Quebec to pay 30 times more for power out of N.L. plant after decades-long dispute

Quebec, Newfoundland and Labrador may finally settle a decades-old energy contract that has long been a point of tension between the two provinces.

Newfoundland and Labrador Premier Andrew Furey said the new agreement would "change everything" for the province, as the previous "lopsided" one "threatened to drown the province in debt."

Under the agreement in principle, Quebec will pay 30 times more for power from the Churchill Falls hydroelectricity plant in Labrador and co-develop new installations.

Hydro-Québec has been buying the lion's share of power from the facility for less than 0.2 cents, making substantial profits, since 1969, which Newfoundland said was too little. The cost will now be about six cents/kWh, allowing Newfoundland and Labrador to significantly increase its revenue up to $1 billion per year until 2041, Furey said at a news conference Thursday.

"We are ripping up the 1969 contract," Furey said at a news conference. "I will not allow our province to ever repeat the mistakes of previous megaprojects. Hard lessons were learned from the 1969 contract."

The original agreement was set to expire in 2041 but will now end on Jan. 1. The new agreement renews Quebec's access to the Churchill Falls plant, allowing it to buy electricity at a lower price than any other renewable option in North America, according to Hydro-Québec. It is set to run until 2075.

In comparison, also according to Hydro-Québec, the price of producing energy from gas or coal in North America is between 20 and 26 cents, the price of wind and battery-powered solar energy in Texas is around 14 cents, while the average cost of producing hydroelectricity in Quebec is 4 cents per kWh.

The utilities corporation and Newfoundland and Labrador will upgrade and expand the facilities.

Hydro-Québec will dish out $25 billion to upgrade and expand the Churchill Falls facility and build a new plant at Gull Island — which Furey said remained "undeveloped" for too long — and assume much of the financial risk. A new power station adjacent to the existing Churchill Falls plant is also planned to be built by 2035.

In total, 9,190 megawatts will be generated, 7,200 of which will be purchased by Hydro-Québec and 1,990 by Newfoundland and Labrador Hydro. Quebec Premier François Legault said it's "a win-win" as it assures Quebecers won't have to pay more for hydroelectricity and will contribute to green energy transitions. 

The agreement announced Thursday is non-binding, and more consultations with local Indigenous communities, namely the Innu, as well as further analyses, will be needed to reach a definitive agreement.

"This agreement is an important step towards decarbonizing Quebec and protecting our environment. It is an essential contribution to our collective wealth. This agreement is a win for citizens, a win for the economy and, of course, a win for future generations," said head of Hydro-Québec Michael Sabia in a news release.

'Elegant solution'

Hydro-Québec was looking toward a possible deficit if it couldn't expand its production capacities, according to Mark Purdon, Chair of decarbonization at Université du Québec à Montréal, and there are only so many rivers to dam in the province.

"There's gonna be load shedding in Quebec if we don't have more generating capacity," said Purdon. 

He said he believes Quebec found an "elegant solution" to the problem because the new agreement allows for Hydro-Québec's expansion and settles what he called a historic injustice, all while protecting hydroelectricity rates for residential consumers. 

"Let's hope that the First Nations are more fully incorporated in all the discussions and the benefit sharing from this, and make sure that this project is really done in an environmentally friendly way," he added.

Pierre-Olivier Pineau, professor and Chair in energy sector management at HEC Montreal, agreed with Purdon. 

He said it's important for Quebec, Newfoundland, and Labrador to collaborate in a peaceful and collaborative relationship to be able to build new transmission lines and generative projects.

"Provinces need to do the energy transition in collaboration, so I'm very happy the fight seems to be over," said Pineau. 

"It's a win for Quebec because there's a continued access to electricity for 50 years and it's a win for Newfoundland and Labrador because they'll get a more and a just price starting immediately." 

However, in terms of decarbonizing the economy, Pineau said the only way to do so is by reducing our overall energy consumption. 

With files from The Canadian Press