"We can't allow things that are inaccurate to stand." — The Word of Our Dan, February 19, 2008.

Thursday, April 02, 2009

Not letting the people know the truth

In 1998, then-Premier Brian Tobin announced the original recall power agreement with Quebec. The release announcing the deal stated:

This will generate new revenues for the province in excess of $20 million annually. We will receive one billion dollars over the life of the project from the Guaranteed Winter Availability Contract.
Later that same year, another release:

Premier Brian Tobin announced today that the province has received its first installment of $27 million for the resale of 130 mw of Upper Churchill power to Hydro-Quebec.

"We are pleased to see the first of many installments for the sale of this Upper Churchill power to Quebec," said the premier. "In fact, this $27 million in revenue to the province is more than twice as much as we received from the sale of Upper Churchill power through CF(L)Co. dividends and royalties in 1997. Our province will receive about $600 million from the sale of this recall power over the life of the Churchill Falls contract."

On March 9, arrangements were also made for Hydro Quebec to enter into a Guaranteed Winter Availability Contract with CF(L)Co. for extra peak season generating capacity from November 1 through March 31, starting November 1, 1998. The sale of this capacity will result in additional revenues to the province of about $1 billion by the time the contract expires in 2041 (at the same time as the Upper Churchill Power contract expires). This equates to average revenues to Newfoundlanders and Labradorians in the order of a further $23 million annually.
In 2001, the three-year Tobin deal was renewed by the parties for another three years. The announcement of the renewal agreement noted:

"The profit over the next three years from the new agreement, based on current forecast requirements in Labrador, is projected to be $80 million," Mr. Matthews said. "The projected profit under the new contract is greater than the previous contract because the revenue cap is higher under this contract (approximately $98 million compared to $78.9 million under the previous contract). The price per Kwh is the same under the two contracts, however the maximum amount that can be paid has gone up."

Mr. Matthews said the actual profit to be realized from the contract will depend on the amount of energy to be produced, the amount used in Labrador and the line losses (the cost of the energy lost during transmission is borne by the vendor).

The $80 million forecast profit is based on gross revenue of $90 million and costs of $10 million," Mr. Matthews said.

In 2004, Premier Danny Williams-Government and Ed Byrne (remember him?) essentially renewed the agreement yet again, this time for a five-year term. (Remember that in the Gospel of the Pink White and Green, shorter-term deals are always infinitely preferable to longer-term ones. In their announcement, they detailed:

The contract will realize $230 million to provincial revenues over its term, an increase of 64 per cent over the previous agreement. In addition to the increase in profitability, the contract maintains full flexibility to meet power requirements in Labrador, eliminates the revenue cap and ensures the sale of all available energy for the benefit of the province. The contract is the second renewal of the 1998 contract, which expires March 31, 2004.

Under the 2001 contract, the price to Hydro-Quebec was $23.9/MWh, with a revenue cap of $97.53 million. Under the terms of the new contract, the renewal price starts at $36/MWh, escalating annually by two per cent, and there is no revenue cap.
The five-year term made today’s announcement all but inevitable. And thank you, Danny Williams, for finally putting paid to the popular myth, which you, of course, have had absolutely no hand in propagating, that Quebec “won’t let us” transmit power across their territory.

Today’s announcement states:

Hydro signed a Transmission Service Agreement with Hydro Quebec (HQ) under HQ’s Open Access Transmission Tariff for power transmission from the Labrador to the Canada-U.S. border. Hydro is then selling power on the Canadian side of the border to Emera Energy Inc. Emera Energy began selling that power to the energy markets in Canada and the United States on April 1, 2009. This power is from the recall block that Newfoundland and Labrador has access to from the Upper Churchill project.
And, suspiciously vaguely:

“The decisions around these transmission and power sales arrangements were made in alignment with our long term business strategy and opportunities,” said Ed Martin, CEO, Nalcor Energy. “Over the decades to come there will be tremendous opportunities in the Canadian and U.S. markets for clean, renewable power and we have a product that the market is demanding now and we foresee a growing demand into the future.

“The various options were subject to the usual rigour of any investment decision we make,” explained Mr. Martin. “The upside of this arrangement will provide more revenue to the company than the recall arrangements with HQ have in the past.”
Conspicuously absent?

Any mention of the value of the power purchase.

Any mention of the cost of transmission. (Hint: it’s greater than zero.)

Any financial numbers at all.

This, from the same guy who brought you the sooper-sekrit Menihek deal.

The same guy who promised no more secret resource deals.

The same guy who flipped through Bartlett to quote Lincoln.

“Let the people know the truth and the country is safe”.

Does that mean, by necessary corollary, that the country — presumably the same country that Jerome Kennedy has been referring to in the last few days — is no longer safe?



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