Several Facebook, and other readers, asked for questions that they could use to challenge their MHAs. Many people want to find out if MHAs are merely ‘holding their noses’ and supporting the Progressive Conservative and Liberal Party-lines, and if each MHA possesses a position that is based on something more than the Wakeham Government’s propaganda, all of which is heavily misleading. The 20 Questions presented are each prefaced with basic information represented in MOU1 and MOU2. Hopefully, you will find the information helpful in addressing an issue which is, by far, the most critical that has confronted the public since Confederation.
Question #1: Premier Wakeham committed that NL would be the “principal beneficiary” of Churchill Falls (specifically the contract as it relates to pricing and energy from the renewal of the existing CF plant that is owned by the people of NL) following his renegotiation of Premier Furey’s Memorandum of Understanding (MOU1). Please inform me if his commitment was achieved and the key elements that distinguish this outcome?
Question #2: Neither MOU1 or MOU2 (Premier Wakeham’s deal) require market prices for Churchill Falls power over the 51-year term. Some analysts estimate NL’s revenue from Churchill Falls is less than 30% of market value of our power. In consequence of this deal, NL has agreed to subsidize Quebec ratepayers and Quebec industry for another 51 years. When NL owns 65.8% of CFLco and the rights to the water that facilitates power generation, too, why has the Wakeham Government agreed to such a lopsided deal?
Question #3: Premier Wakeham and Hydro CEO, Jennifer Williams, have stated that MOU2 gives NL more access to 950 MW of electricity, far more than MOU1. Yet, MOU2 delivers no additional energy from the existing Churchill Falls plant. Delivery of the additional energy relies on cost-based rates for Gull Island power and on wind development. Both projects are subject to enormous uncertainty, Hydro-Quebec having been given a 12-year option to commission construction, and the commitment to wind is only to conduct a study. In addition, both sources of power, if built, will be many tens of times more expensive than the cheap Churchill Falls power NL is giving to Quebec.
Why is Premier misrepresenting what MOU2 contains?
Question #4: Over the period of the 51-year MOU, Quebec will receive about 75% of power production from CF and even more if Gull Island and the wind project do not proceed. Please explain how this lopsided advantage to Quebec benefits Newfoundland and Labrador?
Question #5: Both MOU1 and MOU2 provides for expanded capacity at Churchill Falls on a “Cost of Service” basis. In a nutshell, Cost of Service means that only the costs of the expansion project is repaid. NL does not receive market value for the additional power or capacity produced, though its value is many times higher than mere “cost of service”. Quebec-Hydro receives the opportunity to benefit from the sale of high value electricity because the additional capacity will be employed when the demand for electricity is the greatest. NL earns net of its debt costs less than 5% return on its equity for the upgrades while Quebec gets all the market upside on the price per kWh above the cost for 50 years. Put differently, Premier Wakeham has effectively agreed that value represented by the hundreds of miles of dykes and reservoirs, a water drainage system equal to the size of New Brunswick, a huge system of underground tunnels and other infrastructure, FOR FREE, though it is worth billions of dollars. Through its 65.8% interest in CFLco, NL will also finance and carry the debt for the $4.8 billion project though Quebec is only a 34.2% owner of CFLco, receives over 90% of the new energy and capacity and virtually all of the benefits, too. The IRC report concluded this project had zero value to NL.
Please explain on what basis such a giveaway makes sense for Newfoundland and Labrador?
Question #6: MOU2 commits virtually all Churchill Falls power to Quebec at a net cost equal to approximately 2.6 cents per kWh (present value). The cost of Gull Island power and wind power are expected to be much higher 12 or more cents per kWh. How does selling the cheap power to Hydro-Quebec and maybe gaining access to the most costly power from Gull Island and wind, benefit NL mining, or achieve parity with Quebec ratepayers?
Question #7: Both Premier Wakeham and NL Hydro CEO, Jennifer Williams, have made much of NL having gained wheeling rights for Churchill Falls power. Both refer to four separate blocks of power totaling 985MW as though NL achieved transmission wheeling rights to external markets for all 985 MW. CBC News confirmed this reading on August 2, quoting David Vardy: “only up to 265 MW can be moved for direct sales by Newfoundland and Labrador Hydro. That block comes under transmission rights the corporation already holds.” In other words, this right predated the MOU2. The remaining blocks are also limited by rigorous terms that allow Quebec to prescribe both the rate and the customers of Quebec-Hydro to whom the power must be sold. In contrast, NL does not prescribe for Quebec the price it charges for CF power or to whom its Churchill Falls power should be sold.
Why is the Premier and his Hydro CEO misleading the public on this issue?
Question #8: Most people recall that the biggest problem with the 1969 Churchill Falls Contract was that it lacked any provision for increases in the market value of electricity for 65 years, leaving the price a fraction of a cent per kWh for all of that time. Premier Wakeham and CEO, Jennifer Williams, have claimed that MOU2 offers indexation based on the Consumer Price Index. Several analysts – Economist David Vardy, Gabe Gregory, CPA, Economist Dr. Doug May, Greg Roberts, CPA and others confirm that MOU2 offers little or no protection against inflation. Both Gabe Gregory and David Vardy state that the new Churchill Falls Inflation Adjustment Mechanism described in Annex F of the Agreement is deceiving because the mechanism is not effective for electricity inflation. They state, as history has confirmed, the proper adjustment mechanism is simply the real escalation rate in the cost of electricity.
As our MHA, please describe exactly how Premier Wakeham and CEO Williams assertions are correct, and all those analysts are wrong?
