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)

Sunday, December 22, 2013

Borrowing from Peter to Pay Paul - Nalcor, the Government of NL, and Us

The government of Newfoundland and Labrador is about to make us the laughing stock of the country - again. What's the old saying: fool me once, shame on me, fool me twice, shame on you? That is the stunning revelation written by The Telegram's reporter James MacLeod. His story, printed in this Saturday's paper   says it all - if you read between the lines, and it's not that hard to do.

First off, Nalcor rolls out two new names as reps for the company: Greg Jones (Marketing Manager); and Rob Henderson (Vice-President of something or other). Until now the primary spokesperson from Nalcor has been Vice-President in charge of Muskrat Falls Gilbert Bennett. The other spokesman, on a less frequent basis, has been Nalcor President Ed Martin. Secondly, the announcement comes just before the Christmas holidays, and after the House of Assembly is closed until spring. The most shocking thing though is the message - we are going to be buying power from the US.

Come again you say? We are going to be buying power from the US? Wasn't the plan to be selling power into the US market? The newest twist on the Muskrat Falls fiasco is, in reality, a stunning admission that the Water Management Agreement (WMA) is unconstitutional, and here's why.

Mr. Jones and Henderson state the plan is to allow water to build up in the reservoir, and during this period the dams would be shut down. During the shut down process the province would buy power from the US market. Once the dam reservoir is full, we stop buying power from the US. Sound familiar? It should. It is a seriously bastardized version of the whole "banking" energy plan of the government and Nalcor. Under that deal, enshrined in the WMA, Nalcor would take power from the Upper Churchill when it needed the power and then send the power back during the spring when its reservoir was full, and the dam could operate past 20% firm capacity. This "new" US purchasing of power, in theory, would replace the need for the WMA.

That raises a number of very serious questions, or it should. First, its a stunning admission that the WMA is a deeply flawed document, and the government broke the law by passing it in the first place. If the WMA was legal, Nalcor could take all the power they needed at any time, and according to Nalcor's interpretation, an extra 1500 MW a year on top of that from the Upper Churchill. Obviously, in that case, there would be no need to purchase power from the US or shut a dam down to fill a reservoir. That is the first obvious conclusion. The second conclusion to be drawn is the government is trying to get ahead of the political fire storm which will be ignited when Hydro-Quebec wins their court challenge against us on January 20, 2014. With a US purchase plan they can say that the WMA is no longer of any importance, because they can use the US power to do the same thing - so no biggy.

Then there are some further obvious questions. If the link to Nova Scotia is capable of carrying only 500 MW of power, and 20% of that is being dealt to Emera free for compensation to build the link (25% in the first five years), and Emera has a further option at market rates on the remainder, how will sufficient power be transmitted back from the US on the same line? After all, in theory only, Muskrat Falls is supposed to produce 800 plus MW a year. If say only 300 MW can be transmitted back to Newfoundland from the US, what makes up the 500 MW difference? Well one answer is likely to be: "we don't need all that power now". That seems to be a familiar refrain during this save face at any cost project. A question to that answer would be:" If we don't need that power why are we spending $8-10 billion building the dam?"

The Government of Newfoundland and Labrador is quickly becoming farcical. As we say in this province "too foolish to talk about". But we must. We must talk about it, because it's our financial future on the line. In no other province would a government get away with anything close to the gross incompetence, and spiteful stupidity this government has in this province. The fact that reporter James MacLeod fails to even connect the dots outlined above gives you a hint why they have so far. In any free society, a free and critically thinking press is necessary to hold the government accountable. It's not just up to the Official Opposition. In this province our media, with a few exceptions, simply relays the government message rather than critically challenge it. It's an all too familiar refrain here. This whole issue, including the economics of it, and the impending failure of the WMA in Quebec Superior Court, will play out in the new year. What we need is a press that does not simply repeat what they are told by the government and Nalcor, but actually dissects it. The people need to be "honestly" informed about what is happening to them now and in the future. This terrible admission that we must buy power from the US and shut dams down to fill reservoirs, proves yet again that we can not trust this government.

