After decades of friction, Quebec and Newfoundland and Labrador have reached a new tentative deal over the long-standing issue of energy.
Quebec Premier François Legault met with his Newfoundland and Labrador counterpart Andrew Furey in St. John’s on Thursday for the announcement of an agreement in principle involving the Churchill Falls hydroelectricity plant in Labrador.
The provinces announced a new arrangement that will see Quebec pay 30 times more for power from the Churchill Falls plant. Officials in Newfoundland and Labrador say that increase will net the province $1 billion a year until 2041, which is when the current contract was set to expire.
Hydro-Québec described the preliminary deal as “non-binding and will serve to guide future discussions” in a statement, adding both provinces will benefit from it.
Under the new tentative agreement, Hydro-Québec says Quebec will not only continue to have access to Churchill Falls — but a new generation station at the site and a new facility at Gull Island will also be built. Hydro-Québec will pay $3.5 billion for the right to co-develop the new installations alongside Newfoundland and Labrador Hydro and will assume much of the financial risk.
The original contract, signed in 1969, heavily favours Quebec. At the time, the province assumed most of the financial risk of building the dam in exchange for the right to buy power at a fixed price.
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That agreement allows Hydro-Québec to buy 85 per cent of the electricity generated at the Churchill Falls station for 0.2 cents per kilowatt hour until 2041. The other 15 per cent is used to serve Labrador customers or is sold to export markets.
The decades-long arrangement has allowed Quebec to reap most of the benefits and has become a source of strife between the two provinces. It also sparked a legal challenge, but the Supreme Court of Canada sided with Hydro-Québec in 2018.
Furey has said the fixed price means Quebec buys “essentially free” energy while Legault admitted last year it was a “bad deal.”
Hydro-Québec says the new potential deal means the cost for power from the existing Churchill Falls plant will increase to four cents per kilowatt hour. It will buy hydroelectricity from future developments at an average of 11 cents.
Between the existing and new sites, Hydro-Québec says it will pay an average of six cents per kilowatt hour for the electricity it receives from Newfoundland and Labrador.
The plan means Newfoundland and Labrador will generate more revenue while allowing Quebec “to access 7,200 megawatts for the next 50 years at a lower price than any other renewable option in North America,” according to Hydro-Québec.
“Over the coming months, the signatories will engage with Indigenous communities and continue their analyses with a view to reaching a definitive agreement,” the provincially-owned corporation said in a statement.
Furey and Legault announced last year they had assembled teams to explore how the Churchill Falls deal could be changed and to talk about future projects.
— with files from Global’s Tim Sargent, Brayden Jagger Haines and The Canadian Press
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