Government’s 2024 assertion — that the Memorandum of Understanding (MOU) resulting in an effective average electricity price of 5.9 cents per kilowatt-hour (kWh) is “30 times higher than the current price” is a grossly misleading comparison that distorts the reality of historical and contractual energy pricing.
However, the comparison is entirely inappropriate for several reasons.
Such a claim misleads the public by presenting an apples-to-lemons (2024 to 1969) comparison rather than an honest lemons-to-lemons analysis.
By comparing the “2024” MOU 5.9 cents/kWh price to the “1969” fixed rate of 0.2 cents/kWh price, government essentially ignores all inflationary and economic shifts over more than five decades.
A true, lemons-to-lemons comparison should, at the very least, adjust the historical 1969 price for inflation and other changes in energy market conditions.
The pricing of electricity today is influenced by many factors.
Simply considering energy/kWh pricing and comparing an outdated 1969 fixed price to today’s 2024 MOU price fails to account for important and more complex economic and infrastructural realities.
The increased need and value, as well as the pricing of ‘always available’ firm capacity/power pricing for hydro plants such as Churchill Falls along with transmission costs, environmental regulations, maintenance expenses, and market competition, all shape pricing structures in ways that were not considered five decades ago.
Across most provinces and states, electricity pricing is reflective of modern market conditions, not by fixed and/or government influenced rates from the past century.
Newfoundland and Labrador’s own cost structures, including investments in infrastructure and long-term renewable energy security, should be weighed against the evolution of regional and international energy and transformative benchmarks—not an artificially low, long-ago fixed rate contract price.
What is particularly troubling is that this misleading comparison appears to have been designed to provoke a favourable reaction from the public, rather than to inform them accurately.
By presenting the price difference in extreme terms, the government is distorting public perception and fueling unwarranted support for a pricing structure that—while slightly higher than the historical price—is not the 30 times increase it suggests.
If we apply inflation alone to the 1969 rate, we find that 0.2 cents/kWh would be significantly higher in today’s terms. Adjusted for inflation, the equivalent price in 2024 would be closer to 2 cents/kWh, making the new pricing under the MOU more like 2-3 times higher — nowhere near the exaggerated claim of “30 times higher.”
Now, let’s apply this inflation-adjusted rate to Churchill Falls’ annual energy production.
The Churchill Falls plant generates approximately 30 terawatt-hours (TWh) of electricity per year. Under the original 1969 contract price of 0.2 cents/kWh, Newfoundland and Labrador would receive about $60 million per year in revenue.
However, if the contract had included inflation adjustments, the province would have been receiving around $500 million per year in 2024—an amount that much more closely aligns with the revenue Newfoundland and Labrador is set to receive under the MOU — a more lemons-to-lemons comparison.
While Newfoundland and Labrador would receive around $500 million per year in revenue under an inflation-adjusted 1969 contract, the MOU’s promised $1 billion per year — its “30-fold increase” collapses under scrutiny — the MOU revenue is about 2 times what an inflation-adjusted 1969 (2/10ths of cent/kWh) contract would have provided— not thirty times.
But the deception doesn’t stop there. The government’s claim that Newfoundland and Labrador will receive $1 billion per year for the next 17 years is equally misleading.
Roughly half of that amount—$500 million per year—is simply revenue Newfoundland and Labrador should have been able to secure annually after 2041, when the original Churchill Falls contract expires.
In other words, the MOU does not provide a dramatic increase in revenue—it merely accelerates payments that Newfoundland and Labrador would have received anyway.
Thus, when comparing the inflation-adjusted 1969 contract revenue to the MOU revenue, the numbers tell a very different story than the government’s claim of a “30-fold increase.”
The reality is that the MOU is providing roughly the same revenue in 2024 as Newfoundland and Labrador would have received had the original contract included inflation adjustments.
The government’s assertion that the new price is “30 times higher” is not only misleading but deliberately designed to provoke public reaction rather than inform citizens with accurate financial comparisons.
Additionally, one of the most overlooked aspects of this discussion is also how block pricing affects NL’s revenue potential.
Block pricing is a widely used energy pricing strategy that enables buyers or governments to purchase a set amount of electricity at a predetermined price, shielding them from market fluctuations.
Hydro-Québec controls over 90% of the pricing formula. This effectively camouflages the true cost of electricity by maintaining a regulated pricing structure that prevents significant price increases.
This excessive control over the pricing mechanisms creates a modern version of the 1969 fixed-price contract, where rates remain artificially suppressed despite market realities.
This pricing control is not a coincidence—it is a deliberate strategy that allows Quebec to maintain low electricity rates while securing long-term energy supply at below-market prices.
The result? —- a modern-day version of the 1969 contract, where Newfoundland and Labrador continues to receive suppressed revenue despite the evolving energy landscape.
In summary, the government’s assertion that the MOU represents a historic financial gain is not only misleading but also a calculated attempt to present ordinary revenue as extraordinary gains.
The reality is that the MOU does not dramatically increase Newfoundland and Labrador’s earnings—it merely restructures payments in a way that benefits Quebec’s pricing model while maintaining a multifaceted, interdependent and heavily government controlled fixed-rate contract.
A fair and reasonable evaluation of the MOU pricing requires comparisons based on realistic adjustments and modern pricing factors.
Using a 1969 rate frozen in time as a relevant benchmark for today’s electricity costs is not only misleading but intellectually dishonest.
The government must obtain and present a fair and accurate analysis of energy pricing, rather than cherry-picking figures to create misleading narratives.
The government’s assertion that the new price is “30 times higher” is not only misleading but deliberately designed to provoke public reaction rather than inform citizens with accurate financial comparisons.
It is imperative that public discourse around energy pricing be based on factual, contextual, and properly adjusted comparisons.
Newfoundlanders and Labradorians deserve transparency, not political spin.
The government owes it to the people of Newfoundland and Labrador to present a fair and transparent analysis, rather than cherry-picking figures to create a misleading narrative.