Monday, December 16, 2013

Nalcor Lies of Omission

What's a lie of omission? A lie of omission is defined as leaving out an important fact when putting forward a story. This is what Ed Martin, President of Nalcor did this weekend on CBC's show On Point. Frankly, I was shocked. Then I was angry - and I remain angry. Here is what was said during the interview:

President Ed Martin:

"If I can just take a brief moment to explain, as briefly as I can, what's really happening there. This is really about the Power Contract with the Upper Churchill, and the Power Contract is really the original contact for 40 years and the extension. In the original contract Hydro Quebec had negotiated the ability to really get the power when they wanted it, you know, at their say.In the renewed contract, in the second part of the contract, it is very clear and different. They get a fixed amount every month, and we've said to them you have to take that, that is what the contract says. They said we would like to have it the first way. We said, well folks, a contract is a contract in this particular case, and you are going to take it that way.

Putting that aside, that's what they are trying to argue. But from our perspective, even if we treated it like the original contract, it has no impact on Muskrat Falls flow, so either way we are fine. So we obviously expect we will win that, that court action, but assuming we didn't, either way we've run the numbers and it's not going to have an impact that's going to hurt Muskrat Falls."


" So you're 100% certain that nothing Hydro-Quebec is doing in the courts right now will impact your ability to operate Muskrat Falls as intended in your business plan?"


" That's correct. They've been operating that plant for fourty years in a certain way, and if they continue to operate that plant in that fashion for fourty years, no impact on the project."

Here is the link if you want to listen to it:

Point one is this, Quebec's lawsuit for a declaration of their rights under the Power Contract is not just solely affecting the Power Contract. Hydro-Quebec is suing, because apparently Nalcor/CFLCo have taken more MW of power from the Upper Churchill, since last June, than they are permitted to under the Power Contract. They are also suing over their right to operate the dam in accordance with their needs, which is what the Power Contract allows them to do. Now ask yourself this: If this Hydro-Quebec lawsuit has nothing to with Muskrat Falls, and especially the Water Management Agreement, then why is Hydro-Quebec suing over their right to operate the dam for only their needs (minus recall)?

It is apparent that Nalcor via CFLCo has been taking more MW than they are allowed to, so they must be doing so based on the Water management Agreement, because prior to that they had no grounds to take extra power. We have yet to be told by our government how much power was taken, and under what authority. However, it is clear that Nalcor is "being too cute" by applying the Water Management Agreement to take power, but not disclosing it to the public they are doing so, or what legal quandary that leaves us in - or expense. In other words, they are fighting a territory fight where the Supreme Court of Canada has already said they don't have territory, and we will pay for it, but they don't seem to care about that.

Martin also states that Quebec has to buy a minimum bloc of power under the renewal contract, and that is true. They have to buy what the average consumption they used over 40 years as a minimum monthly purchase. That's about 3500 MW. What he doesn't say is they take more than that now, and are by law entitled to. Essentially, Martin is not telling the truth here. Hydro-Quebec is not arguing about their minimum buy required. It's clear, spelled out, and they use more anyway. It's a completely false argument presented by Martin. There are only two points they are arguing: 1. Does Hydro-Quebec have the right to all the power created except the recall power? The Supreme Court decided that in 1984, and Nalcor has no right to take anything beyond recall. 2. Does Hydro-Quebec have the right to require the dam be operated to meet their needs, and their needs alone, other than recall power. The Power Contract says they do. In any case, Hydro-Quebec's case has nothing to do at all with how much power hydro-Quebec has to buy. This is just a blatantly false statement from Martin, and it really doesn't fit the criteria for a lie of omission - it's just straight out false.

Then Martin says he is 100% certain that Quebec's court action won't affect the flow for the Muskrat Falls dam. That is another stinker. Consider Nalcor's pre filed evidence to the PUB submitted in 2009:

"Uncoordinated production among the Churchill River facilities could result in either
15  excessive or insufficient water at the lower Churchill facilities. Excessive water will result in
16  spill.  Insufficient water to meet delivery schedules will result in excessive drawdown.
17  Either case represents inefficient use of the available water.  Flow regulation is therefore an
18  important factor in fulfilling the efficiency policy contained in subparagraph 3(b)(i) of the
19  EPCA...

