09/15/2011 08:48 EDT | Updated 01/12/2012 02:11 EST

Muskrat Falls is cheapest energy supply option for Newfoundland: study

ST. JOHN'S, N.L. - A consultant's report released on the eve of a provincial election campaign endorses the proposed $6.2-billion Muskrat Falls hydroelectric project as the cheapest power option for Newfoundland and Labrador.

Nalcor Energy, the province's Crown-owned utility, released the $250,000 review Thursday that it commissioned from global energy analyst Navigant Consulting.

The report is glowing compared to a federal-provincial environmental review released last month. After public hearings that included submissions for and against Muskrat Falls, the joint panel found Nalcor had not adequately shown that the project is needed or viable. It recommended more discussion on alternatives.

A provincial campaign for a fixed-date election on Oct. 11 is expected to start by Monday.

Muskrat Falls has been a prime target for opposition critics who say it's a rushed response by the Progressive Conservative government to unproven energy demands. They also say the megaproject will hike electricity bills in the short term.

Navigant concludes the project would be a reliable, secure source of energy that would significantly reduce greenhouse gas emissions.

At present energy values, it also finds that linking Newfoundland to the mainland power grid with subsea cables -- as proposed in the Muskrat Falls project -- would save customers about $2.2 billion through 2067 compared to power options that would see the island remain isolated.

Muskrat Falls would also gradually decrease average wholesale electricity rates for the province, says the review.

"I'm delighted to have it, and delighted to have it before we go to an election," Premier Kathy Dunderdale said Thursday in an interview.

"But I'm not just satisfied with the Navigant report."

The government has also asked the provincial utilities regulator for an independent assessment to be done by Manitoba Hydro International. Those results are expected next spring.

"We actually don't look at it as good or bad," Nalcor CEO Ed Martin said of the Navigant report.

"It's part of our process. We've been clear from the outset that as we move through the process of making a decision, we have particular gates we stop at and do a check."

Liberal Leader Kevin Aylward and NDP Leader Lorraine Michael say the Navigant study, based on Nalcor's own data, can't be called an independent review.

"The report is dealing with information that was given to them from Nalcor," Michael said.

"They've worked totally within the framework of Nalcor's own work, and from that perspective then it seems to me that in and of itself it has to be inadequate."

The opposition leaders say they would both halt spending on Muskrat Falls contracts until an independent comparison is done.

Martin said the joint environmental panel recommended that Nalcor get a "reputable consultant to come in and take a look.

"That's what we've done."

Martin said Nalcor gave Navigant full access to its own analysis of the project.

"And they had the opportunity to sit with us constantly, push us constantly, check all of our data, look at our numbers, get into our process and analyses, until they ... felt they had all the information they needed to make their recommendations."

Nalcor has extensively reviewed other power alternatives but stands by its finding that Muskrat Falls, with a link to the island to meet the province's future energy needs, is the best option, Martin stressed.

Nalcor is adamant that the megaproject is needed because the fast-developing province will face an energy crunch as early 2015 -- another assertion that opposition critics and the joint review panel say has yet to be proven.

Martin has also said that Nalcor will continue to pursue access to transmission rights through Quebec, although testy negotiations with that province have so far been fruitless. Quebec has also pointedly raised its objections to Ottawa's willingness to back a loan guarantee that could shave hundreds of millions of dollars off interest costs for Muskrat Falls.

Dunderdale scoffed at opposition calls for a full independent assessment of other energy options.

"Alternatives are examined in the report," she said. "And the conclusions drawn are that Nalcor's analysis was correct and that Muskrat Falls is the best alternative and the least cost alternative."

The megaproject was announced suddenly last November just before former Tory premier Danny Williams retired from politics.

Under conditions of a term sheet, Nalcor would spend $2.9 billion to build a power generating facility at Muskrat Falls capable of producing 824 megawatts of electricity.

A further $2.1 billion would be spent to build a transmission link from Labrador to Newfoundland, $600 million of which would be provided by Nova Scotia-based private utility Emera (TSX:EMA).

Emera would also fund a 180-kilometre subsea link between Cape Ray, N.L., to Lingan, N.S., at a cost of $1.2 billion.

Under the agreement, Nova Scotia would get 170 megawatts of energy a year -- about 10 per cent of the province's total energy needs -- for 35 years.