The Trudeau government opened its doors on Wednesday by pumping more than $5 billion into Newfoundland and Labrador to save the province, which has drained its finances over a hydroelectric dam project in Labrador.
With high cost overrun and significant delays, the Muskrat Falls project risked doubling Newfoundlanders’ electric bills from 13 to 23 cents per kilowatt-hour. The agreement will eventually limit this increase to 14.7 cents per kilowatt-hour.
By comparison, Hydro-Quebec residential customers pay 6.16 cents per kWh.
To help the island county, Ottawa will provide $1 billion in loan to the project and $1 billion in investment in a transmission line that will transfer power produced at the plant to New Earth Island.
In addition, $3.2 billion will come from taxes that the federal government would normally have collected on the subsidiary benefits of the Hibernia offshore oil extraction project, up to the end of its useful life.
Prime Minister Justin Trudeau defended the investment, saying the hydroelectric project would help Canada reduce greenhouse gas emissions.
The Prime Minister of Newfoundland and Labrador, Andrew Fury, spoke of a “historic moment”. He said in a statement that the $5.2 billion funding announced today will allow the people of our province to breathe a sigh of relief knowing that electricity bills will not double.
In the past, the federal government had already lent Newfoundland nearly $8 billion to support the power plant project, so that the money invested by the federal government is practically equivalent to today’s estimated $13 billion project cost, an amount that has nearly doubled since its launch.
By comparison, the county’s 2021 budget projects revenue of $8.5 billion in 2021-2022, for a population of about 520,000.
Bloc Québécois strongly criticized the Trudeau government’s decision to seek to save Newfoundland.
“Quebecers do not have to pay for this mess. By launching this project, the Newfoundland government has not even hidden that its goal was to harm Quebec, bypass Quebec territory and compete with Hydro-Quebec in export markets,” the door protested. Party speech on natural resources, Mario Simard.
The latter accused Justin Trudeau of “buying votes in Newfoundland with our money”.
The massive investment didn’t impress the Canadian Taxpayers’ Federation (CFC) either.
“The bailout will not solve all of Newfoundland and Labrador’s problems, and it is imperative that the province reconsider its spending to avoid a second or third bailout,” said Franco Terrazano, Federal Director of the Federal Communications Commission.
He continued, “The rescue plan sets a very bad precedent for politicians spending across the country,” calling for the imposition of a balanced budget law in the provinces.
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