22  The control of the rate at which water is delivered to a hydraulic generating facility
23  increases the plant’s ability to produce power on demand.  The ability to regulate the flow
24  of water is a result of having adequate storage.  The degree of flow regulation determines a
25  plant’s firm power and energy capability...

15  Irregular production at Churchill Falls will have different effects on the lower Churchill
16  facilities depending upon the uncontrolled natural inflows at various times of the year.  In
17  many months, the lower Churchill facilities would have insufficient water for production
18  requirements during periods of reduced production at Churchill Falls. However, during the
19  spring runoff, there would be excess water, resulting in spillage, during periods of increased
20  production at Churchill Falls.  These problems would be compounded if full CF(L)Co delivery
21  of Continuous Energy was scheduled early in one month followed by full production late in
22  the following month.  

4  In the absence of a water management agreement, Nalcor would not even have advance
5  knowledge of expected flows from the Churchill Falls facility to enable it to take steps to
6  mitigate spillage through advance drawdown of the lower Churchill reservoirs.

11  In the absence of a water management agreement, Nalcor would be required to utilize the 
12  water as it became available.  Given the limited storage capacity in the Gull Island reservoir 
13  (approximately three to four days of maximum flow from the upper Churchill facilities), 
14  Nalcor would have to turbine the water and produce energy at the time that it was 
15  available; it would be required to “chase the flows” from the upper Churchill.  Spills would 
16  be likely during the period of the spring runoff, resulting in wasted energy.

Water Management Agreement Application ‐ Pre‐filed Evidence
 Page 14

Nalcor Energy    
Table 1: Irregular CF(L)Co Production Profile 
Continuous Energy – First 20 days of month  4,765 MW 
Recall and Twinco  495 MW 
Total – First 20 days of month  5,260 MW 
Continuous Energy – Last 11 days of month  900 MW 
Recall and Twinco  495 MW 
Total – Last 11 days of month  1,395 MW 
1  The resulting releases into the lower Churchill reservoirs would be as follows for the above 
2  production values: 
Table 2: Irregular CF(L)Co Production Water Release 
Daily Churchill Falls Water Release – First 20 days of month  160 million m3
Daily Churchill Falls Water Release – Last 11 days of month  42 million m3
3  During the March timeframe, uncontrolled inflows into the Gull Island reservoir will be 
4  minimal and under average and dry year conditions are as follows: 
Table 3: Gull Island Uncontrolled Inflows March 
Daily Uncontrolled Natural Inflows – Average Year  6 million m3
Daily Uncontrolled Natural Inflows – Dry Year  0.7 million m3
5  Under average conditions, the resulting production at Gull Island would be 1,519 MW for 
6  the first 20 days and 443 MW during the last 11 days of March.  During a dry period, this 
7  scenario would require production levels of 1,471 MW during the first 20 days of March, 
8  and 395 MW during the last 11 days. Consequently, without a water management 
9  agreement, Nalcor would be limited to approximately 400 MW of continuous delivery in a 
10  long‐term power purchase agreement for Gull Island.   Such an arbitrary constraint on lower 
11  Churchill delivery schedules is unnecessary and is incompatible with the concept of the 
12  efficient use of the resource.

Bottom line, by Nalcor's own filed evidence, with an affidavit sworn by Nalcor's VP Gilber Bennett, the Water Management Agreement is necessary to operate Muskrat Falls at more than 20% capacity. So, when Ed Martin says that should Quebec win in court, and those two principles are ruled void, the entire Water Management Agreement is invalid, and we are screwed. Which, of course is why I have been in Court with them. Ask yourself this: Has Nalcor made Hydro-Quebec's claim or their own Statement of Defence available to the public or media?; Have they made their legal opinions available?; and if no why not? The clear answer is that Nalcor is simply not telling the truth. In some cases they are telling part truths without telling all the truths. In other cases they are simply not telling the truth. Either way, we are being deceived, to our peril, by a government and crown corporation that is meant to defend our interests, and not cripple them.

