Hydro‑Québec says Newfoundland and Labrador power deal is ‘clean break’ from the past

Hydro‑Québec president Michael Sabia speaks at the legislature committee studying the utility's strategic plan, Thursday, Nov. 30, 2023, at the legislature in Quebec City. THE CANADIAN PRESS/Jacques Boissinot

ST. JOHN’S — The head of Quebec’s hydro utility was in Labrador on Monday to tour a massive hydroelectric plant at the heart of a draft energy deal touted as a new beginning in the fraught relationship between Quebec and Newfoundland and Labrador.

Michael Sabia spoke to reporters from the Churchill Falls facility in Labrador, saying the tentative deal was a “clean break” from an “unbalanced and probably unfair” contract that Newfoundland and Labrador has long tried to quash.

“This agreement opens really a new chapter, a much better balanced, more collaborative chapter, in the history between Newfoundland and Labrador and Quebec,” Sabia said. “In our view, this is very much a balanced deal.”

Negotiations to hammer out final contracts by April 2026 are proceeding “full speed ahead,” he added.

The tentative agreement unveiled in December has drawn intense scrutiny in Canada’s easternmost province. Newfoundland and Labrador has long felt slighted by a 1969 contract that allowed HydroΓÇæQuebec to purchase more than 80 per cent of the power from Churchill Falls at rock-bottom prices -- and reap most of the profits. As of 2019, the deal yielded close to $28 billion in profits to Quebec, and about $2 billion for Newfoundland and Labrador.

The contract was set to expire in 2041, but the new agreement would end it on Jan. 1, 2025, with Hydro-Quebec paying steadily increasing rates for Churchill Falls energy. Those rates would begin retroactively at 1.63 cents per kilowatt hour -- compared to the current price of 0.2 cents -- and rise to 7.84 cents by 2041. By 2056, the price would hit 19.4 cents.

Some energy watchers in Newfoundland and Labrador have questioned why Hydro-Quebec would continue to pay low prices in the first years of the new contract. Sabia said it was a matter of phasing in the arrangement.

“We think that’s part of a balanced deal that there are very, very substantial increases in our payments and they step up over time, which gives us an opportunity to adjust to that very substantial increase,” he said.

The new agreement also provides Hydro-Quebec an opportunity to co-develop more projects in Labrador with Newfoundland and Labrador Hydro, including a new hydroelectric plant at Gull Island, which is along the same river as the Churchill Falls plant.

Quebec and Newfoundland and Labrador have been aiming to develop Gull Island for years, and the provinces reached a draft deal about its development in 2002, but it ultimately fell apart.

Sabia said he was “100 per cent” confident Gull Island will go ahead this time around.

“Is there a percentage higher than 100 per cent?” he asked. “Because if there is, that’s where I would be.”

Sabia said the new arrangement will have mechanisms to tie energy prices to the market -- something that was lacking in the 1969 contract. It will also give Newfoundland and Labrador access to a “growing pool of energy,” he said.

If everything in the draft agreement comes to fruition, it promises more than $225 billion in new revenue to the provincial treasury in Newfoundland and Labrador by 2075. Roughly $180 billion would come from the new rates paid by Hydro-Quebec for Churchill Falls power, officials have said.

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.

By Sarah Smellie, The Canadian Press

This report by The Canadian Press was first published March 10, 2025.