- Options to reduce impacts of Muskrat Falls, including both cost savings and revenue opportunities involving the electricity-related activities of Nalcor Energy and its subsidiaries;
- The domestic need for Muskrat Falls power versus export availability; and,
- Quantifying the impact of the identified options.
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Learn more Mandate of the Public Utilities Board Mitigating Muskrat: 30 Month Review Follow us on Twitter: @GovNL and @NR_GovNL Media contacts Michelle Cannizzaro Office of the Premier 709-729-3960 michellecannizzaro@gov.nl.ca Nancy Hollett Natural Resources 709-729-5777, 685-3372 nancyhollett@gov.nl.caBACKGROUNDER
Reference Questions to the Board of Commissioners of Public Utilities Rate Mitigation Options and Impacts
The June 23, 2017 update on the Muskrat Falls Project by Nalcor Energy indicates the capital cost and during-construction financing costs of the Muskrat Falls Project have risen to $12.7 billion, which is more than double the estimated costs submitted to the Board of Commissioners of Public Utilities (the “Board”) in the 2011 reference question, when the Board was asked to compare the Muskrat Falls Project and an isolated-island alternative. The obligations under the Federal Loan Guarantee, dated November 30, 2012, place the financial burden of the Muskrat Falls Project on Newfoundland and Labrador ratepayers. As a result, the June 23, 2017 update forecasts that, without taking mitigating actions, rates for domestic customers on the Island of Newfoundland will increase to 22.89 cents per kilowatt hour in 2021, and related increases are expected for other Island rate classes. This rate increase is primarily attributable to the impact of cost recovery required for the Muskrat Falls Generating Station, Labrador Transmission Assets, and the Labrador Island Link projects, collectively known as the Muskrat Falls Project (the “MFP”), which was exempted from oversight by the Board on November 29, 2013. Government’s position is that the projected rate increases associated with Muskrat Falls Project costs are not acceptable. Without intervention, these projected rate increases would likely cause financial hardship for customers in all rate classes on the island portion of Newfoundland and Labrador (“Ratepayers”). With the assistance of the Board, the Government of Newfoundland and Labrador wishes to examine options to reduce the impact of the Muskrat Falls Project on rates. To assist with Government’s approach to this issue, pursuant to section 5 of the Electrical Power Control Act, 1994, the Government of Newfoundland and Labrador hereby refers the following matter to the Board: The Reference Questions The Board shall review and report to the Minister of Natural Resources on: 1) Options to reduce the impact of MFP costs on electricity rates up to the year 2030, or such shorter period as the Board sees fit, including cost savings and revenue opportunities with respect to electricity, including generation, transmission, distribution, sales, and marketing assets and activities of Nalcor Energy and its Subsidiaries, including NLH, Labrador Island Link Holding Corporation, LIL General Partner Corporation, LIL Operating Corporation, Lower Churchill Management Corporation, Muskrat Falls Corporation, Labrador Transmission Corporation, Nalcor Energy Marketing Corporation, and the Gull Island Power Company (together the “Subsidiaries”, and collectively with Nalcor Energy, “Nalcor”); 2) The amount of energy and capacity from the MFP required to meet Island interconnected load and the remaining surplus energy and capacity available for other uses such as export and load growth; and 3) The potential electricity rate impacts of the options identified in Question 1, based on the most recent MFP cost estimates. These questions are the “Reference Questions”. In answering the Reference Questions, the Board shall consider the power policy of the province, as set out in the Electrical Power Control Act, 1994, and the following:- New and existing sources of Nalcor income that could be put towards reducing rate increases, including income from:
- Nalcor power exports, including those from generation assets it owns or controls, the MFP, and Churchill Falls recapture power, taking into account any export-related costs such as those relating to Nalcor Energy Marketing; and
- any other effective opportunities to find synergies, efficiencies and reduce duplication and costs within Nalcor and its subsidiaries.
2018 09 05
3:20 pm