Saturday, December 7, 2013

On Heroes

This week marked the end of a long life of suffering, oppression, and final victory for Nelson Mandela. He passed away as a hero of the world. He is now with another of my greatest heroes - Martin Luther King. It is amazing, even ironic, that in a world that has seen nothing but the subjugation and oppression of black people, that two of the world's biggest heroes of modern time were black men. It's ironic because none of the "great" white men have made anywhere near an impression on the world, yet white societies have controlled the history books for a millennium. But, despite the absolute greatness of these two men, this article focuses on other heroes.

Master Cpl. Sylvain Lelievre, 3rd battalion of the Royal 22nd Regiment; Master Cpl. William Elliott, CFB Shilo, 2nd Battalion, Princess Patricia's Canadian Light Infantry; Warrant Officer Michael McNeil of 3rd Battalion, Royal Canadian Regiment; and another yet named. These four men all committed suicide this week. They suffered from Post Traumatic Stress Syndrome (PTSD). These men are all heroes, tragic heroes, for suffering through the anger of PTSD, being ignored by the military, and sadly in the end taking their own lives.

There is also the case of Master Cpl. Kristian Wolowidnyk. He attempted suicide a few weeks ago, because the military was shuffling him out of the Canadian Forces for the great sin of having PTSD and associated depression. As the former Veteran's Ombudsman, Col. Strogran, himself suffering from PTSD, said this week on national television: " The government would rather have soldiers killed than come home wounded". Bottom-line, it's cheaper for them. A dead soldier equals a one time payment of less than $300,000. A wounded or disabled soldier is a "constant drain" on the system. Many with zero military experience, especially in the media, would consider this a radical statement, but those of us that have been in know it to be a fact.

Now, suddenly, with the death of four soldiers in one week the politicians are tripping all over themselves in concern. Do not believe it for a moment. That includes the military politicians. This week the Chief of Defence Staff issued an impassioned plea for vets to reach out for help if their PTSD is causing a crisis. Here is his advice: 

"If you have thoughts of suicide, help is immediately available by calling 911. Expert help is also available at your base and wing clinics, via the member assistance program (1-800-268-7708) or at your local emergency room.."

So call 911 is an option. Not original, and certainly not acquainted with vet's issues or PTSD, but they can send you an ambulance or the police. Local emergency room is an option also, if the vet wants to wait in an overcrowded room of sick people to talk for 2 minutes, if they are lucky, to a doctor. Seems to me the "emergency" type situation involved with a suicidal soldier requires specific "emergency" type response - let's say from the military. Oh, there is that 1-800 number. Can't recommend that option for a distressed soldier though. I've tried the number myself.

Here is what you will get on the other end: a person who does not work for the military; is not a medical person; is a bureaucrat from Health Canada; and will not provide you with any counselling. No, that person will take your name and number, will find a social worker or other professional in your area that has a contract with National Defence, and won't guarantee you will hear from that medical professional for at least a few days. When that medical professional contacts you, they will make an appointment for you when they can. Normally that is at least days. Oh yes, they won't diagnose you either. They will talk to you, but that's it. So if you need a sympathetic ear, and aren't concerned with what is happening to you, and aren't in a hurry, by all means contact the 1-800 number.

The Government of Canada's response to its vets is a shame akin to the internment of Japanese Canadians during World War II. How to get rid of an inconvenience en mass? Simply place them in a bureaucratic maze, or circus may be better, claim to be doing the honourable thing with plenty of resources at the ready, and then leave them to tread water until they snap or simply go away to make make out as they will. The entire veterans system in Canada is based on denying vets real assistance - like funding and proper, unobstructed treatment. 

