Quebec has secured a tentative new deal over Churchill Falls amid a decades-long dispute and tense negotiations with Newfoundland and Labrador. But what does the energy agreement worth billions of dollars mean for Quebec?
Louis Beaumier, executive director of the Trottier Energy Institute at Polytechnique Montréal, said his “overall impression is it’s a good deal.”
“I’m struggling to find something that’s not good,” he said in an interview Tuesday, noting that the next steps toward finalizing the deal include discussions with Innu communities.
In terms of hydroelectricity, Beaumier said, “this is probably the cheapest hydro power we can get.”
When announcing the non-binding agreement Monday, Quebec Premier Christine Fréchette said it would help meet the province’s energy demands for the next 50 years. The deal, which replaces a scrapped 2024 memorandum of understanding, is what Newfoundland and Labrador Premier Tony Wakeham called a “rare win-win-win” outcome for both provinces and the federal government.
Over the course of five decades, Quebec will pay an average of six cents per kilowatt hour and have access to a potential of more than 10,000 megawatts of electricity, according to Hydro-Québec. The cost is about one-third of alternatives, with the energy provider saying the renegotiated fee is a competitive rate.
Quebec will pay a higher price for hydroelectricity from Churchill Falls under the new deal compared with the controversial 1969 agreement. The original contract has long been criticized as lopsided in Quebec’s favour, fuelling years of resentment from Newfoundland and Labrador.
Under the 1969 agreement, Quebec took on the bulk of the financial risk of building the dam in exchange for the right to buy power at a low price. As of 2023, the contract had generated $28 billion for Hydro-Québec, while Newfoundland and Labrador saw a $2-billion return. The original contract is set to expire in 2041, but negotiators are hoping to finalize the new draft agreement by the end of this year.
François Bouffard, associate professor of electrical engineering at McGill University, said from his perspective as a long-term planner for power systems, “2041 is tomorrow.”
“Time is of the essence here,” he said, because “from a hydro development perspective, nothing gets moving fast.”
Dave Rhéaume, executive vice-president of energy and regulatory strategy and industrial operations at Hydro-Québec, said “the alternative, if you can’t reach an agreement, is to build new infrastructure.”
But that, combined with letting the clock run out on the 1969 agreement — even if the fees are lower than those in the new deal — would cost more in the long run.
“You’ll save between now and (2041), but when the time comes, the shock is sure to be much greater,” Rhéaume said of the costs.
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Rate hikes, eventually
In securing continued access to Churchill Falls, Quebec will be paying more than it does now. How will it affect Hydro-Québec customers’ rates in the years to come?
“It would be lying” to say a new pact “will not have an impact on rates,” according to the Trottier Energy Institute’s Beaumier.
“Every new capacity will have an impact on the rate. But in that case, I think we’re getting the cheapest — it’s probably the cheapest project we can get, or it’s the project with the cheapest cost per kilowatt hour for consumers,” he said.
It’s not Hydro-Québec that sets energy costs, though the utility does make requests to the province’s energy board. The board already set the rates for 2026 through 2028 earlier this year — and those won’t change. Those increases, however, didn’t take into account the new deal announced this week.
A major factor in negotiating a new Churchill Falls agreement was starting with a low rate of “about 1.5 cents or less” per kilowatt hour, according to Rhéaume. Hydro-Québec pays 0.2 cents per kilowatt hour for energy under the existing contract.
“We made sure to keep the increase curve very low so that, say, in the first year of the operation, everyone wouldn’t suddenly say: ‘Wow, my bill just went up 10 per cent,’” he said. “We wanted to make sure that didn’t happen. So, customers won’t see a distinct impact from the new agreement.
“It’s really something that will blend in with the overall rate increases over time.”
McGill’s Bouffard said electricity rates will eventually rise, but “it’s unclear as to which classes of customers will be taking the lion’s share.”
“It’s the cost of this development versus the alternative,” he said of the benefits of the latest Churchill Falls deal. “If we wanted to go full solar or full wind power backed by batteries or things like that, there is quite a large difference in the cost per kilowatt hour.”
For Bouffard, “it’s a no-brainer.”
“There will be an escalation in costs. But based on the fact that we need more electricity, we’re going to build more things,” he said. “This is the cheapest option available at the moment that’s technically feasible.”