TORONTO, Jan. 11, 2012 /CNW/ - Newfoundland should hold off on plans to
develop a power project on the Lower Churchill River in Labrador,
according to a report released today by the C.D. Howe Institute. In
"Newfoundland's Electricity Options: Making the Right Choice Requires
an Efficient Pricing Regime," Memorial University economist James P.
Feehan says the province should first reform electricity prices to
better reflect costs and reduce consumption.
The Government of Newfoundland and Labrador, notes the author, is
assessing whether to authorize the multi-billion dollar Muskrat Falls
hydroelectricity project on the lower Churchill River. Proponents, who
include the provincial Crown electricity corporation, favor immediately
developing the Muskrat Falls site and bringing its electricity to the
island and the Maritime Provinces.
A better first step, says Professor Feehan, would be to reform
provincial regulations that set artificially low prices for electricity
and support excessive power consumption, which is a problem in
Newfoundland as it is in other provinces. Changing regulatory regimes
so that the price of electricity reflects underlying costs would make
economic sense and promote energy conservation, says the author,
lessening the need for the expensive electricity produced by the
Holyrood oil-fired plant, which currently supplements existing
on-island hydro-electric generation.
Newfoundland should proceed with a second investment strategy that would
involve adding a mix of new capacity, as needed, including new wind and
small on-island hydro facilities. "Proceeding now with Muskrat Falls is
premature at best," concludes Feehan, "Instead, the Newfoundland
government should reform its pricing regime and then reconsider the
For the study go to: http://www.cdhowe.org/pdf/ebrief_129.pdf
SOURCE C.D. Howe Institute
For further information:
Professor of Economics,
Vice president Research,
C.D. Howe Institute.