Why Quebec struck a new hydro deal with Newfoundland and Labrador

For years, Quebec has benefited from a lopsided deal with Newfoundland and Labrador that saw it pay just a fraction of the amount it made from electricity produced at the Churchill Falls power station.

But on Thursday, the two provinces announced a tentative agreement to replace that old, contentious deal with one that would give the Atlantic province far more money — and bring Quebec more energy.

Hydro-Québec President and CEO Michael Sabia said the agreement will help Quebec meet its projected increased demand for clean energy.

"For us to have access to power at such a powerfully attractive price over 50 years, and that quantity of power, that helps us secure Quebec's energy future," Sabia told CBC's Power and Politics.

Like Quebec Premier François Legault and Newfoundland Premier Andrew Furey, Sabia billed the deal as a "win-win," after years of acrimony.

'Both parties can win'

Under the agreement signed in 1969, the Atlantic province receives 0.2 cents per kilowatt hour, amounting to roughly $100 million annually, according to Hydro-Québec.

In its most recent annual report, Hydro-Québec says the average sale price for exported electricity in 2023 was 10.3 cents per kilowatt hour.

That would mean electricity it exported was sold at 51 times higher than what it paid for Churchill Falls electricity.

Under the new deal, as of Jan. 1, Quebec will pay an average price of 5.9 cents per kilowatt hour, netting Newfoundland and Labrador Hydro about $1 billion per year until 2041, when that amount could climb further.

"Both parties can win. Newfoundland and Labrador will get a very significant — and rightly so — a very significant increase in the price being paid for Churchill," Sabia said.

"We will get access to substantial amounts of additional power and we will get it at a very reasonable and attractive price."

The new contract also lays out a partnership between Hydro-Québec and Newfoundland and Labrador Hydro to expand the current Churchill Falls power plant, and build another one further along the Churchill River at Gull Island.

WATCH: Breaking down the details of a new Churchill Falls agreement:

Breaking down the details — and risks, rewards — of a new Churchill Falls agreement

10 days ago

Duration 3:10

There was applause, hugs and almost too many politicians to count in St. John’s Thursday, when the premiers of Quebec and Newfoundland and Labrador announced a memorandum of understanding to end the notorious Churchill Falls agreement 17 years early. A new deal, if sanctioned, scores of billions of dollars flow in N.L. coffers for decades to come. The CBC’s Terry Roberts explains.

Once all the projects are complete, Quebec will have access to 7,200 MW over the next 50 years.

All told, each province stands to gain about $200 billion, Furey and Legault said.

Pierre-Olivier Pineau, HEC Montréal chair in energy sector management, said the deal will help Quebec as it steers away from fossil fuels.

"For Quebec it's very good news," he said. "Hydro-Québec is investing a lot in wind power, but this brings a lot of relief and removes pressure to develop projects very quickly."

First Nations must agree to deal

Discussions with Indigenous communities in Labrador and on Quebec's North Shore will begin immediately, now that a preliminary framework between the provinces is in place, Sabia said.

On Thursday, the Innu Nation in Labrador was on hand to sign the memorandum between the two provinces.

Grand Chief Simon Pokue said the premiers have acknowledged the problems of the past, and he trusts they will include the Innu in future plans and benefits.

"Finally we, the Innu, are finally being included in [the] partnership," Pokue told CBC Radio's On the Go.

The First Nations involvement will also include some 200 kilometres of new transmission lines to connect Gull Island to La Romaine, a hydroelectric complex in Quebec.

Those transmission lines will pass through First Nations territories, and Sabia said Hydro-Québec would open a dialogue with First Nations communities in Labrador and Quebec.

The provinces plan to have a binding agreement in place no later than April 30, 2026, and Legault said he wants to "close the deal" as soon as possible.

Once that happens, Quebec will pay the higher rates for Churchill Falls power retroactive to Jan. 1, 2025.

If ratified, the new agreement can serve as an example of collaboration between provinces, Pineau said.

"This is something that is lacking across Canada — collaboration between provinces on these big projects," he said. "Hopefully, it will be an inspiration."