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Prospects for finalizing the power agreement seem to hinge less on engineering or economics than on politics and timing
Original: financialpost.com/commodities/energy/newfoundland-quebec-face-high-stakes-year-hydro-deal
Newfoundland and Labrador and Quebec face a pivotal year in finalizing a long-awaited multibillion-dollar hydroelectric agreement, but political pressures on both sides could make a deal challenging.
The proposed deal would replace the controversial 1969 Churchill Falls contract, which expires in 2041, and could boost Newfoundland’s annual hydro revenue to $1 billion from about $100 million, a potential lifeline for a province carrying nearly $20 billion in net debt, the highest debt per capita in Canada.
Under the proposed 50-year agreement signed in December 2024 by then-Liberal premier Andrew Furey and Legault, Newfoundland and Labrador would receive about 5.9 cents per kilowatt-hour, roughly 30 times more than under the existing contract.
Newfoundland would fund and co-develop new and expanded hydro facilities on Churchill River, including the 2,250-megawatt Gull Island project and upgrades to Churchill Falls. Hydro‑Québec would purchase much of the power and assume key construction and financial risks.
Quebec also has a lot at stake. Hydro‑Québec is expected to purchase much of the power, and the deal would allow the province to secure reliable electricity amid growing demand and droughts. Political missteps or delays could threaten both the financial and strategic benefits for Quebec.
“From the perspective of the Coalition Avenir Québec government, these delays are not well perceived,” Daniel Béland, director of the McGill Institute for the Study of Canada, said. “They believe this could endanger the survival of the agreement.”
Quebec Premier François Legault remains unpopular in recent polls, and his government faces growing scrutiny over the deal. Opposition parties already criticize it as too generous to Newfoundland, and a provincial election scheduled for October 2026 could complicate negotiations further.
“It’s far from certain that negotiating with a new government, especially a Parti Québécois government, would be easier,” Béland said.
As a result, the prospects for finalizing the Newfoundland–Quebec hydroelectric deal seem to hinge less on engineering or economics than on politics and timing.
Under a memorandum of understanding (MOU), the two provinces are supposed to reach a deal by April, but an independent review panel, appointed by Newfoundland Premier Tony Wakeham last week, has until late April to release its report. He has said any final deal would then be put to voters in a referendum.
The three-person review panel will assess whether the proposed deal serves Newfoundland’s economic and public interests, but the terms of reference do not require a comparison with a no-deal scenario, which critics say could be the province’s strongest bargaining position.
Critics also say the deal heavily favours Quebec, while supporters say it is reasonable given Hydro‑Québec’s investment and control of the transmission network.
Newfoundland has an incentive to move quickly since any delay postpones the significantly higher revenues obtained from the deal, which includes a price escalator, allowing provincial revenue to rise over time with market-linked pricing.
But former premier Danny Williams has said the province could secure a much better deal, while others question whether Newfoundland’s financial gains are enough.
Alvin Hewlett, a former member of the House of Assembly and longtime political adviser, called the MOU “as bad or worse than the original Churchill Falls contract,” and that it is unlikely to survive independent scrutiny.
He said bundling upgrades to the existing plant with new Gull Island generation obscures how much benefit would flow to Quebec, which he said would still be “getting 90 per cent of the gravy.”
Hewlett also said Newfoundland is in a stronger bargaining position than ever because Quebec needs extra power to manage droughts and rising demand, but that the prospect of coming up with a fair agreement could be difficult in the next year.
Béland said he would be surprised if the deal is finalized next year, particularly if Wakeham proceeds with a referendum. If the review panel recommends changes, negotiations could have to wait for a new Quebec government to review the changes, which he said could take years.
“The room to bargain more with Quebec is very limited,” he said.
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