The CEO of NL Hydro, in the response to the CBC news story (N.L. Hydro ‘taken to the cleaners’ on Churchill Falls MOU, says former CEO), has confirmed my suspicion of what is actually taking place within the MOU with respect to the existing Churchill Falls block of energy. The fact is that Hydro Quebec (HQ) has no intention of giving up on the 1969 power contract. HQ currently pays CF(L)Co 2 mils/kWh (2/10ths of one cent) for power purchased under the 1969 contract. Clearly, HQ was not prepared to pay a penny more until the contract expires in 2041.
Ms. Williams responding to my comment that a key metric was the replacement cost to HQ for alternative sources, stated “the MOU, once finalized, will replace the existing Churchill Falls deal 17 years before it was set to expire and that if the payments expected between now and 2075 were instead spread out between 2041 (the end of the current deal) and 2075, the effective price would swell to 13.3 cents per kilowatt hour.” The present value of 13.3 cents per kWh, escalated at 2% per annum to 2075 totals $33.8 billion in net present value. Similarly, 5.9 cents per kWh present value escalated at 2% per annum for 51 years to 2075 comes to $33.8 billion. It is the same amount of money over a different term. Ms. Williams also stated, “we got a large portion of the replacement cost, but we’re getting it paid sooner because that’s something that was important to our jurisdiction.” An odd choice of words, I think she was referring to our Government. The conclusion being that the Government wanted money earlier than 2041, not something that HQ was prepared to consider.
In the MOU every cent for power paid to CF(L) Co between 2025 and 2041 above 2 mils per kWh is effectively a cash advance against future revenues post 2041. There are no additional monies from HQ. Obviously, HQ is indifferent as to where the $33.8 billion is applied. In fact, they get the power post 2041 until 2065 at lower annual payments until all the advances prior to 2041 are repaid.
Clearly, there is a misrepresentation by the Government of Newfoundland and Labrador and NL Hydro of the facts. I and others were led to believe that the 1969 contract had been terminated and replaced with a higher price for power paid to CF(L)Co for purchases from now till 2041. We were not informed that the monies related to power purchases from HQ were cash advances against future revenues post 2041. The dramatic gesture by the Premier in tearing up the 1969 contract was an illusion.
None of the above facts were disclosed during the recent debate at the Legislature. Nor were they disclosed in the Government brochure -A New Chapter for Hydroelectric Generation in Labrador. In my view, the perception of the majority of the population is that the MOU cancels the final 17 years of the 1969 contract and CF(L)Co is being paid a higher price. The truth is, if this charade is continued in the Definitive Agreements, future generations after 2041 will pay a heavy price.
The bottom line is that we have given up tens of billions of dollars on the upper Churchill and entered into a 51-year deal that provides no additional money. The MOU $33.8 billion present value paid to CF(L)Co by HQ is a fixed amount for all power purchases to 2075. HQ gets exactly what it wants over the next 51 years and has issued a press release boasting as follows:
- “The average net cost for power from the existing Churchill Falls site will be 4 cents /kWh (in 2024 dollars).
- The average price for electricity from the new developments will be 11 cents/kWh, which is below the generation price forecast in the Action Plan 2035 (13 cents/kWh).
- Together, the average cost of all electricity from Labrador will be 6 cents/kWh, which is half the price of the renewable alternative available to Quebec.”
There has been a massive transfer of wealth to HQ and Quebec which will continue for another 51 years. Nothing has been learned, nothing has changed, it’s deja vu all over again.
The sad truth is we live in a dystopian time where the facts don’t matter, truth is a variable and subject to misinterpretation by the artful. The public should be engaged in a democracy, but their own lives and social media are a distraction. They think Government is there to look after our interests, an unfortunate but sad reality.
I am reminded of the line from the comic strip Pogo: “we have seen the enemy and he is us”.