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.

Thursday, November 28, 2013

Paul Oram's Bed

Paul Oram is a Newfoundland businessman. He is also an ex minister of the PC Williams government. He has interests in Labrador, including the Home Hardware in Lab West. He's all in when it comes to business and politics in this province. You will know Paul Oram if you go to Glovertown, and see the only older guy with a year round tan there. That's him.

This week, Oram lost it on the social media site, Twitter, after his beloved PC party lost an important by-election. As Kathy Dunderdale put it in The Telegram today:

“I’ve had tremendous support from the caucus, particularly all through the campaign, again last night and this morning,” she said. “I’ve had wonderful messages from party members from right across the province — very positive, very supportive.”
Dunderdale pointed out that the goverernment has spent an a lot of money in that district since it came into the Tory fold in 2007.
“We’ve invested hundreds of millions of dollars in that district, so the demands of the district were met,” she said. “This was a district that was largely ignored when it had Liberal representation, so there was a great deficit in infrastructure.”
Oram saw things a little differently - especially on the whole "tremendous support thing.
Check out his tweet from the night the PCs lost the by-election:
Time for our party to take a hard look at the future. Enough is enough.

Better communications. Our message is just not resonating with the people of this great province.

@waynerbennett im saying that it's time that we do whatever it takes to make this right. The good message is not resonating.

Then there is this dandy conversation:

Image will appear as a link

Now, in the most political jurisdictions in Canada this would pass without any real notice. In this province, however, the government/party message is strictly controlled and dissent is an offense punishable by shunning - financially and otherwise. A rant like this on social meia in this province is really akin to a call to arms, or perhaps better put - knives.

That is passing strange to me coming from Oram. You see, it wasn't long ago that Oram was a very devoted follower of Dunderdale. I was going to keep this diddy solely for my book, but what the heck, it fits now.

You have to go back to early 2011 - January to be exact. Williams had resigned, Dunderdale was appointed interim leader (and thereby Premier), and the leadership nomination process had just ended. As part of the process each candidate had to submit a list of 50 people who supported the party's policies and principles, and also supported your leadership bid. I had 70 odd just to be safe - wasn't safe enough though.

In any case, that list of people went to the Party leadership committee, and only the party leadership committee. It was not a public document. Imagine my surprise then when one of the main supporters of my quiet campaign to get nominated called me, rather panicked, because Paul Oram had phoned him from his holidays down south.

What most people in the province do now know is that members of Oram's family in the Glovertown area were my main organizers and supporters. We met, we planned, and we executed that plan. I could not have done it without them and a few others. Paul Oram didn't quite appreciate the niceties of democracy, and especially did not appreciate members of his family and church signing my nomination papers - he didn't know the full extent of their involvement then. My man in Glovertown, his family member, was upset that Oram had called him and threatened him if he didn't quit supporting my campaign immediately. Oram was bewidered why he would support anyone other than Dunderdale, and it was bad for business. His family member wasn't swayed however, and we carried on.

What Oram also didn't know is that his family members had brought along PC MHA Sandy Collins. Collins is the member of Oram's district. Collins was on board for the leadership challenge all the way, and even wanted to meet in St. John's the night before the nomination papers were going in - I called it off due to the late hour. If Oram had known that he would likely have seriously lost it. I remember thinking then, this Oram guy must be some kind of control freak that he would call and threaten his family members for supporting me in an entirely democratic leadership contest.

And now Oram is the one leading the charge to oust Dunderdale - or so it seems in my opinion. Such is the dark side of politics here. Such is the hypocrisy. Such is the pragmatic twisting of our democratic values. My advice to Oram, and the like, is scream all you like, but enjoy laying in the bed you made.

Saturday, November 16, 2013

Columnist Latest Victim of Muskrat Falls Dam

" We have a natural right to make use of our pens as of our tongue, at our peril risk and hazard"

Michael Johansen is an excellent journalist. An award winning journalist. A published novelist. A columnist that is now without a column.

Johansen lives in Labrador, and loves it. He took three years to build his own cabin near the Churchill River in the rough backwoods of Labrador. It is his place to live and his place to love. The place is sacred to him. Michael Johansen is also an opponent of the Muskrat Falls hydro dam project, located ten miles from his cabin, and that made him dangerous.

What most people in Canada, and the world, do not understand about this province is its dark side. The side that is not the "friendly Newfoundlander and Labradorian". The side of the Merchants. In this province it is alive and well. Michael's story is the most recent of many similar stories.

