Panel concludes Quebec energy deal is not good enough for Newfoundland and Labrador

A panel appointed by the Newfoundland and Labrador government says a proposed energy deal with Hydro-Québec is not in the province’s best interests.

In a report Tuesday, the three-person panel outlines a series of concerns with the non-binding framework agreement to share power from Labrador, signed by the provinces’ hydroelectric utilities in 2024.

It says the Newfoundland and Labrador government must make “significant decisions” before resuming negotiations with Hydro-Québec to come up with an arrangement that serves the province.

At stake are billions of dollars and significant new power capacity at a time when Canada is racing to expand its energy sovereignty amid major uncertainty in global politics, with war in the Middle East and an American government upending its historic relationships.

“The speed of progress is not up to us alone,” said Newfoundland and Labrador Premier Tony Wakeham in a news release Tuesday. “It depends on how urgently Quebec and the federal government choose to act in addressing the issues raised by the independent review committee.”

The panel criticizes the pricing structures and power allocations in the framework agreement, and accuses the former Liberal government of meddling in negotiations, which it says may have resulted in a weaker deal for Newfoundland and Labrador.

The three panellists also accuse Hydro-Québec of being in a conflict of interest as a minority shareholder and primary customer of proposed hydroelectric developments along the Churchill River in Labrador.

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Their report said the draft deal, as it stands, would bring roughly $36 billion in present-day dollars to Newfoundland and Labrador’s treasury until 2085. The former Liberal government underestimated, overestimated or left out information from its valuations of several parts of the agreement, it said.

Hydro-Québec and Newfoundland and Labrador Hydro are joint owners of the 5,428-megawatt power plant at Churchill Falls. The framework agreement they signed in late 2024 would put an end to a 1969 contract allowing Hydro-Québec to buy most of the energy from the facility at basement-floor prices.

Set to expire in 2041, the contract has long been a source of bitterness in Newfoundland and Labrador, where some feel the province was cheated by Hydro-Québec.

The draft deal would also allow Hydro-Québec, alongside Newfoundland and Labrador Hydro, to lead new developments on the Churchill River. If the two utilities proceed, they would ultimately share more than 9,000 megawatts of power from the river, of which Hydro-Québec would be entitled to roughly 80 per cent despite being a minority owner.

Newfoundland and Labrador would get more money from Hydro-Québec for electricity from Churchill Falls and an increasing amount of power over the course of the agreement, the panel noted. But those increases slow to a trickle after 2041.

That risks limiting long-term economic growth and undercutting western Labrador’s mining sector, which is already stunted by a lack of available power.

The panel said the Newfoundland and Labrador government must decide how much economic growth it is willing to give up in exchange for income from selling power from the Churchill River, the report said.

Under its terms of reference, the panel was tasked in December to determine whether the draft deal is in the “best long-term interests of the people of the province.” The deal was unveiled in late 2024 in St. John’s by Newfoundland and Labrador’s previous Liberal government. If finalized, it would expire in 2075.

Wakeham, a Progressive Conservative, had demanded a review of the proposal since the day it was announced. He assembled the panel just weeks after his party formed government last fall, halting all negotiations of final agreements to wait for the committee’s report.

“The (independent review committee) concludes that despite the benefits, the memorandum of understanding in its current form is not in the public interest,” their report said.

In a brief statement on social media, Quebec Premier Christine Fréchette said she had spoken with Wakeham on Monday and that they both “agree on the importance of reaching a win-win agreement in the near term.”

“Today, more than ever, it is essential to work with our neighbours to ensure the economic and energy development of Quebec, as well as that of Newfoundland and Labrador. I will meet with Mr. Wakeham soon.”

Chris Huskilson, a former chief executive of Nova Scotia-based power company Emera Inc., led the group. His team included former EY executive Michael Wilson, who previously criticized the draft deal and said Newfoundland and Labrador could get better terms.

Wakeham had promised that the panel members would present their report in person on Tuesday. However, his office said Friday that would no longer happen. The members decided their report speaks for itself, a spokesperson said.