Here's to the crazy ones, the misfits, the rebels, the troublemakers, the
round pegs in the square holes... the ones who see things differently -- they're
not fond of rules... You can quote them, disagree with them, glorify or vilify
them, but the only thing you can't do is ignore them because they change
things... they push the human race forward, and while some may see them as the
crazy ones, we see genius, because the ones who are crazy enough to think that
they can change the world, are the ones who do.

Steve Jobs
US computer engineer & industrialist (1955 - 2011)

Saturday, July 6, 2013

Cathy Bennett's Complex Muskrat Falls Case

 Cathy Bennett, poster child for the St. John's Board of Trade, owner of nine McDonald's franchises, fingers in many business pots, and former Chairman and Director of Nalcor Energy, has decided to try and secure the leadership of the provincial Liberals. On the face of it Bennett is a very unlikely Liberal. However, times are changing. Her provincial PC party is in a state of collapse and pragmatism demands a change of colours. The primary purpose of course in control of the provincial governments budget by the St. John's business crowd, but that isn't the focus of this post. The focus here is a curious statement made by Bennett when announcing her candidacy for the leadership of the Liberals.

According to Bennett, support for the Muskrat Falls project rests on "a complex interweaving of multiple business cases." Curious statement for the public to digest, and one which she gave no clarity to. However, for those of us doing in depth study on the Lower Churchill project it rang remarkably true. It was, in a way, a hint. We are all familiar with the arguments about selling power to Nova Scotia, the Labrador mines, the Island and so on. Each of these "business cases" requires the power be sold at a significant loss, which frankly doesn't make much sense from a financial point of view to most of us - these parts of the equation are frankly not that complex. However, there is one crucial, central, and strategic business case that nobody, and I mean nobody is or has spoken of.

To find out what that central business case is you have to go back to Danny Williams strategic plan entitled the "Energy Plan", and the energy warehouse. The stated primary purpose of the plan was to utilize all the province's energy sources to their maximum capacity - including the Upper Churchill. To that end he amended the Electrical Power Control Act to force water management agreements on companies proucing power on the same river. Considering the Upper Churchill was the only situation the amendments applied to the target was obvious as was the aim - take power from the Upper Churchill by forced recall. The premise is outlined in the words of Gilbert Bennett, Vice President of Nalcor in charge of Muskrat Falls:

"Gilbert Bennett: Section 2.1 of the Renewed Power Contract entitles Hydro Quebec to take the Continous Energy in each month, including during the winter...the average production at Churchill Falls is about 34 TWh. If we deduct the 2.36 TWh and 1.97 TWh for recall and Twinco respectively, we are left with approximately 29.7 TWh for HQ, or approximtely 2.5  TWh per month. Interestingly enough, this means the plant on average will deliver on average just
over 3470 MW for HQ + 525 for NLH/Twinco (or 3995MW out of 5428MW) over the course of the month, meaning tat while Hydro Quebec can have additional capacity, they can not have it all of the time, as they will exceed their energy allowance. This point ensures their will be lots of opportunities to withdraw stored enegy from CF, even in the winter.

Translation, Nalcor's big plan is to "withdraw", which is recall, roughly 1500 MW from the Upper Churchill and transfer it to the Island. Under such a scheme Nalcor would pay the same rate for that power as Hydro Quebec does - by 2016 .002 cents a KWH. In other words, the province gets the power of Gull Island, without building Gull Island, fot the same price Hydro Quebec gets its power for - a master stroke. The massive profits on the sale of that 1500 MW would subsidize all the losses of power sales, and contribute all that "revenue" we hear about. Then add in the two lines being built from the Upper Churchill, each capable of carrying 1000 MW, to Muskrat Falls and beyond. Then consider this comment from Nalcor's magazine called "Outlet", dated Winter 2010:
" The current 800 MW design (under sea cable) has the capacity to be increased by a further 1000 MW, without changes to the operating voltage or overhead transmission lines."

Bottom line, take the power. Most would say what a great plan. Except, its not constitutional, and therefore it is illegal. In a sense it is like stealing. This is the great plan of Williams and company - which most certainly includes Cathy Bennett.

As former Chairman of Nalcor, and director, Bennett would have been fully aware of all these plans. When she says it is "complex" she means she can't discuss it, because if she were to reveal that plan the Courts would consider it a deliberate plan rather than an unintended consequence. The province is relying on that constitutional defence. Unfortunately, any recall or taking of power beyond the 300 MW of recall allowed in thePower Contract is illegal - intended or not. So, yes, Cathy Bennett is right - it is complex. She should know. She helped get it through. She should have the courage to admit it. Now these issues are in front of the Supreme Court of Newfoundland and Labrador. Why? Because courage of conviction when it comes to protecting your own people from harm is the number one requirement of any leader of any political party. Complex indeed.

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