Michael, up until this week, was a weekly contributing columnist to the Aurora and Labradorian newspapers in Labrador, and a frequent contributor to The Telegram in St. John's. All three papers, and all the papers in this province, are owned by Quebec based Transcontinental Media Inc.

Michael's columns varied, but often focused on the provincial government here, and its child Nalcor Energy - a provincial crown corporation. His columns were often not favourable to the two and in particularly the Muskrat Falls project. They also focused on the costs of the project like the hyper inflationary effect on the local rental market, which left people homeless and hopeless. In other words, he focused on the societal costs versus the fanatical march of Nalcor and the government to build the Muskrat Falls dam. In doing so, Michael reflected the concerns and feelings of many in our province. That was, apparently, his great sin.

In June of this year a new Editor was put in charge of the Aurora and Labradorian newspapers - one Bonnie Learning. Not a name really known among the province's people, but one certainly known in provincial government circles. Learning was the constituency assistant for John Hickey, the now retired Progressive Conservative Cabinet Minister from Labrador - Minister of Labrador and Aboriginal Affairs. Hickey was, and remains a vocal proponent of the Muskrat Falls dam project.

Given that constituency assistants to Ministers must be aligned with their employers political beliefs, and given that Learning filled that role for Hickey, Learning is in a potential conflict of interest in adjudicating her editorial functions when it comes to issues that involve the Muskrat Falls project. She took the position of Editor in the summer of 2013. Barely 5 months later, and after an ongoing war with Johansen over content regarding Muskrat Falls, Nalcor and the government, he finds himself without a column.

This is how it works in Newfoundland and Labrador. The politics of feudalism. Do as the master says or bury thyself. Michael is the latest victim of that cancerous mentality. A mentality that has left the province as the worst democratically functioning governments in Canada - if not North America. What surprises me is that Transcontinental Media, a Quebec based company would hire a person, so directly linked to the current government, for a position that requires neutrality. The position of Editor is critical in our democracy as it dictates what the public will see, learn, and know.

The censorship surrounding Michael has been dutifully ignored in the media by and large. The Independent gave a great story on the issue. VOCM ran a news article on it, and all three of its daily province-wide radio shows covered the issue. In particularly, Paddy Daley gave an inspirational talk on the issue, and lambasted the apparent censorship. However, stations like the CBC did not even give it a mention - as if somehow the firing of an award winning journalist and columnist over his stories on the government and Nalcor was a non-event. Something rotten in the State of Denmark to be sure.

Unfortunately, both the travesty delivered to Michael, and the reaction to it in the media here, illustrate an ongoing illness in Newfoundland and Labrador. An illness that keeps its people down, and without the taken for granted right to knowledge that most in the country enjoy. That illness is totalitarianism. The few dictate to the many. Newfoundland and Labrador is not a democracy. Instead, it is the playground of the small business elite in St. John's and to a lesser extent, those situate in Labrador. A marriage of financial interest that have nothing to do with the well being of our people. A ruthless, undemocratic approach to governing in modern times. An insult to our dead that rest in graves throughout Europe, and the people inside them who gave everything so that we could live in freedom. "Lest We Forget". Yes, lest we forget why they sacrificed. That sacrifice is ignored here. It is an unhelpful encumbrance to those that demand to impose their will upon us. Michael Johansen is the latest victim of this.      

Wednesday, November 13, 2013

Muskrat Falls Math - Part 2 - the Newfoundland Power Angle

No discussion on power can happen in this province without factoring in Newfoundland Power Inc. Newfoundland Power is a subsidiary of Fortis Inc. It has the enviable position in Newfoundland and Labrador of being the sole retailer of power to customers in the province. Essentially, it buys power from Newfoundland and Labrador Hydro (NLH), a crown corporation controlled by Nalcor (the province's energy crown), and in turn sells it directly to customers.

I was able to piece together a historical summary of revenue for selling power vs cost of buying it. The history goes like this, with the percentage of profit before other costs beside it:

In the millions:

2012   581,000 -  380,000 - 35%
2011   573,000 -  369,000 - 36%
2010   555,000 -  358,000 - 35%
2009   527,000 -  346,000 - 34%
2008   517,000 -  337,000 - 35%
2007   490,000 -  327,000 - 37%
2006   421,300 -  257,200 - 39%
2005   420,000 -  256,000 - 39%
2004   404,400 -  244,000 - 40%
2003   384,200 -  228,000 - 41%
2002   369,627 -  210,764 - 43%
2001   359,305 -  202,479 - 44%
2000   348,413 -  199,266 - 43%
1999   342,001 -  192,775 - 44%
1998   335,751 -  191,586 - 43%
1997   343,677 -  190,711 - 45%
1996   341,560 -  192,114 - 44%
1995   338,934 -  191,081 - 44%
1994   338,367 -  188,352 - 44%
1993   333,570 -  186,146 - 44%

The near twenty year trend is clear - the profit in retailing power in this province has been steadily dropping, yet it still comes in at 35% before other expenses. Also, the cost of power to Newfoundland Power more than doubled in the last twenty years, but its profit margin decreased just 9%. This is the key factor.

