Budget 2021: Nalcor to be reviewed, but Liberals will not commit to eliminating it

The future of the Crown corporation behind the controversial Muskrat Falls hydroelectric project is under review, the Newfoundland and Labrador government announced Monday.

But Energy Minister Andrew Parsons stopped short of saying whether Nalcor Energy will be eliminated, which was a recommendation of the Greeneeconomic recovery report released earlier this month.

"Now is the perfect time to look at the future of Nalcor," Parsons told reporters Monday before the Liberal government released its budget for the2021-22 fiscal year, which revealed a dire financial situation that was partly offset byhigher than expected oil royalties, and increased transfers from the federal government.

When asked why the he could notsay whether Nalcor would be shut down and its operations merged with its subsidiary Newfoundland and Labrador Hydro, Parsons said "there's a lot of things I would love to say," but cited "contractual arrangements" and legal complications for his cautious tone.

The government is promising an "analysis and reorganization" of Nalcor in order to "streamline, remove duplication and save money."

It's the latest scrutiny for a controversial Crown corporation that was heavily criticized duringa public inquiry into the Muskrat Falls project. Commissioner Justice Richard LeBlanc finding that some Nalcor leaders took "unprincipled steps" to get the project sanctioned.

Nalcor created for broader energy mandate

Nalcor's review is part of a larger transformation announced in the budget that also includes the merging of two other agencies theCentre for Health Information and the 911 emergency calling service into core government.

The Newfoundland and Labrador English School District will also be integrated into the Department of Education, though no formal timeline was revealed.

Nalcor was created in 2007, during the government of then premier Danny Williams, with an objective of managingand developing the province's hydroelectric and oil and gas resources.

The corporation has an estimated 1,600 employees, and spearheaded the development of the Lower Churchill Project, which includes the power generating station at Muskrat Falls, and a transmission line from Labrador to Newfoundland's Avalon Peninsula.

The project was sanctioned in 2012 at an all-in cost of $7.4 billion, but the price tag has ballooned to more than $13 billion, and threatens to double electricity costs when it is commissioned later this year.

Nalcor also has ownership stakes in some offshore oil projects, including Hebron and the Hibernia South Extension.

Salaries at Nalcor have been a source of irritation for government leaders trying to deal with a financial crisis, with Parsons ordering Nalcor earlier this year to end the practice of paying bonuses to employees.

And current and past finance ministers have raised concerns about compensation rates for employees of agencies, boards and commissions that are higher than those working for government departments.

Muskrat Falls remains a 'huge issue'

Earlier this month, the premier's economic recovery team, chaired by Moya Greene, released a report called The Big Reset, which recommended Nalcor's elimination.

Now, with Muskrat Falls just months away from completion, Parsons said a review is timely.

"It's a huge issue," Parsons said of Muskrat Falls, which was labelled a boondoggle by Stan Marshall when he took over as Nalcor CEO in 2016.

Once Muskrat is commissioned, the provincial government will have to find some $600 million annually to prevent electricity rates from soaring from 13.5 cents to 24 cents per kilowatt hour. Negotiations with the federal government over a strategy to prevent that from happening has been ongoing for months.

Like Parsons, Finance Minister Siobhan Coady was also evasive when asked whether Nalcor will exist in 12 to 18 months.

"We're going to be looking at how we ensure we have the best means and mechanism for developing our energy services in the province," she said.

But even before any decision, big changes are occurring at Nalcor, with Marshall set to vacate the CEO's position in mid-June, and several other top executives have also left, or are about to leave.

With the Muskrat Falls project close to collapse, and costs spiralling out of control, Marshall was hired by former premier Dwight Ball in April 2016 to lead Nalcor and stabilize the project.

As for the hundreds of Nalcor employees, Parsons said the review "is not meant to drive fear into them."

Parsons and other government officials were careful Monday to avoid any talk of large-scale layoffs.

"We will need to hold onto people," said Parsons.

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