Quebec Premier Francois Legault and Andrew Furey, Premier of Newfoundland and Labrador, shake hands after signing a memorandum of understanding during an announcement in St. John's, on Dec. 12.Paul Daly/The Canadian Press
Geography made them neighbours, but history has long prevented them from becoming friends. A long-standing border dispute between Quebec and Newfoundland and Labrador – settled by Britain’s privy council in Newfoundland’s favour – first soured the relationship more than a century ago. But it was the 1969 contract that has seen Hydro-Québec pay a pittance for power from Churchill Falls that turned that mutual resentment into rancour.
On Thursday, Quebec Premier François Legault and his Newfoundland counterpart, Andrew Furey, took a giant step toward ending the hostility between their provinces with a deal that would see Hydro-Québec significantly increase the sum it will pay for 4,800 megawatts of power from the Churchill Falls project in Labrador between 2025 and the current contract’s expiry date in 2041.
The new deal would allow Newfoundland to pocket about ten times the amount – or an extra $9-billion over 16 years – it would earn under the existing contract.
Under the agreement in principle signed by the premiers, which would extend the term of the current power-purchase contract to 2075, Hydro-Québec would pay an average of two cents a kilowatt-hour for Churchill Falls power between 2025 and 2041, compared with 0.2 cents under the existing contract. The price would rise to seven cents after that, though Hydro-Québec estimates its average price over 50 years at four cents a kwh.
In exchange, Hydro-Québec would become the “project lead” on $25-billion worth of new hydro developments on the Churchill River, totalling 3,900 MW in capacity.
The Quebec utility, which has been scrambling to identify new renewable power sources to meet a 50-per-cent increase in projected electricity demand by 2050, would purchase 90 per cent of the power from the additional sites at a price of 11 cents per kilowatt-hour. It would also be responsible for 90 per cent of any cost overruns on the proposed new hydro developments.
Hydro-Québec chief executive officer Michael Sabia, who led the negotiations on behalf of the Quebec government, insisted the agreement is a good one for the utility, even though the additional $9-billion it will pay for Churchill Falls power by 2041 will eat into the utility’s profits and lead to higher rates for its customers
“If you look at what is happening [to electricity prices] in some U.S. states, if somebody tells me I can get that quantity of electricity for four cents for the next 50 years, I’m going to grab that,” Mr. Sabia said, referring to the much higher costs facing U.S. utilities.
“The passage of time is not Quebec’s friend. Every year that goes by between now and 2041, our leverage with [Newfoundland] goes down.”
Mr. Sabia, who moved to the top job at Hydro-Québec in mid-2023 after a 30-month stint as deputy finance minister in Ottawa, stressed that the negotiations with Newfoundland and Labrador Hydro CEO Jennifer Williams “were undertaken as business discussions.” There was no explicit goal to make up for what Mr. Legault himself last year said had become “a bad deal” for Newfoundland as market prices for electricity spiked after 1969.
Mr. Legault and Mr. Furey must now sell the new Churchill Falls deal to their respective constituents, including several Indigenous communities, before a definitive binding agreement between the two provinces is struck.
Of the two, Mr. Furey faces a bigger near-term challenge, with a provincial election scheduled in late 2025. He will need to persuade Newfoundland voters that their province is not getting once again fleeced by Hydro-Québec, which had for decades refused Newfoundland’s demands to renegotiate the 1969 contract. The deep bitterness and distrust that many Newfoundlanders feel toward Hydro-Québec remains a huge obstacle Mr. Furey must overcome.
For Mr. Legault, whose popularity has plummeted since he won a second term in 2022, the agreement is an early Christmas gift for his beleaguered government. He has been facing questions about leadership; this deal allows him to show it.
Quebeckers have grown accustomed to seeing cheap hydropower as their birthright, with per capita electricity consumption that is almost twice the national average. The prospect of energy scarcity has rarely crossed their minds. Yet, that is what the province could face as demand soars and climate change leads to more variable water levels in Hydro-Québec’s vast reservoirs.
Locking in Churchill Falls power for another five decades and securing access to additional megawatts from new developments in Labrador would go a long way toward ensuring that Quebec remains an attractive location for electricity-intensive industries, including aluminum smelting and battery manufacturing.
A final deal would also help Mr. Legault cement his political legacy in a province that often judges its premiers by how well they manage the hydro file.
And it just might enable Quebec and Newfoundland to finally call themselves not just neighbours, but friends.