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Ottawa hands N.L. $5.2 billion for troubled Muskrat Falls hydro project

The Canadian Press
Ottawa hands N.L. $5.2 billion for troubled Muskrat Falls hydro project

ST. JOHN’S, N.L. — Prime Minister Justin Trudeau announced July 28 a $5.2-billion deal to help Newfoundland and Labrador cover the costs of its troubled Muskrat Falls hydroelectric project.

Trudeau’s visit to St. John’s, N.L., comes amid growing speculation that a federal election is on the horizon, and he announced later in the day the province will become the fourth to strike a deal with Ottawa for a $10-a-day child-care program.

Premier Andrew Furey, who joined Trudeau for the hydro announcement, said the federal funding will help Newfoundland and Labrador avoid a spike in electricity rates that had been feared when Muskrat Falls begins generating power this November.

“Muskrat Falls has been the No. 1 issue facing Newfoundlanders and Labradorians now for well over a decade,” Furey said, adding he is regularly asked by people whether their electricity rates are going to double.

“We landed on a deal today that I think – I know – is a big deal for Newfoundland and Labrador and will finally get the muskrat off our back,” he said.

The money will help cover costs set to come due when the Labrador project comes online, preventing rate increases that would have been necessary to pay the bills. Ottawa is giving the province an estimated $3.2 billion from its share in the Hibernia oilfield off the coast of St. John’s, while the remaining $2 billion comes from loan guarantees and a $1-billion investment in the province’s portion of the Labrador-Island Link transmission line.

Trudeau, whose Liberals hold six of the province’s seven electoral ridings, called the agreement “a big step in the right direction” and said the funding “will ensure financial sustainability of the project while protecting people from major electricity increases.”

Electricity rates in the province will rise when the project comes online, to 14.7 cents per kilowatt hour from the current 12.5 cents, but that’s well below the projected 23 cents that officials had said would be needed to cover the project’s costs. Muskrat Falls was commissioned in 2012 at a cost of $7.4 billion, but its price tag has since ballooned to $13.1 billion.

Ottawa previously backed Muskrat Falls with billions of dollars in loan guarantees, and in December, Trudeau announced he had appointed Serge Dupont, former deputy clerk of the Privy Council, to oversee negotiations with the province about financially restructuring the project.

Furey has likened Muskrat Falls to an “anchor around the collective souls” of the province. Its looming impact on provincial finances is set against an already grim financial situation: the province projected an $826-million deficit in its latest budget, coupled with $17.2 billion in net debt.

Trudeau joined Furey later that same day to announce that in 2023, the average cost of regulated child care in the province for children under six would be cut to $10 a day from $25 a day. Trudeau said that within five years, almost 6,000 new daycare spaces would be created.

“As part of the agreement, a new full-day, year-round pre-kindergarten program for four-year-olds will also start rolling out in 2023,” the prime minister told reporters at the College of the North Atlantic. “For parents, this agreement is huge.”

Newfoundland and Labrador is the fourth province, after Prince Edward Island, Nova Scotia and British Columbia, to sign on to the federal government’s child-care program.

 

© 2021 The Canadian Press

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