Software troubles blamed for $260M Muskrat Falls cost increase, with N.L. power rates stable for now

Long delays in perfecting the computer software needed to safely transmit Muskrat Falls electricity to Newfoundland are largely responsible for a $256-million increase in project costs, say N.L. Hydro officials.

But after years of cost increases and missed deadlines, Muskrat Falls is now forecast to be completed by the end of this year.

Executives of the Crown-owned utility gave an update on the Lower Churchill Project on Friday, revealing that the final bill for the troubled hydro project has increased to $13.37 billion, up from the $13.11 billion announced in November 2020.

When it was sanctioned in late 2012, the project was estimated at $7.4 billion.

"We know that any change in the cost of this project is challenging for customers. We have been working to manage the risks we have faced," Hydro CEO and president Jennifer Williams told reporters.

Despite the increase, Williams said power rates will remain stable this year, with the earliest that an increase will be felt by customers is next summer, after a rate mitigation plan involving the federal and provincial governments — one that has been touted to keep rates from doubling, as was feared — is completed. Currently, residential customers on the island interconnected grid pay 13.4 cents per kilowatt-hour.

Williams noted the more than quarter-billion-dollar increase is a cost to the total project that will have to be recovered over a 50-year period.

"Any cost increase is something that is significant," she said. "We've worked really hard to mitigate these costs."

The Muskrat Falls power generating station on the Churchill River was completed last fall and slightly exceeded its rated output by producing 839 megawatts of zero-emitting energy on May 31.

But the 1,000-kilometre high-voltage line to the Avalon Peninsula, known as the Labrador-Island Link, is not yet ready to handle all that power. That's because the company hired to develop the control and protection software, GE, has been unable to smooth out glitches in the software. It's the final hurdle to completing the project — and is emerging as one of the most challenging. 

As a result, the link is restricted to a maximum of 450 megawatts, which allowed Hydro to displace 570,000 barrels of carbon emitting oil last year at its Holyrood thermal generating station.

Muskrat Falls electricity is also be transmitted to Nova Scotia, reducing the need for greenhouse gas emitting thermal generation in that province, said Williams.

• N.L. Hydro claims victory in Muskrat Falls arbitration dispute with Astaldi

A new version of the software recently passed testing at GE's factory in England and is now undergoing testing on the link. If the software is successful, final commissioning of the project could take place this fall.

"Yes, there have been challenges along the way, and there may be more, but we are making progress," said Williams.

Meanwhile, Williams said she was pleased with the results of a long and complex arbitration battle with Muskrat Falls contractor Astaldi.

Astaldi was hired to build the generating station and dams at Muskrat Falls but was kicked off the project in late 2018 as the project was teetering on the brink of collapse.

Astaldi sought more than $400 million in damages, but Williams said the net value of Astaldi's award was $12.7 million.

Williams said the arbitration will not impact the final cost of the project because it will be covered by a contingency fund.

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