In Part One of this series, Muskrat Falls Math - Into the Abyss, I outlined several scenarios likely with the construction of the proposed dam. In Newfoundland and Labrador, Newfoundland Power's cut has to be factored into the equation.

Given the current rate of power sold to Newfoundland Power on a wholesale basis is about 4.7 cents per kwh, the following scenarios are very real scenarios for us:

1.  Current arrangements remain in place, and the dam produces only 510 MW as stated by Nalcor VP Gilbert Bennett capacity of Muskrat Falls is realized, the blended price Nalcor would have to wholesale the power at, to break even, is 13 cents per kwh. That is a 276 % increase in the wholesale price from today. Then there is Newfoundland Power's retail cut. Based on the historic percentages outlined above, Newfoundland Power's hike up could be as high as 35%. If that scenario were realized the cost to the average home for power would be 16.9 cents - with HST 19.09 cents. From the current rate of 10.4 cents, that is almost a 100% increase.

2.  Combined lawsuits by myself, and Hydro-Quebec, render the Water Management Agreement unconstitutional. The maximum production of the project is 110 MW. In this scenario the base rate for wholesale of power rises to 15 cents per kwh - which represents a 300% increase in the current base rate. Add in a 35% hike up from Newfoundland Power and the new rate for rate payers would be 20.25 cents per kwh - with HST 22.93 per kwh. That represents a 125% increase.

When you consider that only 30% of Newfoundlanders and Labradorians pay any income tax (an indication of poverty within the province), the aging population of the province, and the loss of competitive advantage for industry, this spells economic disaster. Elderly people and low income earners can expect to pay twice as much for a bill that does not increase the quality of their lives. No extra economic spin off will result in benefits for businesses or their employees - other than the three year build period at Muskrat Falls. In fact, according to the Newfoundland and Labrador government, only 80 permanent jobs will be left created once Muskrat Falls is complete.All we will have done, as has been done with the economy (particularly in St. John's area) is create hyper inflationary pressures that can not be sustained given the debt and demographics of the province. In other words, the party will be over and the bill will be massive.


Saturday, November 9, 2013

Muskrat Falls Math - into the Abyss

I have yet to read an article that attempts to tackle the complete Muskrat Falls "integrated business case", including especially the costs and returns it is designed to provide. So it's time to tackle that head on.

This week VP Gilbert Bennett, Nalcor stated the average production for Muskrat Falls is estimated at 510 megawatts (MW). That should be a big wake up call for people. Up until now Nalcor and the government had been holding fast to the full production capacity of the planned dam - 824 MW. That represents a 38% decrease in expected production from the Muskrat Falls facility. Ordinarily that would kill a project immediately, but the government has other plans. I'll get to that in a bit, but first the actual production costs compared to the returns for our treasury.

Back a year ago our now departed Minister of Natural Resources, Jerome Kennedy, stated in the House of Assembly that the cost of power produced at Muskrat Falls would be $.25 a kilowatt hour (kwh). That was based on production of 824 MW. That was to break even, and before costs associated with transmitting to Nova Scotia were factored in, and without cost over runs. 824 MW of power equals 4.9 terawatt hours, or 4.9 million megawatt hours of energy per year, or 4.9 billion kilowatt hours - for the purposes of this article we will stick with kwh.

So, if Muskrat Falls could produce full power, full time, it would produce 4.9 billion kwh at an annual cost of $1.225 billion - to break even (remember that number). That is to Soldiers Pond. As the energy converts from DC lines to AC lines, travels under the Gulf, and does that process again, it loses about 5% (conservatively) of it's energy on each end. Then there are the transmission fees Nalcor has to pay to Emera to send power across the sub sea line, etc. I'm not even going to factor that in to keep things semi-clean.

