Volume 4 – Looking Forward
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Muskrat Falls: A Misguided Project Commission of Inquiry Respecting the Muskrat Falls Project Volume 1: Executive Summary, Key Findings and Recommendations Volume 2: Pre-Sanction Events Volume 3: Post-Sanction Events The Honourable Richard D. LeBlanc Volume 4: Looking Forward Commissioner Volume 5: Appendices March 5, 2020 Volume 6: Exhibit Listing COMMISSION OF INQUIRY RESPECTING THE MUSKRAT FALLS PROJECT MUSKRAT FALLS: A MISGUIDED PROJECT VOLUME 4: LOOKING FORWARD The Honourable Richard D. LeBlanc, Commissioner Submitted to: The Honourable Siobhan Coady Minister of Natural Resources for the Province of Newfoundland and Labrador March 5, 2020 WWW.MUSKRATFALLSINQUIRY.CA About This Report This Report quotes heavily from testimony and exhibits presented at or to the Commission during the activities of its inquiry. Documentary evidence was catalogued and made available to the public on the Commission’s website. When cited in this Report, these public exhibits are referred to by their individual number (for example, P-00001). Similarly, testimony given by witnesses during the public hearings was transcribed and made publicly available at muskratfallsinquiry.ca. Quotes from testimony are cited with a date and transcript page number. Because both types of citations are so numerous in this Report, smaller type was used to reduce their intrusion in the text. No changes to spelling or punctuation were made in any quoted material. The minimal additions to quotes that were made (for clarity) were inserted [like this]. It should also be noted that, unless otherwise indicated, all monetary figures are in Canadian dollars. As will be explained in more detail in the text, the “Muskrat Falls Project” and “the Project” both refer to the tri-part development that includes the infrastructure and generating station at Muskrat Falls, the Labrador-Island Link and the Labrador Transmission Assets. For the convenience of the reader, a Glossary of terms, a list of Acronyms and a list of Names and Affiliations has been included in each of the first four volumes of the Report. This Report is in six volumes. © Queen’s Printer for Newfoundland and Labrador, 2020 ISBN 978-1-55146-709-2 Table of Contents TABLE OF CONTENTS VOLUME 1: EXECUTIVE SUMMARY, KEY FINDINGS AND RECOMMENDATIONS VOLUME 2: PRE-SANCTION EVENTS VOLUME 3: POST-SANCTION EVENTS VOLUME 4: LOOKING FORWARD CHAPTER 27: LOOKING FORWARD ........................................................................................... 1 2041: Expectations and Planning ....................................................................................................... 1 CHAPTER 28: NALCOR – A CROWN CORPORATION ................................................................... 7 Corporate Objectives and Purpose ................................................................................................. 11 The Appointment of Board Members ............................................................................................ 14 Board Functioning and Independence .......................................................................................... 17 Board Committees ................................................................................................................................. 20 The Relationship of the Board and the CEO................................................................................ 21 Communications with Government ................................................................................................ 23 The Role of Crown Corporations and Related Matters ........................................................... 24 The Number and Compensation of Board Members .............................................................. 25 Recommendations ................................................................................................................................. 29 CHAPTER 29: THE ROLE OF THE PUBLIC SERVICE AND THE DUTY TO DOCUMENT ........................ 31 Providing Advice ..................................................................................................................................... 31 The Duty to Document ........................................................................................................................ 37 CHAPTER 30: ELECTRICITY REGULATION ................................................................................. 45 The Mandate of the PUB ..................................................................................................................... 46 Performance-Based Regulation ........................................................................................................ 47 Integrated Resource Planning ........................................................................................................... 48 Exporting Power ...................................................................................................................................... 49 Volume 4 Page i Table of Contents Major Projects and the PUB ............................................................................................................... 49 Energy/Environmental Policy ............................................................................................................. 50 Power Advisory’s Recommendations ............................................................................................. 51 Final Thoughts on Electricity Regulation and the Energy Plan ............................................ 52 CHAPTER 31: FINANCIAL IMPACTS – RATEPAYERS AND TAXPAYERS .......................................... 53 Residential Customers .......................................................................................................................... 57 Industrial Customers ............................................................................................................................. 59 Commercial/Institutional Customers .............................................................................................. 59 Population and Demographics ......................................................................................................... 60 A Consideration of GNL’s Four Policy Options .......................................................................... 61 CHAPTER 32: MANAGING LARGE PUBLICLY FUNDED PROJECTS ................................................ 77 Foundations for Reliable Estimates and Execution: Professor Bent Flyvbjerg ............... 77 Complexity, Risk and Leadership: Professor George Jergeas ............................................... 80 Comparing Governance Frameworks: Professor Ole Jonny Klakegg ................................ 81 Conclusions ............................................................................................................................................... 87 CHAPTER 33: CLOSING REMARKS ........................................................................................... 89 ACKNOWLEDGEMENTS .......................................................................................................... 91 GLOSSARY ........................................................................................................................... 95 ACRONYMS ........................................................................................................................ 103 NAMES AND AFFILIATIONS .................................................................................................. 107 VOLUME 5: APPENDICES VOLUME 6: EXHIBIT LISTING Page ii Commission of Inquiry Respecting the Muskrat Falls Project List of Figures LIST OF FIGURES Figure 4.1: Nalcor Skills and Experience Matrix ................................................................................ 15 Figure 4.2: Electricity Distribution on the Island of Newfoundland ......................................... 57 Volume 4 Page iii Intentionally Left Blank Page iv Commission of Inquiry Respecting the Muskrat Falls Project Chapter 27 CHAPTER 27: LOOKING FORWARD Having set out in the previous two volumes the history and development of the Muskrat Falls Project as it was revealed during the work of the Commission, I find it appropriate to complete this Report by focusing on the future. These chapters consider the lessons to be learned and discuss some consequences—real and potential—of the Project. In Phase 3 of the hearings, the Commission heard evidence on these topics, which require some discussion. This evidence is also considered in the recommendations I have proposed. 2041: EXPECTATIONS AND PLANNING When it comes to electrical power, the importance of 2041 looms large in the province of Newfoundland and Labrador’s future. Under the 1969 Upper Churchill Contract, Churchill Falls (Labrador) Corporation committed to selling Hydro-Québec the vast majority of the power from the 5,428 megawatt Churchill Falls generating station at extremely low prices and for 70 years after first power in 1971. That contract, with its exceedingly favourable returns for Hydro-Québec, will expire in 2041. I have previously expressed my concern that when Nalcor was considering the viable options for supplying electricity to Island ratepayers, the potential availability of electricity from the Churchill Falls facility in 2041 was not given adequate consideration. As has been seen, over time the terms of the Upper Churchill Contract have resulted in considerable resentment towards Québec within this province. It seems clear that this resentment