Just a few days after the report on cost options for the Muskrat Falls Project was released, the Government of Newfoundland and Labrador has announced how it plans to proceed to cover the cost of the project.
Premier Dwight Ball and federal Minister of Natural Resources Seamus O’Regan announced, what they believe, will be a sustainable, long-term solution to protect ratepayers from the negative impacts of the Muskrat Falls Project.
“We committed to protecting ratepayers from the negative impacts of the Muskrat Falls Project,” Ball said. “Working with the Government of Canada, we have extensively analyzed the true financial structure of the Muskrat Falls Project, which was sanctioned by the previous government in 2012. We have identified a long-term solution on behalf of the people of the province.”
Both governments have agreed to undertake a financial restructuring of the projects to ensure that they are financially stable over the long-term and ratepayers are protected. The solution involves transitioning the Muskrat Falls/Labrador Transmission Assets revenue model to a traditional cost of service model, which will ensure that equity returns from Nalcor are redirected to benefit ratepayers. The change to a cost of service model reflects the approach used for regulated utilities throughout North America. A more detailed explanation of the revenue model is included in the backgrounder below.
With the Government of Canada’s involvement, monetizing suitable assets, such as our dividends from the Labrador Island Link, is also required to ensure a sustainable long-term solution. Related discussions are ongoing.
To reduce cash requirements related to servicing the project’s debt, the Government of Canada is allowing a deferral of Sinking Fund and Cost Overrun Escrow Account payments if required.
The formal agreement with both levels of government will be implemented by project commissioning. Residents will be further updated once the specifics have been finalized.