Changes vital to project, expert says
Nalcor Energy must agree to changes to the Muskrat Falls deal if it wants Nova Scotia ratepayers to fund a subsea cable across Cabot Strait, says a Maine energy expert.
Gordon Weil said Tuesday a provincial Utility and Review Board ruling puts the onus on the Newfoundland and Labrador Crown utility, not project partner Emera Inc.
“It was a good decision by the board. It’s kind of said, ‘The ball’s in your court, Nalcor. It’s not in ours,’” Weil said in an interview from Harpswell, Maine.
The provincial regulator approved the $1.5-billion Maritime Link project Monday but attached a major condition to it. The ruling said NSP Maritime Link Inc., the Emera subsidiary that will own the cable, needs a guarantee that Nova Scotia will have access to market-priced energy as part of the 35-year agreement.
Neither Emera nor Nalcor have revealed how they will respond, only saying that they have to study the decision.
Ed Martin, Nalcor’s president and chief executive officer, did say the utility still expects to have surplus power for sale. But Martin wouldn’t say whether Nalcor was prepared to give Nova Scotia first dibs on it.
But Weil said the board’s ruling means the Newfoundland and Labrador utility has to provide some sort of guarantee as part of the plan to develop the overall $7.7-billion Muskrat Falls project.
The provision could be either related to supply or price, he said.
A price guarantee would protect ratepayers if the province bought market-priced electricity from another source in the region other than Newfoundland and Labrador, Weil said. If that sale price were higher than the Massachusetts market rate, including transmission costs, Nalcor would cover the difference, he said.
“You can do it one of two ways, but both of them involve Nalcor,” said Weil, a former director of Maine’s state energy agency.
The link deal would give Nova Scotia 20 per cent of the output of Muskrat Falls, slated to become operational in late 2017. That is enough electricity to meet 10 per cent of the province’s needs.
The agreement assumes Nova Scotia gets another 15 per cent of its power in the form of lower-priced market energy.
Emera and Nalcor maintain that Newfoundland and Labrador will have surplus hydroelectric power available.
But the board ruled that the link is only the lowest-cost long-term option for the province if the project gives Nova Scotia access to additional market energy.
Consumer advocate John Merrick said the most likely remedy would be for Emera to try and negotiate a supply guarantee with its project partner.
“I would assume that the easiest option for them would be to deal with Nalcor,” the Halifax lawyer said.
Emera could seek a deal with another utility in Eastern Canada or the United States, but it is unlikely the company will find an attractive long-term deal, Merrick said.
Emera, Nova Scotia Power’s parent company, has said the link will make it easier to import power from various regional sources, if surplus Labrador hydroelectric power isn’t for sale.
But Liberal energy critic Andrew Younger said the cable plan becomes less viable if the province is buying electricity via the New Brunswick system.
“We’d be asked to pay $1.5-billion for a link that may only be half used. That doesn’t make any sense.”
Nalcor officials wouldn’t say Monday whether the utility would attempt to build the subsea cable itself if the current agreement collapses.
John Herron, president of Atlantica Centre for Energy, said he thinks the partners will work out a new deal.
“I would suggest that it’s a pretty progressive partnership that Emera and Nalcor, and the provinces of Newfoundland and Nova Scotia, have developed,” said Herron, whose Saint-John, N.B.-based think-tank includes Emera as a member.
Barbara Pike, CEO of the Maritimes Energy Association, agreed that talk of the plan’s demise is premature.
“It matters not what the skeptics say, or what the analysts suggest. This is still a viable project as long as Emera and Nalcor say it is. I have heard nothing from the principals to suggest otherwise.”