Are the suicides of our four boys this week shocking? Yes they are. They are terrible. Their blood lays in the hands of a government and military that talk the talk, but do not walk the walk. As an Officer I used to eat last, and the men ate first. That's the way it is. You have what's left, and your men are taken care of before you are. Our government and military brass do the opposite. They take what they want, and the soldier is left with what is left, and that's usually nothing. If you are a civilian, and are reading this, do your part and contact your media, or MP, or write to the Minister of National Defence or the Prime Minister, and tell them how disgusted you really are. If you aren't disgusted, then ask yourself why not. If you are a member of our government reading this, know that you are betraying our heroes. If you are a soldier reading this, stay strong and remember the people in your life love you and need you, and that you are a hero.

Monday, December 2, 2013

Emera's Poison Chalice

The day Nova Scotia's Utility and Review Board (known as the URAB) handed down the best decision Emera could hope for on the Maritime Link, the Nova Scotia government handed them a grenade. Just as was the case when: Danny Williams announced the Muskrat Falls project, and on the same day North East Utilites of the US announced it was building a billion dollar power line from Quebec to the eastern US; and just like the day of the original URAB decision that granted conditional approval of the Maritime link, and on the same day Hydro-Quebec announced it was filing suit against CFLCo/Nalcor over illegally taking power from the Upper Churchill - the government of Nova Scotia rained on the Emera/Nalcor party.

The Nova Scotia government introduced a bill named "The Electrical Reform Act". What does "reform" mean? In this case it means deregulation for the electricity market in Nova Scotia, and that means an end to Emera's (through its subsidiary Nova Scotia Power) monopoly of power generation and distribution. That is a massive price to pay for a small amount of mega watts from this province.

To understand Emera's position you have to understand what Emera is and how it makes its money. Emera is the parent company of four primary businesses: Nova Scotia Power; Caribbean operations; Maine utility operations; and pipelines. In 2012, Emera made  $2.058 billion in revenues before expenses. They break down like this:

NOVA SCOTIA POWER               $1.237 billion

CARIBBEAN OPERATIONS          $  421 million

MAIN UTILITY OPERATIONS     $  205 million

PIPELINES                                  $   49 million

Basically, other some other odds and ends, that's it. Now revenue is revenue, but here is what they cleared from each in operations, before tax and other expenses:

NOVA SCOTIA POWER              $  703 million

CARIBBEAN OPERATIONS         $  151 million

MAIN UTILITY OPERATIONS    $    55 million

PIPELINES                                 $    35 million

Bottom line? Emera exists solely based on the monopoly it enjoyed in Nova Scotia. Consider that 60% of all Emera's revenue comes from Nova Scotia Power. Then consider a mind blowing 75% of its cash after operations money comes from Nova Scotia Power. The value of a utility monopoly starts to come into focus. Essentially, Emera should really be named Nova Scotia Power with a few subsidiaries.

Perhaps the biggest concern for Emera until now was its credit/debt situation. S&P downgraded both Emera and Nova Scotia Power's outlook from "stable" to "negative". The reason given in the media was the costs associated with moving away from coal generated power to "renewables". However, a look at the companies debt picture, in itself, should be a big clue. Emera's line of credit facilities have about a $600 million limit, of which about 50% is used up now. However, the big number is its contractual numbers. They include debt, and committed money to projects, suppliers, and the like. That number stands at a whopping $10.064 billion.

Then there are legal issues. It's operation in Maine is under attack for an excessively high "Return on Equity (ROE)" rate. For instance, Nalcor's ROE rate here is about 8.5. Nova Scotia Power's ROE is 9.2. Emera was just taken, by user watch dog groups, to FERC where there 11.14% ROE in Maine was ruled over the top, and had it reduced downward to an eventual 9.7%. Emera's operations in the Caribbean have been fraught with public protests over escalating rates. And now this.

Emera is going to lose its monopoly in the one place it can not afford to. The one place where it makes all its money to keep the whole operation afloat. That leaves the door wide open for Hydro-Quebec to move in with the 1000's of MW of power it can't even sell. If that happens, which you must consider a distinct possibility, then Emera is done for. It's likely future: takeover target (probably by Hydro-Quebec); and/or a takeover and break up of its assets for sale sale independently. Either way, Emera may have won the battle over the Maritime Link approval, but the cost of new regulation removing their monopoly is a real "poisoned chalice" indeed.