So, the annual budget necessary to run Muskrat Falls at a break even point is $1.225 billion. That doesn't change now that the average production, according to Bennett would be 510 MW per year. What it does mean is the cost per kwh goes from $.25 per kwh to $.40 per kwh. That is bad. Very bad. Now that $.40 per kwh has to be blended into Nalcor's already existing energy production (Churchill Falls is not included - explanation later) of 1850 MW or 11 billion kwh. Right now rates differ depending on where you live in the province and whether or not you are business or residential. Based on stated gross electricity sales of $520.7 million for 2012, the average price per kwh for power is 4.7 cents per kwh ($100 million of that $520.7 million is heavily subsidized Labrador and Industrial customers). 

Blending the current rate with the Muskrat Falls rate puts the new average rate at 13 cents per kwh or 300% higher than the current average rate. Of course that number includes industrial and Labrador clients.

Here is the hitch. All the numbers above are based on the Water Management Agreement being legal/constitutional. Without the Water Management Agreement, Nalcor stated in pre-filed evidence with the PUB, that Muskrat Falls could only run at 20% capacity. This issue is before the Court in Quebec - it will be heard on January 20, 2014. It is also before the Court here with yours truly. What happens if/when the obvious happens and the Water Management Agreement is thrown out?

Well, it changes the numbers radically. That takes the average production at Muskrat Falls down to a mind blowing 102 MW - or 607,142,857 kwh. To put that number into focus, the average price per kwh for Muskrat Falls energy would have to be $2.02 per kwh - by far the most expensive power on the planet by a landslide. In 2012 Nalcor generated that $520.7 million in revenue on 1850 MW. Now it's looking to generate an additional 102 - 510 MW for $1.225 billion a year. The math is pretty clear.

Of course Nalcor is, according to the Premier and Gilbert Bennett, planning on taking 1500 MW a year from the Upper Churchill starting in 2016. Seems they have been taking additional power from the Upper Churchill since June 2012 according to Hydro-Quebec (which is apparently why they filed suit). If that plan was actually legal the additional revenue, based on an average of 6 cents per kwh (the average spot price for 2012) would give Nalcor an extra $534,600,000.00. The Government and Nalcor have been spinning the line that Muskrat Falls will make $400 million in revenue. Seems they are depending on taking that "extra" power from Hydro-Quebec. Like I said, if it was legal then it would be great. It just isn't though. Even Nalcor own 2012 Financial Report states all the power, but recall, "generated at the Upper Churchill" belongs to Hydro-Quebec.

Just one last thing. If Muskrat Falls is projected to generate 510 MW Nova Scotia wants about 300 MW of that power at spot market prices, plus the 25% of generation it gets for free. My math has that total commitment to Emera being 427.5 MW for a blended price to them of 4 cents per kwh - about the same price they have promised to Labrador mining companies. Obviously, the government is not building a dam to give all but 82.5 MW to Nova Scotia. They need that Water Management Agreement to take that additional power from Hydro-Quebec or their deal with Emera is finished. All the economics, and therefore the project, rely on the Water Management Agreement. Bad as Muskrat Falls is for the taxpayer/ratepayers of Newfoundland and Labrador, the death of the Water Management Agreement is a step into the abyss if we continue to build...

Wednesday, November 6, 2013

Harper, a Caligula for our time.

In normal times I would not write this story, but these aren't normal times. I looked forward to seeing the eyes of the people, through the media, being firmly focused on the scandal enveloping the Prime Minister, his office and the Senate. Yet it was  not to be. Instead, Toronto's Mayor Rob Ford pulled his Samurai sword out and threw himself upon it in front of the blood thirsty Toronto media.

Ford, a personal and political friend of the Prime Minister decided, that of all days, to admit to having tried crack cocaine, by stopping himself in front of the media at his office and asking them to ask him a question that was asked over a year ago: "Did you smoke crack?". That drew the attention of the national and international media for the day, including a dramatic press conference right before the Senate was to have its historic vote which was just a repeat of his earlier performance. Mission accomplished - the night of the long knives in the Senate drew barely a glance.

The fact is Prime Minister Harper, the Caligula of our times, had his guard politically execute three Senators. Senators Duffy, Wallin, and Brazeau. The Canadian public had watched this drama take place in record numbers, with about 88% engagement - a record in recent times. The central issue to Senators fighting the Prime Minister's plans was due process - were these Senators being given fair judgement before being suspended. The issue of due process struck home with Canadians as they railed against yet another arbitrary decision of their Prime Minister. After Duffy's revelations of a political conspiracy and cover up, backed by an extensive email and paperwork trail, confirmed for many their thoughts of Prime Minister Harper - he is dishonest.

