ST. JOHN'S, N.L. -- The cost of building the Muskrat Falls hydroelectric project in Labrador has risen by nearly $800 million for Nalcor Energy with the price tag now forecast at just under $7 billion.
Despite the higher capital cost of the project, Nalcor president Ed Martin defended the project on Thursday.
"The Muskrat Falls project continues to be the right decision for long-term energy supply for Newfoundland and Labrador and will deliver significant long-term value to the people of the province," he said in a news release.
The Crown-owned company is blaming the increase on higher construction costs because of competition in the industry, and additional spending to improve the system's reliability and operation.
The joint project with Nova Scotia utility Emera (TSX:EMA) would bring power from Muskrat Falls to the island of Newfoundland and on to Nova Scotia through a complex system of overland transmission and subsea cables.
Nalcor's share of the project was $6.2 billion, but is now estimated at $6.99 billion.
Nalcor says based on the new cost figures, electricity rates are expected to increase by about seven per cent to the average homeowner on the island of Newfoundland who uses electric heat. When Muskrat Falls comes into service, it says that means an average electricity bill will increase by $8 per month over Nalcor's projection when the project was first approved.
The total cost estimate for the project now stands at about $8.5 billion, with Emera spending $1.5 billion on the subsea cable -- known as the Maritime Link -- that will be used to transmit electricity from the dam under construction in central Labrador.
Construction has already started on the 170-kilometre cable that links Cape Breton with southwestern Newfoundland. Emera said as recently as April that the Maritime Link was on budget and on time.
Martin said over the life of Muskrat Falls, it will bring in more than $30 billion in revenue.
"This will provide a substantial benefit for all Newfoundlanders and Labradorians," Martin said. "The decisions to invest in additional reliability and productivity measures will help ensure this important asset will provide long-term value to the province well into the future."
Martin has previously said the goal of providing power from the project by 2017 could also be delayed.
Construction on Muskrat Falls began in 2013 and Nalcor says the engineering and design of the project is more than 98 per cent complete.
More than 1,800 people are working on the project, with Nalcor saying employment is expected to peak at 3,300 jobs next year.
It says all major contracts for the project are expected to be awarded by the end of this year.
