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More audits for Muskrat Falls project in Labrador after costs rise

ST. JOHN'S, N.L. - Nalcor Energy has agreed to expanded audits of the $8.5-billion Muskrat Falls hydro project in Labrador after a provincial committee recommended more scrutiny.

But the opposition says those efforts to track already escalating spending fall short because the project needs independent oversight.

In its first report released Thursday, the committee led by the clerk of the executive council recommended Crown corporation Nalcor Energy expand assessments done by independent external auditors, which it has agreed to do. The provincial panel is also working with Nalcor Energy's internal auditors.

Premier Tom Marshall said the committee set up last March is an extra oversight layer to assure people the Progressive Conservative government is doing all it can to curb overruns.

"Costs could bloat," he told a news conference. "But I've got confidence in the management team and I've got confidence in the oversight that's put in place that they can anticipate these risks and then take the appropriate action to mitigate those risks."

Marshall again Thursday defended Muskrat Falls as the cheapest way to meet the province's long-term energy needs that will ultimately earn dividends.

Project manager Nalcor Energy said last month that competition for labour helped drive up construction and other costs by almost $800 million. Those extra expenses mean the total estimated price tag for the Muskrat Falls dam and power station on the lower Churchill River is now $8.5 billion.

The joint project with energy company Emera (TSX:EMA) would bring power from Muskrat Falls in Labrador to Newfoundland then Nova Scotia.

The provincial oversight committee is to report again next fall on construction progress and expenses. Its monitoring is on top of regular visits by an independent engineer that reports to the federal government as part of a loan guarantee that cut borrowing costs.

The committee's report says first power from Muskrat Falls is scheduled for December 2017, with full operation later in 2018.

Liberal Opposition member Tom Osborne said a government committee reporting on a government-backed megaproject that has already dwarfed initial budget estimates is cold comfort for ratepayers.

"The premier said today that this is a project that's owned by the people. It's a publicly owned project yet he refuses to allow the Public Utilities Board to provide continuous and ongoing oversight," he said.

"They've got a committee of government officials reporting on a government project and trying to tell the people that this is okay. It's not."

The government all but removed the Board of Commissioners of Public Utilities from Muskrat Falls oversight after it declined in 2012 to endorse the development. The public utilities board said it lacked updated information.

A provincial law passed to help satisfy terms of the federal loan guarantee further diminished the regulator's authority. It gives the public utilities board a role in setting blended power rates but says the regulator will be "directed" by government to incorporate full Muskrat Falls costs.

NDP Leader Lorraine Michael also cast doubt on whether the provincial oversight body will offer credible assurances to ratepayers footing that bill.

"I'm not sure that a government committee, a bureaucratic machine set up by government, is going to do the kind of analysis that I'm looking for.

"I don't see it as an external committee and that's what's really problematic."

Follow @suebailey on Twitter.

The Canadian Press


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