The three Senators claimed they followed the rules. They produced emails from senior officials authorizing their expenses, and charged the Prime Minister with getting rid of them for to garner political favour with the Conservative Party base.

The Prime Minister, and the Conservative Party, claimed these Senators "broke the rules", were caught by the auditors, and deserved a two year suspension without pay, benefits or use of the Senate facilities and staff. The common spin being if you or I did this in our work place we would be treated no differently - at a minimum.

All these arguments aside, and they can be put aside, the one most relevant guideline that was completely ignored by Harper, the Conservative Party, the Press, and even the Senators is such a move is unconstitutional. The role of the Senate, and the guidelines for all things Senate, is the British North America Act (BNA) of 1867 - our original constitution. It was consolidated with our official constitution in 1982 - The Constitution Act. The BNA makes no provision for suspending a Senator. It does have a very specific set of criteria to fire a Senator:
Disqualification of Senators31.The Place of a Senator shall become vacant in any of the following Cases:
(1)If for Two consecutive Sessions of the Parliament he fails to give his Attendance in the Senate:
(2)If he takes an Oath or makes a Declaration or Acknowledgment of Allegiance, Obedience, or Adherence to a Foreign Power, or does an Act whereby he becomes a Subject or Citizen, or entitled to the Rights or Privileges of a Subject or Citizen, of a Foreign Power:
(3)If he is adjudged Bankrupt or Insolvent, or applies for the Benefit of any Law relating to Insolvent Debtors, or becomes a public Defaulter:
(4)If he is attainted of Treason or convicted of Felony or of any infamous Crime:
(5)If he ceases to be qualified in respect of Property or of Residence; provided, that a Senator shall not be deemed to have ceased to be qualified in respect of Residence by reason only of his residing at the Seat of the Government of Canada while holding an Office under that Government requiring his Presence there.


Not one of these criteria were met. There is the suggestion that these Senators did not reside in their province, but no finding was made to that effect by the Senate or the Courts. Even if they were found not to be residing in their province the sentence is to expelled from the Senate permanently, with a replacement to be chosen. That is a very important fact. The constitution requires that each province in confederation be represented by a specific number of Senators. It states these Senators must be "in" the Senate, and they must "represent" their province. Specifically, from the BNA Act:

Representation of Provinces in Senate22.In relation to the Constitution of the Senate Canada shall be deemed to consist of Four Divisions:
3.The Maritime Provinces, Nova Scotia and New Brunswick, and Prince Edward Island;
4.The Western Provinces of Manitoba, British Columbia, Saskatchewan, and Alberta;
which Four Divisions shall (subject to the Provisions of this Act) be equally represented in the Senate as follows: Ontario by twenty-four senators; Quebec by twenty-four senators; the Maritime Provinces and Prince Edward Island by twenty-four senators, ten thereof representing Nova Scotia, ten thereof representing New Brunswick, and four thereof representing Prince Edward Island; the Western Provinces by twenty-four senators, six thereof representing Manitoba, six thereof representing British Columbia, six thereof representing Saskatchewan, and six thereof representing Alberta; Newfoundland shall be entitled to be represented in the Senate by six members; the Yukon Territory and the Northwest Territories shall be entitled to be represented in the Senate by one member each.
In the Case of Quebec each of the Twenty-four Senators representing that Province shall be appointed for One of the Twenty-four Electoral Divisions of Lower Canada specified in Schedule A. to Chapter One of the Consolidated Statutes of Canada.

The Senate is in fact, constitutionally, not a "star chamber" of sober second thought. Constitutionally it is described to be a weighted, appointed body that's focus is to represent provincial interests against an otherwise elected House of Commons. The rise of provincial governments in that role has practically diminished that role for the Senate, but on paper that remains its purpose. The bottom line is, the provinces of Quebec, PEI and Saskatchewan are without the constitutionally required number of Senators to represent them for two years. That is unconstitutional. That is improper.

Stephen Harper, the prodigy of Preston Manning, and co-founder of the western based Reform Party of old, has become the ultimate dictator. Instead of changing Ottawa for the better, he has simply used his office as a tool to impose his will. He has abused his power, his authority, and his office. He has shown his ruthlessness, and at the same time exposed to us all that the foundations of our country are but a mere inconvenience to him. It does not make him a strong leader with a vision. It makes him the Caligula of our times here in Canada, and it needs to change immediately.