“An Important Step Towards Securing Quebec’s Energy Future”
This is the heading for the Press Release issued by Hydro Quebec following the signing of the Mou last December.
Quebec Hydro stated that they secured their energy security by getting guaranteed access” at a lower price than any other renewable energy option in North America.”
How was this accomplished? By ensuring that “the average cost of all electricity from Labrador will be 6 cents/kWh, which is half the cost of the renewable alternatives available to Quebec.”
What does this mean for Quebec?
Their electricity rate are among the lowest rates in Canada at 7.80 cents/kWh. Our rates are 15.2 cents/kWh, twice twice the rates in Quebec.
Their policy is to limit increases for residential customers to 3%. The MOU allows them to accomplish that objective. Our rates increased by 7% on July 1.
It’s very generous of us.
So what are the motivations for the Quebec and Newfoundland and Labrador Governments to enter into a MOU 16 years before the end of the contract in 2041?
In the case of Quebec their government is facing an election next fall. Current polls have them third at 17%. Their hope is that the MOU will help them to close the gap. There is no indication that it has.
In our case, we wanted to get an immediate infusion of cash to allow us to continue to spend at an unsustainable rate. Don’t take my word for that. The Parliamentary Budget Office continues to state that our spending is unsustainable, and has so stated since the Office started to assess the financial stability of the provinces. While the amounts appear to be impressive they don’t take inflation into account. A billion dollars in 16 years time won’t be worth the one billion dollars in purchasing power it is today.
And we also wanted Gull Island to be developed because of the short term construction jobs it will produce for our economy.
Those goals may have been achieved but at at what cost to us?
We know, because Hydro Quebec has told us, that they are getting the power at half what it would cost them to produce it.
They have also assured their energy future for the next 50 years because they retain their one third interest in the Upper Churchill and obtain a 40% interest in Gull Island should it be developed.
Of the 9,190 MW which will be available should the new projects be achieved, Hydro Quebec gets 7,200 MW.
Hydro Quebec and the people of Quebec are the true beneficiaries of the MOU in the long term. To their credit they look at the long term and they are far better negotiators than we are.
How did we get to where we have ended up?
To their credit our government appointed an Expert Panel in May, 2022. Their public report did not tell us much about their deliberations as their report was not shared publicly, ostensibly to protect our commercial interests and ability to negotiate.
All the panel told us was that three main opportunities were considered:
“1. Increased sales inside the province for electrification, as well as new and growing industries
2. Increased sales to export markets
3. A new arrangement for sales to Hydro Quebec”
The government has chosen the third option and there is no evidence it looked for any customers other than Quebec.
It seems to me that there ought to have been a fourth option considered and that is waiting until 2041 when the contract will come to an end.
We know as a result of a decision on the Upper Churchill Water Rights Reversion Act by the Supreme Court of Canada in 1984 that the power contract prevented us from taking back full control of the water rights and acquiring the interests of Hydro Quebec.
Once the power contract comes to an end it may well be possible to accomplish the goals of that legislation and take back full control of our river.
It appears that option was never seriously considered by the Expert Panel nor the government.
I recognize that the problem of barriers to the interprovincial transmission of electricity remain because our national government refuses to use it’s undoubted constitutional authority to take over the responsibility, like it already does for pipelines. This is no doubt because of the outsized political power of Quebec.
What has changed as a result of the protectionist policies of the Trump administration is a real push to remove internal trade barriers in Canada. I would have thought our government would have advocated the removal of this most egregious internal trade barrier but not a peep. Our objective should have been the creation of a national power grid.
In addition we should have looked for other potential customers and identified potential domestic uses. If there are other customers who are prepared to pay more that would create political allies in our efforts to get transmission rights. In theory we have the right already to wheel electricity through Quebec but I know we will face roadblocks.
I’m surprised that no one appears to have any concern about the continuation of Quebec Hydro’s one third interest in the Upper Churchill for another 50 years, made worse by their 40% share of Gull Island should it be developed.
I know that it is trite to say that this election is the most important one in our history. But this issue sets the stage for the next 50 years. Unlike oil revenues, which will eventually come to an end, the Churchill River is the key to our long term viability. Let’s make sure we do it right for once, so that in 50 years time our children and grandchildren won’t ask “why did they enter into another lopsided deal.”