Consumer advocate has eye on Muskrat Falls, rising power rates

Newfoundland and Labrador's consumer advocate says he's still in favour of Muskrat Falls, although the government will have to take steps to manage the troubled megaproject's rising costs, which could double electricity rates in Newfoundland and Labrador in six years.

"The type of rate increases that they're forecasting for 2021-22 are outside of the realm of reasonableness. Let me make that very clear," Tom Johnson told CBC Radio's St John's Morning Show, adding he felt the long term value of the project is still valid.

"We could not have continued coasting along without having other options on the horizon, in terms of things that were going to cost us money, in order to meet our future electricity needs."

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Johnson's comments come on the heels of Nalcor Energy CEO Stan Marshall's project update last week, wherein he outlined a grim situation: a multi-billion dollar cost overrun and delayed start to first power pumping out, which will result in a spike in electricity rates to almost double the current 11 cents a kilowatt hour.

Mitigating measures

Marshall vowed to spend the next few years finding ways to reduce that blow to ratepayers — and with Muskrat Falls so far behind schedule, Johnson said that may just work in consumers' favour.

"The fact that the project is not coming on for another few years gives time to come up with mitigating measures," he said.

Johnson expects the province to take steps such as exporting energy to new markets, and forsaking any returns on the project.

"The government's own return as a shareholder in Nalcor is going to have to be trimmed back, to make sure the ratepayer is not faced with the high rates," he said.

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Johnson said as troubling as the project's status might be, the alternative of reinvesting in the Holyrood generating station — which burns heavy oil to provide power — was unrealistic.

"Once you make a capital decision to invest in another Holyrood, you are basically saying we are going down the route of oil and hydrocarbons for the next 50 years," he said, adding federal loan guarantees would be virtually impossible to secure for fossil fuels.