.L. Hydro asked the Public Utilities Board to approve the rate increase in May. In a letter, Energy, Industry and Technology Minister Andrew Parsons supported the increase, though he asked N.L. Hydro to keep electricity rates "as close to current levels as possible."
Province modifies order in council
Muskrat Falls is not yet fully online — largely due to software problems with the Labrador-Island Link transmission line — and an order in council dictated that ratepayers on the island of Newfoundland would not begin paying for the project until the project was fully commissioned.
The provincial government modified that order in council so N.L. Hydro could begin collecting costs associated with Muskrat Falls once the project is "nearing" commissioning.
In June, N.L. Hydro said the project was expected to finally be completed by the end of the year.
In an interview with CBC News, interim Progressive Conservative Leader David Brazil said the decision to begin recovering the cost of Muskrat Falls from consumers should have been delayed.
"There was an opportunity here for people to get some reprieve when it came to their electricity bills and this administration chose not to do that, not to help the people while they're struggling," he said.
In a statement, Parsons said reducing the rate was not an option and would have resulted in increased borrowing costs for Muskrat Falls.
"Reducing the rate for one year to have it increase significantly the following year is not consistent with rate mitigation and also places an increased financial burden on taxpayers one year from now," Parsons said.
Decision 'reasonable': consumer advocate
Brazil said his party didn't know the payments from Muskrat Falls would start in July. He criticized the government for not being more transparent.
"Why would you implement it now? Why would you not share it with the people of the province in advance?" he asked.
Provincial consumer advocate Dennis Browne said the decision to begin collecting costs from consumers was "reasonable."
"We're into a financial hole due to Muskrat Falls, and what has happened is in order to stabilize rates, we have gone into rate stabilization efforts," he said.
In February, the provincial and federal governments signed a complex agreement aimed at softening the worst of the financial impact from Muskrat Falls. Even with the agreement, Browne noted, the provincial government will have to pay hundreds of millions in order to stabilize electricity rates. Muskrat Falls would otherwise cost customers 23 cents a kilowatt-hour, he said.
"That is out of the range of affordability for most people, and that's why we're into rate mitigation," he said. "This was part of a rate mitigation effort, and I accepted it as part of that."