Hydropower

NL government finalizes rate mitigation plan for 824 MW Muskrat Falls hydro project

NL government finalizes rate mitigation plan for 824 MW Muskrat Falls hydro project
(Muskrat Falls hydro generating station)

The Honourable Andrew Parsons, KC, Minister of Industry, Energy and Technology, Government of Newfoundland and Labrador, announced finalization of the rate mitigation plan for the 824 MW Muskrat Falls hydro project with Newfoundland and Labrador Hydro (NL Hydro).

In July 2021, the provincial government announced its $5.2 billion rate mitigation deal with the Federal Government. Without rate mitigation, NL Hydro’s rates would have almost doubled (to 23.6 cents per kWh) as a result of the Muskrat Falls project.

This plan, which comes into effect July 1, applies only to island customers paying for the project. The plan will ensure domestic residential rate increases are capped at 2.25% annually for cost recovery associated with Muskrat Falls.

Finalizing rate mitigation provides clarity of NL Hydro’s annual electricity rate increases associated with Muskrat Falls up to and including 2030. With this rate mitigation plan, on an average monthly bill of $300, customers will pay $307 a month in July 2024 compared to $500 a month without the plan.

The Muskrat Falls station, on the Churchill River, is part of the Lower Churchill Project. It was released for service in November 2021. The Muskrat Falls project includes construction of the hydroelectric generating facility that will produce 5 TWh of electricity annually, over 1,600 km of transmission lines across the province, and associated electrical equipment.

The plant was commissioned in November 2021 and the Labrador-Island Link was commissioned in April 2023. Since then, NL Hydro has been paying the Muskrat Falls project costs.

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The total projected investment required from NL Hydro to fund this stage of the rate mitigation plan is over $2 billion, including the financial projections up to and including 2030. This includes retirement of the 2023 deferral account balance of $271 million.

“Our government recognizes that many people are facing challenges and electricity customers continue to be concerned about electricity rates. The rate mitigation plan mitigates costs associated with the Muskrat Falls project and provides certainty around rates related to the project for ratepayers from now up to and including 2030,” Parsons said.

Through normal regulatory process, the PUB may approve additional rate changes resulting from Newfoundland Power general rate applications, rate stabilization, or municipal tax account or other adjustments.

NL Hydro produces electricity and distributes it directly to 24,000 customers on the island, one of which is Newfoundland Power. Newfoundland Power distributes the power it receives from NL Hydro to an additional 275,000 customers on the island.

Originally published in Hydro Review.