A recent proposed agreement between Newfoundland and Labrador and Quebec lays out a blockbuster energy deal that could last for the next half century.
The agreement amends, extends and expands the 1969 Churchill Falls agreement, which has long vexed Canada’s easternmost province.
The provinces’ premiers have both celebrated the agreement, framing it as a win for their constituents. But not everyone is lauding the deal.
Under the current Churchill Falls agreement, which is formally between Newfoundland and Labrador Power and Hydro-Québec, electricity is sold to Quebec at the farcically low price of 0.2 cents a kWh. Under the proposed new deal, the price would rise to 5.9 cents a kWh — a 30-fold increase.
The new deal also allows for price adjustments based on future market prices, and it extends the deal termination date from 2041 to 2075.
“After more than 50 years of a lopsided agreement … we finally have a new deal for Churchill Falls with Quebec,” Newfoundland and Labrador Premier Andrew Furey said at a Dec. 12 event to announce the deal.
The province estimates the new Churchill agreement will contribute $17 billion in revenue by 2041 — about $1 billion a year. An additional $1 billion in the current fiscal year would represent a roughly 10 per cent boost to total revenues and would turn the province’s deficit into a surplus.
For his part, Quebec Premier Francois Legault positioned the deal as beneficial to both provinces.
“In the short term, we give more money to Newfoundland, but when you’re in politics you have to think in the long term. You have to think of future generations,” Legault said, speaking in French, at the same event.
“It really is an extraordinary agreement. I have been Premier of Quebec for six years and this is by far the agreement I’m most proud of.”
Sensitivities
Under the new deal, the provinces have also agreed to co-operate on upgrades, additional electricity generation and transmission projects.
The existing Churchill Falls facility will be refitted to generate an additional 1,650 MW at a cost of $6.5 billion. Newfoundland and Labrador Power will remain the majority owner, maintaining its roughly two-thirds ownership share, versus Hydro-Quebec’s one-third stake.
The largest proposed development is a new generating facility on the Churchill River at Gull Island. The project has been proposed in various configurations since the 1970s, but has not materialized due to political disputes, cost and sensitivities resulting from the original Churchill deal.
The new agreement proposes the construction of a 2,250 MW generating station at a cost of $25 billion. That station will be 60 per cent owned by Newfoundland and Labrador Power and 40 per cent owned by Hydro-Quebec. Quebec will pay the entire dollar cost of constructing the station.
Hydro-Quebec has “full decision-making authority” over the project, making it responsible for construction, design and — importantly — liability for any cost overruns.
| Asset | Capacity | Capital Cost | HQ Ownership | NLH Ownership | Operator | Construction |
| Churchill Falls (Existing) | 5,400 MW | n/a | 34.2% | 65.8% | NLH | n/a |
| Churchill Falls (Upgrade) | 550 MW | $1.9 Billion | 34.2% | 65.8% | NLH | Joint |
| Churchill Falls (Expansion) | 1,100 MW | $4.6 Billion | 34.2% | 65.8% | NLH | HQ |
| Gull Island (New Build) | 2,250 MW | $24.9 Billion | 40% | 60% | NLH | HQ |
New transmission lines will be constructed in both Labrador and Quebec to bring the additional electricity generated to market.
According to Hydro-Quebec, the average cost from all sources of electricity sourced from Labrador will be 6 cents a kWh. This is “half the price of the renewable alternatives available to Québec.”
‘A deal of reason’
While the premiers have touted the deal’s benefits, Danny Williams, Newfoundland’s premier from 2003 to 2010, says he is skeptical of the deal. He says the province can do better.
“I am humbly suggesting that we take this opportunity to tell (Quebec) to come back and start off by at least doubling their offer and then we will set our terms for a new deal,” he said in a January news release.
Williams’ government oversaw the controversial Muskrat Falls project, also situated on the Churchill River in Labrador. That project saw the development of a 824 MW hydroelectric generating station at a projected cost of $7.4 billion that ballooned to $13.5 billion in 2023.
Controversially, the project did not route power through neighbouring Quebec. Instead, it used subsea cables to route electricity to the island of Newfoundland and then on to Nova Scotia, all to avoid Quebec.
François Bouffard, associate professor of electrical engineering at McGill University, sees the partnership between Newfoundland and Labrador and Quebec as unavoidable. “We’re doomed by our geography to work together,” he said.
“[Newfoundland and Labrador] had to go back to the traditional route, which is to pass through Quebec. No matter what, they had to come to an agreement … It was a deal of reason … They had no choice.”
He views partnering with Quebec as logical, even if it involves Newfoundland and Labrador getting a lower equity stake and price for electricity. “Developing it on their own might have been another sink hole for the province,” he said, referring to the Muskrat Falls project.
Bouffard also considers the less-discussed transmission requirements to be noteworthy. “Building transmission is extremely expensive … Hydro-Quebec is taking the burden of that part of the project … which is not negligible.”
Opposition walks out
But like Williams, Newfoundland’s official opposition, the Progressive Conservative Party, has expressed reservations about the deal.
Opposition Leader Tony Wakeham has complained that members of the house did not have “the opportunity to determine what other options were available to the province.”
The legislature was recalled from Christmas break to debate the agreement in a special session over four days.
“Why are we in a hurry to sign another 50-year deal with Quebec for lower-than-market prices and without the benefit of a second and independent opinion?” Wakeham said.
The 14-member opposition walked out in protest without voting. They criticized the government for failing to provide sufficient time for review and inadequate independent oversight.
With the Progressive Conservative Party members not voting, the motion passed 25-0.
Officials from Newfoundland and Labrador and Quebec are now moving beyond their non-binding memorandum of understanding to negotiate binding agreements, which they hope to complete by April 2026.
Newfoundland’s provincial election is scheduled for October 2025, where the future of these projects and control on the Churchill River is expected to feature prominently.
Regardless of the outcome, Bouffard, of McGill University, expects a relationship with Hydro-Quebec will endure.
“We’re stuck with the geography we have.”
“Building transmission is extremely expensive … Hydro-Quebec is taking the burden of that part of the project … which is not negligible.” – could you add the estimated cost of new transmission to your piece? And indicate where that transmission would go? There’s a lot of discussion here in NL about the potential that more power could enable more mining projects in Labrador but doesn’t that depend on where they are sited and whether they could be connected to the grid by power lines with adequate capacity? Would Quebec be obliged to pay to connect new Labrador mining operations?
Hi David – Thanks for reading and reaching out.
It is my understanding that transmission lines have not been routed or costed yet, but there are multiple options, including along existing rights-of-way.
In terms of design and construction, each province is responsible within their respective jurisdictions.
The MOU does not require Hydro-Quebec to build interconnections to any potential new off takers within NL.
Hope this helps!