Emera didn't ask for lowballed Muskrat Falls costs: Huskilson

The former CEO of Halifax-based energy conglomerate Emera has told a public inquiry in St. John's, N.L., he never intended nor asked the Newfoundland and Labrador Crown corporation Nalcor to lowball cost estimates for the Muskrat Falls megaproject.

The issue emerged at the Muskrat Falls inquiry this week with claims that Nalcor cost estimates were deliberately lowered in order to help project partner Emera's application to Nova Scotia's utility regulator, and to get approval for a $5-billion federal loan guarantee.

Chris Huskilson, who retired as Emera CEO earlier this year, was asked by the inquiry to respond to a statement in a Nalcor briefing book indicating Nalcor executives decided to "drop the provisional strategic risk allowance … to respond to Emera's concern regarding its ability to sell the strategic risk concept to the Nova Scotia regulator."

In a Nov. 26 letter to the inquiry, Huskilson wrote that Emera expressed "concern" to Nalcor about using "strategic risk allowance" terminology because the concept was not used by Emera nor the Nova Scotia Utility and Review Board.

The Nova Scotia regulator was examining Emera's portion of the project — the $1.5-billion Maritime Link to carry electricity across Newfoundland via subsea cable to Nova Scotia.

Huskilson wrote "it was, of course, important for both Nalcor and Emera to use the same terminology when presenting costs associated with project risk to allow for an 'apples to apples' comparison of the project cost estimates for the Maritime Link and Muskrat Falls projects."

Pressure to keep costs low

Appearing before the inquiry this week, Nalcor vice-president Gilbert Bennett acknowledged there was pressure to keep Nalcor costs down so Emera could the meet the test from Nova Scotia regulators who wanted proof electricity from Muskrat Falls was the lowest cost option for consumers before it approved the Maritime Link.

The inquiry has already heard evidence that a strategic reserve allowance recommended by an external risk consultant at around $497-million was removed prior to sanctioning.

Didn't expect costs to be removed

In his letter to the inquiry, Huskilson said Emera's practice is to present a project cost estimate developed on a line-by-line basis that includes a determination of all risks represented in the base project and the project contingency in the base estimate.

That is why, said Huskilson, he requested the parties use the same terminology in presenting costs associated with project risk.

"That is not to say that I expected removal of any costs Nalcor felt were appropriate to include in its overall cost estimate," he wrote.

"Emera was not involved in how Nalcor subsequently chose to deal with costs associated with project risk in its overall estimate, but Emera did subsequently receive estimates in a format that was consistent with Emera's which, in turn, allowed for the desired 'apples to apples' comparative analysis," Huskilson wrote.

Questions raised

Neither Emera nor the Nova Scotia Utility and Review Board commented Tuesday.

The issue raises questions for Nova Scotia Utility and Review Board, said Dennis Browne, electricity consumer advocate in Newfoundland and Labrador.

"It may be of concern now to the UARB that some of the numbers being presented to the UARB are, according to the evidence here, by Emera may be subject to some manipulation. That's a problem for them to sort out," he said.