One of the bond rating agencies doesn’t see government’s rate mitigation plan as a solution for the first few years of Muskrat Falls when power rates are projected to soar.
The premier says their plan will confine rates to no more than 13.5 cents KWH whereas the P.U.B. saw them rising by about 75 per cent within a couple of years.
Michael Yake, a vice-president of Moody’s Investor Service, says until Newfoundland and Labrador provides details on rate mitigation factors, they will continue to see risk that may lead to putting more money into Nalcor directly or subsidizing electricity rates outright.
He doesn’t see anything in the plan which prevents rates from rising to that 23 cents projected by the P.U.B..
Plan Lowers Province’s Long-term Returns on Muskrat Falls
As well, they aren’t convinced there will be enough money for Nalcor to manage the operation.
Yake says the announcement to defer sinking fund payments and cost overrun escrow accounts payments lowers the necessary long-term return on Muskrat Falls’ operations.
Until the province provides details on rate mitigation factors, he says they may need to support Nalcor directly or subsidize electricity consumers to achieve its rate control numbers of 13.5 cents/kWh.
Back in July, Moody’s lowered Newfoundland and Labrador’s credit rating, but improved the economic outlook from negative to stable.
At the time, Moody’s believed there was too much risk around government’s rate mitigation plan to align with the province’s previous credit rating due to unproven and untested plans.