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Ed Hollett @edhollett
, 10 tweets, 4 min read Read on Twitter
Just because there's no magical solution to the Muskrat Falls problem doesn't mean there isn't a solution. There is just one that isn't simple. There are at least 3 problems, actually, but let's talk about the rates one for a bit. 1/ #nlpoli
Dwight Ball is right: it is a debt problem. The question is how we pay for the debt. Until now the scheme was to pay through electricity rates over a long time, and with deferred payments of the principle to lower front end rates. Never a good plan. 2/ #nlpoli
Step 1: Define the problem. If you don;t know what the problem is, then you cannot figure out how to solve it. So break down the types of costs, the amounts for each, and who gets paid, and go from there. 3/ #nlpoli
Keeping it simple here, we have to repay the loans and interest for construction (plus a profit for Nalcor) , government equity, operations and maintenance, a dividend to government, and Emera expects to get their costs plus a profit for the island link. 4/ #nlpoli
Anything here we don't absolutely have to pay? Yep. Dividend, which is a new tax for government. Plus we can repay the government equity through taxes instead of rates. That would drop the amount for rates. There'd be issues but solvable ones. 5/ #nlpoli
Anything we have to pay most likely through rates? Yep. Some or all of the O and M. Upside is that even with the inflated estimate of $109 million, it is less than we currently pay for Holyrood. Pay through rates might be lower cost than Holyrood. 6/ #nlpoli
Since we never really needed MF anyway, there was no reason to pay for MF through rates in the first place. So pay whatever we have left from general revenue of government. We have taken care of about half the amount we started with. 7/ #nlpoli
Step 2: Options. Export sales of electricity will net about 60-70 million based on current rates. Diverting oil equity stakes net revenue will give you another amount. Now the amount is a lot smaller and we haven;t touched rates. 8/ #nlpoli
There are issues in this approach, including lots of talks with the creditors to make sure they are happy. Their main interest is in getting paid. As long as you pay them, they don't care about the rest. 9/ #nlpoli
So there you have both potential answers to the Muskrat problem AND a simple explanation of what it's about. It takes a bit from the Premier, Jim Feehan, and Dave Vardy and adds more detail. Now let's have an informed discussion. 10/10 #nlpoli
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