Nalcor's lowballing is proof Muskrat Falls was never viable, says consumer advocate
Dennis Browne now certain project would never have been approved if regulator had been given full oversight
Provincial Consumer Advocate Dennis Browne says the admission that the true cost of Muskrat Falls was never disclosed to the public is proof the project was never viable.
"When you see these manipulations, obviously the project couldn't stand on its own two feet," Browne told reporters Tuesday outside the hearing room at the Muskrat Falls inquiry.
Nalcor Energy vice-president Gilbert Bennett admitted to the inquiry Monday that cost estimates were deliberately lowered in order to support Emera's application to Nova Scotia's utility regulator, and to get approval for a $5-billion federal loan guarantee.
Government left in the dark
Evidence shows Nalcor removed a half-billion-dollar strategic risk allowance from its costs estimates in 2010, despite the fact it was recommended by an external risk-assessment expert.
Nalcor also took a riskier approach to determining cost estimates around the same time. And the government-owned corporation sanctioned the project knowing there was a slim chance of delivering first power on schedule in mid-2017, and did not include any contingency amounts for that expected delay.
Bennett said it was important to keep the capital cost estimates low in order to ensure the Maritime Link to Nova Scotia remained Emera's least-cost alternative for electricity.
Otherwise, he said, the project would not have proceeded.
And Bennett said Emera's involvement was also crucial to getting the federal loan guarantee, which allowed Nalcor to save hundreds of millions in borrowing costs.
Bennett said he agreed with the decision to remove the strategic risk allowance, believing costs would be offset by savings from the loan guarantee.
But Bennett said the ultimate decision was made by former Nalcor CEO Ed Martin. Based on previous testimony, senior politicians and bureaucrats with the provincial government were not informed.
Muskrat was sanctioned at a construction cost of $6.2 billion, but all-in costs, including financing, have since soared to nearly $13 billion, and first power is not expected until at least 2019.
Browne says Muskrat a 'debacle'
Browne is a longtime opponent of the controversial hydro project, and said the most recent evidence is proof that Muskrat Falls is a "debacle."
He also said he's 100 per cent confident that if the Public Utilities Board had been granted authority to do a full review of Muskrat, it would never have been sanctioned.
"If it had to go to the PUB and auditors had to get in behind their numbers, we wouldn't be here today," said Browne.
One of the overarching themes of the inquiry to date is the level of scrutiny that Nalcor underwent in the lead-up to sanctioning.
Multiple reviews of the project were undertaken, but there are growing questions about how independent they were, and there is evidence that Nalcor massaged and edited some of the reports in order to present a favourable picture to the public.
Browne said it's clear a truly independent review was never done.
"All they were doing was repeating what Nalcor was telling them their numbers were, and they were saying that looks reasonable," said Browne.
"The whole thing, the way it's unfolding, doesn't look very good for Nalcor or the project management team."
Bennett is schedule to continue testifying at the inquiry on Wednesday and Thursday.
Martin, meanwhile, will appear Dec. 10-14.
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