Waiting until 2041 to renegotiate Churchill Falls is a non-starter, says N.L. Hydro CEO
Quebec would look elsewhere to meet energy needs, says Jennifer Williams
The timing is right to strike a new Churchill River energy deal with Quebec, and waiting until closer to 2041 would likely mean losing out on billions of dollars, says the CEO of N.L. Hydro, Jennifer Williams.
"If we wait five, six, seven years — two or three years — Hydro-Quebec is likely going to be out finding other plants," Williams explained Monday while answering questions from MHAs in the provincial legislature.
It's one of the questions that's emerged since the Churchill Falls MOU was signed on Dec. 12: couldn't Newfoundland and Labrador increase its bargaining power, and extract more money from Quebec, by delaying negotiations?
No, says Williams, when asked that question by Government House Leader John Hogan.
Quebec needs to double the size of its power grid because of the fast pace of electrification, Williams explained, and it's planning now for that growth.
If Quebec gets the signal that it can't rely on electricity from the existing Churchill Falls power station after 2041, or from proposed new developments on the river, including Gull Island, it will look elsewhere.
"So if they can't get an answer from us on what they want to do, they will start doing something else. If they start doing something else, the value of this moment may not be what we think it should be. So us waiting for a very long time may not be the right thing to do," she said.
Hydro-Quebec intends to invest $150 billion over the next decade on energy projects, Williams added, and both sides have agreed that the Churchill River is a key element in those expansion plans.
"Of course they want to do this project. They have said quite clearly this is the best project for them to do," she said.
The lopsided 1969 Churchill Falls agreement expires in 2041. Under the terms of that deal, Hydro-Quebec buys power from the Labrador power station for just 0.2 cents, which is essentially free electricity that accounts for about 15 per cent of Quebec's power supply.
Last month, after two years of negotiations, both provinces announced a tentative agreement to rip up that 1969 agreement 16 years early, with Quebec agreeing to pay a higher price — up to 7.84 cents by 2041 — for Churchill Falls electricity.
By delaying talks, Williams said the province would lose out on $17 billion in revenue — an average of $1 billion annually — between now and 2041, and risk the more than $225 billion in revenue that will flow to the provincial treasury over the next 50 to 60 years.
And if Quebec decides to develop projects within its own borders, Newfoundland and Labrador will also forego the thousands of construction jobs and other spin offs linked to the the developments on the Churchill River, said Williams.
"We hand those jobs and GDP growth over to Quebec," she said.
And the prospect of selling post-2041 Churchill Falls power to customers other than Hydro-Quebec is also unrealistic, said Williams.
She said it would not be feasible to construct a transmission line to Newfoundland with the capacity to handle 5,400 megawatts.
She said the Labrador-Island Link from Muskrat Falls to the Avalon Peninsula cost roughly $6 billion to construct and took nearly a decade to build. The LIL, as it's known, has a 900-megawatt capacity.
Williams estimated the cost of building a line from Churchill Falls at about $30 billion.
Another alternative is transmitting Churchill Falls power through Quebec, but Williams said that's also unlikely.
"Think that through of how that would go," she said in what was likely a reference to Quebec's historical insistence that it own every electron that touches its border.
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