Power projects under review in Labrador

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Kathy Dunderdale, right, premier of Newfoundland and Labrador, and Nova Scotia Premier Darrell Dexter, left, talk with reporters in the main lobby of the Confederation Building in St. John's on Thursday, July 12, 2012. The two premiers were discussing development of the Muskrat Falls energy project and possible cost overruns and other issues pertaining to the project. THE CANADIAN PRESS/ THE TELEGRAM - Joe Gibbons (CP)

ST. JOHN'S, N.L. -- Providing cut-rate power to mining companies in Labrador should not be a prime reason for developing the Muskrat Falls hydro megaproject, says a growing cast of critics.

Skeptics of all political persuasions are warning that residential ratepayers could wind up paying for industrial expansion, and they want the Progressive Conservative government to make power purchase deals public.

The proposed hydro dam and generating station on the lower Churchill River will top $6.2 billion, a massive commitment of public funds over a 50-year project. Detractors say it's a high-risk and outdated venture fraught with potential cost overruns.

The government and its Crown corporation, Nalcor Energy, have promoted Muskrat Falls as the cheaper, cleaner option to meet future power needs. But they're waiting on a promised federal loan guarantee that could shave hundreds of millions of dollars off borrowing costs, and an arm's-length assessment from Manitoba Hydro International before the government decides whether to approve the project.

Brendan Sullivan, a St. John's businessman and former provincial government economist, says average ratepayers should not have to subsidize mining corporations.

Since the project was first announced in November 2010, he said he has listened to the government's messaging on Muskrat Falls shift from domestic power needs to export possibilities to increasing demands from mining interests.

"I have no problem with giving power to mining companies if they need it and if they're prepared to pay a decent price," Sullivan said in an interview. "But you know and I know that's not going to happen here.

"There should be no requirement that we subsidize mining companies."

Industrial electricity rates of about seven cents per kilowatt hour for firm power are already substantially lower than the average domestic rate of about 11 cents, Sullivan said.

Newfoundland and Labrador Hydro's interim industrial rates -- adjusted for such variations as fuel cost, load and rural rates -- are about two to three cents per kWh for companies such as Teck Resources Ltd. and Vale Newfoundland and Labrador Ltd.

Teck Resources owns a copper and zinc mine in central Newfoundland and Vale operates the Voisey's Bay nickel mine in northern Labrador.

Government rhetoric in support of Muskrat Falls has in recent months highlighted potential mining projects in Labrador West. Premier Kathy Dunderdale and Natural Resources Minister Jerome Kennedy have both repeatedly stressed the power needs of companies wanting to set up or expand iron ore production sites.

Dunderdale says it's business as usual to offer electricity discounts in return for jobs and investment.

"We want companies to invest here, to create work for our people here in Newfoundland and Labrador," she told reporters last week. "But at the same time, you have to be sure that there's a return to the people of the province.

"Remember: this is a foundational principle of this government, that the people... be the beneficiaries of the development of our natural resources."

Dunderdale said several companies are inquiring about the prospect of getting power from Muskrat Falls, expected to generate a maximum of 824 megawatts by 2017.

Kevin Lacey, Atlantic director of the Canadian Taxpayers Federation, said companies should pay their fair share.

"Certainly our fear is that what will happen is the government will give huge breaks to these companies at the expense of the average homeowners who are paying already higher increases in power rates. These tend to be just backdoor subsidies to companies that come at the expense of the average person who can least afford it."

-- The Canadian Press

Republished from the Winnipeg Free Press print edition October 1, 2012 B7