Question #9: Why – recognizing that such “wheeling” rights for electricity, are not free and require payment – did Premier Wakeham not require from Quebec reciprocal transmission rights? The basis for such transmission has been established by “Open Access” rules that the American Government imposes on all sellers of electricity into that market. Why should they not apply to Newfoundland and Labrador?
Question #10: Having failed to obtain, demand, or negotiate transmission rights for our power through Quebec in order to reach third party customers, are you, as an MHA, content that we should be second class citizens in Confederation?
Question #11: Why did Premier Wakeham agree to allow Hydro-Quebec 40% ownership in Gull Island when Newfoundland and Labrador will have to bear 60% of the borrowing risk and equity contribution even as Quebec receives 86% of the power? Then there is the matter that after a financing period of 50 years, the project will not be debt-free and all of the energy will be sold on a cost of service basis with most of the market value upside going to HQ, the same as the current CF contract. Yet, Premier Wakeham accepted that NL’s profit from the venture should be capped with a net rate of return on equity of less than 5% – less than the return available on many lower risk investments?
How does this financing and pricing scheme make any business sense for the people of Newfoundland and Labrador?
Question #12: As my MHA, do you agree that both Premier Furey and Premier Wakeham populated their negotiating committee with people dramatically less experienced than those representing Hydro-Quebec?
Question #13: Exhibit “C” of MOU2 prevents the NL Government from adjusting water royalties and other levies for 51 years. Since 1969, NL has earned a pittance from this potentially lucrative source of resource revenue. This concession to Quebec erodes our ability to finance our debt and deliver social programs; it erodes our sovereignty as a province in the process.
Why has Premier Wakeham accepted that NLers should benefit so little from our natural resources, in this case the very water that drives the Churchill Falls turbines?
Question #14: Analysts of MOU2 have concluded that most of the energy from Churchill Falls continues to be sold to HQ at a price that starts under 2 cents in 2027, reaching 10.85 cents by 2041, only touching today’s replacement cost of 17 cents around 2054.
As an MHA, is this your idea of fairness when Premier Wakeham committed that NL would be the “principal beneficiary” of Churchill Falls?
For Liberal MHAs, why does Liberal Leader John Hogan, not support NL’s right to be the “principal beneficiary” of Churchill Falls? If he does, why did MOU1 not contain those benefits?
An additional question for Liberal MHAs: why is Liberal Leader, John Hogan, and his energy critic, Fred Hutton, speaking only about peripheral issues, like use of the CPI Index, and not the whole Memorandum of Understanding when the Independent Review Committee was unequivocable that MOU1 did not make NL the “principal beneficiary” and was not in the interests of our people?
Question #15: The Independent Review Committee commissioned to study, among other things, whether MOU1 made NL the “principal beneficiary” of Churchill Falls proposed strategic guidance and preparations for the Wakeham Government to follow in preparation for a new series of negotiations with Hydro-Québec. The Report, entitled Creating Long-Term Value from the Churchill River for the People of Newfoundland and Labrador outlined the need to develop a targeted economic vision and strategy, formulate pricing models, and evaluate alternative ownership and operating models for projects like Gull Island. The Wakeham Government ignored the IRC recommendations and set up a new negotiating Committee and commenced negotiations with Hydro-Quebec within just days of receiving the Report. Wakeham gave the Committee few guidelines and established no set of principles to establish a minimum floor acceptable to NL in a negotiated outcome.
As a Member of the House of Assembly, do you agree that this approach was unprofessional, even reckless, and that it likely contributed to the poor outcome achieved by the negotiating committee?
Question #16: The IRC stated that the inclusion of Churchill Falls, Gull Island, capacity expansion at CF and the transmission projects, tied together obscured the value to NL of each component. Multiple analysts advised Premier Wakeham to “unbundle” the MOU, in part in the interest of transparency, but also so that the value of each component part, individually, could be assessed. Premier Wakeham refused this advice. Taking into account how little MOU2 achieved, do you still support the Agreement? Do you agree that it should run for 51 years?
Question #17: During the last general election Premier Wakeham promised that all Newfoundlanders and Labradorians would have a say over the outcome of any deal with Quebec in a Referendum. He has gone back on his word.
Are you prepared to take a stand and advise the Premier to hold a Referendum on the MOU as he promised?
Question #18: Do you plan to support Premier Wakeham’s MOU2 during debate in the House of Assembly? Will you vote with the Wakeham Government if Members are asked to indicate their support for the deal?
Question #19: The market value of the annual energy from the existing Church Falls Plant is estimated to be in the $4 to $5 billion range. The 2024 MOU delivers revenues to the provincial Treasury in the amount of about $400 million annually; the new MOU the same.
Accounting for full market value for Churchill Falls power which should commence upon the expiry of the 1969 Contract in 2041, how do you justify such a low return to NL when we should receive 100% of net revenue to the extent that it reflects both 65.8% of CFLco ownership and the value of our water rights?
Question #20: Newfoundland and Labrador has, by far, the highest per capita public debt in Canada. Churchill Falls represents the best opportunity for the province to address this problem, without drastically undermining the current level of public services. The revenue potential from Churchill Falls far outstrips any other to address our debt and deficit. As it stands, MOU2 won’t deliver enough revenue to offset the current subsidy given the Muskrat Falls project. Bear in mind that MOU1 and MOU2 transfer $200 billion (Quebec’s estimate) to that province over the like of the agreement. The figure will grow as electricity prices increase.
Why would an elected member of the House of Assembly agree to rob Newfoundland and Labrador of the opportunity to “fix” its financial position, enhancing Quebec’s in the process?
Don’t you think its time you told Premier Wakeham that we need an “independent” review of MOU2, and that a referendum is not waste of either time nor money but an expression of the public’s will?