Quebec energy deal touted as new chapter for Newfoundland and Labrador heads for vote

From left to right: Denis Mahoney, Deputy Minister of Justice and Public Safety, Jennifer Williams CEO of NL Hydro and Walter Parson, Vice-President of NL Hydro take questions from the House of Assembly in St. John's, Tuesday, Jan. 7, 2025. THE CANADIAN PRESS/Paul Daly

ST. JOHN'S, N.L. — A draft energy deal with Quebec heralded as a game-changer for indebted Newfoundland and Labrador is heading for a vote Thursday night at the legislature in St. John’s, N.L.

The Liberal government opened the House of Assembly on Monday for four days of debate about the memorandum of understanding unveiled Dec. 12 between Hydro-Quebec and Newfoundland and Labrador Hydro. The agreement promises about $227 billion in revenue to the Newfoundland and Labrador treasury, much of it coming from the new rates Hydro-Quebec will pay for power from the Churchill Falls plant in Labrador.

Ian Gillies was among the dozens of people who tuned into the debates each day through a YouTube stream. The 58-year-old said he’d never watched the legislature before, but the issue was too important to ignore.

“This could be a whole new world for us,” said Gillies, who works in a university library in St. John’s. “My son is 23 years old. He’s in university. He doesn’t want to leave Newfoundland ... I was away for 20 years, and I’m sick and tired of us having to leave the best place in the world to go and work elsewhere.”

The tentative agreement doesn’t just promise new revenue, it promises an end to a bitterness and sense of injustice stemming from a 1969 contract that heavily favoured Quebec. Under the old agreement, Hydro-Quebec purchased about 15 per cent of its energy from the Churchill Falls plant at prices far below market value.

Under the new scenario, Hydro-Quebec will pay about 30 times more for power, netting Newfoundland and Labrador an average of $1 billion a year until 2041, and $4 billion a year after 2056.

Quebec’s provincially owned hydro utility will also pay Newfoundland and Labrador Hydro a $3.5-billion fee for the right to co-develop two more energy projects on the Churchill River. Newfoundland and Labrador Hydro will be the majority owner of these developments, and Hydro-Quebec will absorb any cost overruns.

Newfoundland and Labrador Hydro gets to keep more than one-third of the $3.5-billion fee, whether the projects go ahead or not.

The province’s total budget this year is about $10.4 billion, and the province is carrying a net debt of about $17.7 billion.

“The perceived sense of grievance over the 1969 Churchill Falls development has been profound in Newfoundland and Labrador,” said Sean Cadigan, a professor at Memorial University in St. John’s who studies the history of the province.

He was “flabbergasted” when the two provinces announced they’d worked together to come to a new arrangement, he said in an interview.

Gillies said he was unsure about the deal before he began listening to the debates on Monday. He worried it wouldn’t get enough independent scrutiny. By Thursday morning, he’d changed his mind. He wasn’t alone.

The provincial NDP also threw their support behind the arrangement Thursday. The party’s two members joined the province’s two Independents to say they will vote in favour of the province accepting the tentative deal and negotiating final agreements. The move came after the Liberals announced an independent panel led by the province’s consumer advocate will review the memorandum of understanding and subsequent negotiations.

Firms including JP Morgan and Power Advisory have also provided advice, and their representatives testified on Wednesday.

The Opposition Progressive Conservatives have asked repeatedly for the vote to be delayed until that scrutiny is complete. On Wednesday, Tory Leader Tony Wakeham said they wouldn’t vote if the agreement wasn’t first reviewed. The party occupies 14 of the legislature’s 40 seats.

The Progressive Conservatives have also brought up historical friction with Quebec. On Tuesday, Wakeham held up a map from the Quebec government showing that the boundary between the provinces in Labrador was disputed. Quebec has never recognized the 1927 border ruling by the British Privy Council, which says the southern border of Labrador lies at the 52nd parallel north of the equator.

“Certainly that map is a misrepresentation, we should all be cognizant of that map,” Premier Andrew Furey responded. “But that boundary is final, non-negotiable and it will be forever.”

That night, Wakeham sent out a fundraising email asking, “Is Quebec in the driver’s seat?”

“Did Quebec get the better deal -- again?” it said.

The Progressive Conservatives have also pointed to comments from Hydro-Quebec officials that the tentative deal gives the utility decades of energy at “remarkable” rates.

Compared to the cost of energy from other sources, the rates are indeed cheaper, Furey told reporters on Wednesday. “If it wasn’t a good alternative for them, why would they do a deal with us?”

Jason Chee-Aloy, managing director with the Toronto-based Power Advisory, said the deal is “very good” for Newfoundland and Labrador, and it reflects lessons learned from past wrongs.

Most people in the Canadian energy sector know the hydroelectric history of Newfoundland and Labrador and Quebec, he told reporters on Wednesday. “They understand how complex and how big this deal is,” he said. “They’re very impressed that it actually got to the point of a memorandum of understanding.”

Hydro-Quebec and Newfoundland and Labrador Hydro hope to have final, binding agreements hammered out in 2026.

The Churchill Falls facility has a generating capacity of around 5,400 megawatts and produces about 34 billion kilowatt-hours annually -- roughly enough to power Denmark, according to the U.S. Energy Information Administration.

This report by The Canadian Press was first published Jan. 9, 2025.