A new report from the Public Utilities Board says without rate mitigation, average domestic electricity rates will rise by about 75 per cent by 2021—in order to recover the full cost of Muskrat Falls.
Even with aid from Ottawa, it will be an uphill battle to achieve the goals set by the provincial government to keep costs at a manageable level.
The Department of Natural Resources released the PUB’s report on Friday evening. View the full report at this link.
The Public Utilities Board recommends a number of cost-saving and revenue opportunities for government to pursue in order to offset some of the costs of Muskrat Falls.
But—it cautions—if the province sticks to its promise of maintaining power rates at 13.5 cents/kWh or less, the PUB’s recommendations will not be enough to clear a shortfall of about $600-million. Rather, there will still be a gap of $400-million.
When Muskrat Falls was sanctioned in December 2012, the average electricity rate was projected to be 15.1 cents/kWh. By June 2017, that rose to 22.89 cents/kWh—a total increase of about 75 per cent.
Even if all opportunities identified in the review are applied, the PUB estimates that rates will rise over 50 per cent for customers—well above the “rate shock” threshold of 10 per cent—bringing the average domestic rate to 20 cents/kWh in 2021.
Residents will not be alone. While the report did not map out the impact of rising costs on industrial customers, the PUB says it will likely bring local industry from some of the lowest rates across Canada to some of the highest.
Talks with Ottawa Critical
The PUB suggests additional mitigation could come through Muskrat Falls Project financing, and Newfoundland and Labrador’s ongoing talks with the federal government.
It says that an additional $200-million mitigated through a financing agreement would reduce rates to a level between 16 and 17 cents/kWh while still leaving a gap of about $200-million.
Moving forward, the Public Utilities Board says the outcome of the province’s ongoing discussions with the federal government will be critical in establishing its rate mitigation plan.
Potential Rate Increase “Unprecedented”
The PUB cautions that with little time remaining before Muskrat Falls comes online—currently scheduled for the last quarter of 2020—a rate mitigation plan must soon come into effect.
The potential for power rates to almost double, according to the PUB, is without precedent for both this province, and in regulatory practice in Canada.
The report states if that were to happen, it would have “serious negative consequences for residents, businesses and industry.”
When reached for comment on the document, the Premier’s Office says they are reviewing the report and will comment it at a later time.