Muskrat Falls imprudent, experts warn

This image shows Muskrat Falls. (QMI AGENCY FILE)

This image shows Muskrat Falls. (QMI AGENCY FILE)

QMI Agency

, Last Updated: 5:54 PM ET

Several experts have slammed the Newfoundland and Labrador government's planned $6.3-billion hydroelectricity project as an unnecessary financial risk that could bury the province in debt.

An economist this week said the "expensive" project would be "unnecessary" if the province altered its electricity pricing system.

What's more, a former justice minister and the former chairman of the province's utilities board called it a "significant risk" in a letter to the provincial daily newspaper.

The project, which aims to generate 824 megawatts of power at Muskrat Falls on the Lower Churchill River in Labrador, is supposed to help the province handle expected increases in energy consumption.


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But a C.D. Howe Institute report by Memorial University of Newfoundland economy professor James Feehan says the government could lower its energy consumption without risking $6.3 billion, some of which will be subsidized by the federal government, much to Quebec's dismay.

"A better first step, however, would be to reform provincial regulations that set artificially low prices for electricity and support excessive power consumption, which is a problem in Newfoundland as it is in other provinces," Feehan wrote. "Changing regulatory regimes so that the price of electricity reflects underlying costs would make economic sense and promote energy conservation. For Newfoundland, such a change could make the expensive Muskrat Falls project unnecessary."

In a letter to the editor published in the Telegram newspaper, former Public Utilities Board (PUB) chairman David Vardy and former deputy minister of justice Ron Penney criticized the province for turning down the PUB's request for an extension on the deadline for its review of the project.

The PUB has argued that Nalcor Energy — the Crown-owned corporation that is leading the hydro mega-project — has been unco-opertaive in handing over information.

"This project exposes us to significant risk," the pair wrote. "Major infrastructure projects like this inevitably cost considerably more than originally estimated so we might well double the debt of the province at a time when it is likely that offshore revenues are in decline and our expenditures are increasing to meet the challenges posed by our changing demographics."

The province has argued it wants the review done by March 31 so it can be debated in the provincial legislature.


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