Ahead of energy talks, Quebec premier says open to paying N.L. more for electricity

The construction site of the hydroelectric facility at Muskrat Falls, Newfoundland and Labrador is seen on Tuesday, July 14, 2015. (THE CANADIAN PRESS/Andrew Vaughan)

ST. JOHN'S, N.L. -

Quebec Premier Francois Legault says he is ready to make "adjustments" to the Churchill Falls energy agreement between his province and Newfoundland and Labrador ahead of the official end to the contract in 2041.

Speaking to reporters ahead of his two-day trip to St. John's, Legault said Quebec is open to paying more for the electricity generated from Churchill Falls in exchange for a "very advantageous" price for power when the existing agreement ends in 18 years.

"Are there any adjustments to be made, between now and 2041, to, on balance, say that there are (gains) for Newfoundland?" Legault said.

"It will depend on the price that Newfoundland offers us from 2041. If we are offered a very advantageous price starting in 2041, are we ready to make payments before 2041? It's going to be part of what's going to be asked, probably."

Legault was referring to meetings scheduled later this week between himself and Newfoundland and Labrador Premier Andrew Furey. Legault is expected to arrive in St. John's to dine with Furey on Thursday evening, and energy talks are scheduled for the next day. The talks will be "high level," Furey said Wednesday, describing them as "discussions" rather than negotiations.

The 1969 Churchill Falls deal allows Quebec's provincially owned hydroelectric utility, Hydro-Quebec, to purchase 85 per cent of the electricity generated at the station in central Labrador -- and reap most of the profits.

Under the agreement, Hydro-Quebec pays a fixed price of 0.2 cents per kilowatt hour for Churchill Falls power. By comparison, the utility made an average of 8.2 cents per kilowatt hour on power it sold outside the province in 2022, according to a Hydro-Quebec news release on Wednesday.

As of 2019, the deal has yielded close to $28 billion in profits to Quebec, and about $2 billion for Newfoundland and Labrador.

The contract was challenged unsuccessfully in Quebec Superior Court. Churchill Falls (Labrador) Corporation Ltd., a subsidiary of Crown corporation Newfoundland and Labrador Hydro, argued that Hydro-Quebec had a duty to renegotiate the contract because the lopsided profit structure was unforeseen in 1969. Appeals ultimately made it to the Supreme Court of Canada, which ruled in 2018 that there was no legal obligation to reopen the deal.

Furey acknowledged the existing deal is "an emotionally charged issue" for his province.

"There is a generation of ill will and distrust between Newfoundlanders and Labradorians and Hydro-Quebec. That relationship needs to change; that trust needs to change," he said.

Furey told reporters on Wednesday that he finds the idea of reopening the arrangement "most interesting."

"That would show an ability to work together. That would show an ability to build trust," he said. "But again, I can't stress enough, I'm not about to do a bad deal."

The province is in a strong negotiating position, Furey added, noting, "We're not on bended knee to Quebec. Quebec is coming to us."

Legault has made the renewal of the Churchill Falls deal a key piece of his energy strategy as the province tries to lower greenhouse gas emissions and meet its growing electricity needs. He told reporters Wednesday he expects a long negotiation.

"It might seem far away but constructing a dam -- if you include negotiations with Indigenous communities -- on average in Quebec, it has taken between 12 and 15 years," Legault said. He acknowledged that the existing Churchill Falls agreement has been particularly beneficial for his province.

"Andrew Furey -- he's already talked to me about this -- will make all sorts of demands; we'll listen to him about what is a priority for him," Legault said.

The Newfoundland and Labrador government assembled a panel last year to determine how the province could best capitalize on the end of the Churchill Falls deal in 2041. It issued a statement Tuesday saying it has made its recommendations to the province, adding that details would not be made public to protect the province's negotiating position.

However, the panel recommended that the province ensure Indigenous people in Labrador are properly consulted about the future of the Churchill River, from which the Labrador generating station gets its power.

The Innu of Uashat mak Mani-utenam in Quebec filed a $2.2-billion lawsuit against Hydro-Quebec earlier this year, claiming the Churchill Falls hydroelectric station has destroyed a significant part of their traditional territory. In 2020, the Innu Nation in Labrador sued Hydro-Quebec and Churchill Falls (Labrador) Corp. for $4 billion for the ecological and cultural damage caused by the damming of the upper Churchill River in the early 1970s.

Furey said he informed Innu Nation Grand Chief Etienne Rich on Tuesday that Legault was coming to the province for talks. "I will certainly provide him an update on Friday after the discussions," he added.

The Churchill Falls facility has a generating capacity of 5,400 megawatts; it produces about 34 billion kilowatt-hours annually. The generating station and transmission equipment in Labrador is owned and operated by the Churchill Falls (Labrador) Corp. Newfoundland and Labrador Hydro owns 65.8 per cent of that corporation's shares, and Hydro-Quebec owns the rest.

Hydro-Quebec will maintain its 34.2 per cent share of Churchill Falls (Labrador) Corp. when the contract expires in 2041.

"Newfoundland and Labrador is very much in a listening position," Furey said, adding, "I'm willing to listen, to move to the next page."

With files from Patrice Bergeron in Quebec City and Michael MacDonald in Halifax.

This report by The Canadian Press was first published Feb. 22, 2023.