Hydro Quebec wins another round in energy feud with Nfld.

Court affirms its right to buy ``virtually all of the power'' from Churchill Falls dam.

August 10, 2016   by CP STAFF

ST. JOHN’S, NL — Newfoundland and Labrador has lost another legal skirmish in its long-running energy feud with Hydro-Quebec over power supplied by the Churchill Falls dam in Labrador.

Crown corporation Nalcor Energy said it’s translating and reviewing a 200-page Quebec Superior Court judgment involving access to energy from the Churchill Falls dam in Labrador.

Hydro-Quebec asked the court to affirm its right based on a 1969 power contract to buy “virtually all of the power” from the 5,428-megawatt generating station owned and operated by the Churchill Falls (Labrador) Corp., known as CF(L)Co.

Hydro-Quebec took issue with the Labrador corporation’s assertions that the Quebec utility will be entitled to monthly allotments once the contract is automatically replaced Sept. 1 with a renewal deal that doesn’t expire until 2041. It argued that since 2012, the Labrador corporation had been selling more than that amount to Crown utility


Newfoundland and Labrador Hydro – interrupting Hydro-Quebec’s contracted deliveries.

At issue is how much surplus power might be available for sale. And it’s just the latest wrangle involving the two provinces, which for decades have been at loggerheads over perceived transmission hurdles and pricing issues.

The judgment supports Hydro-Quebec’s view that the Labrador corporation, despite new language in the renewal contract, still can’t capture more than two fixed blocks of power – worth 300 megawatts and 225 megawatts – for sale to third parties.

“CF(L)Co’s position is that as the owner of the Churchill Falls Generating Station and the Upper Churchill water rights, it has the right to undertake and benefit from new commercial opportunities while still respecting its existing contractual obligations to its customers, including Hydro-Quebec,” Nalcor said in a statement.

“The decision ruled against CF(L)Co.”

A spokeswoman for Nalcor said no one was available for an interview, and that it’s too early to say if it will appeal.

Former premier Kathy Dunderdale blasted the legal motion when it was filed in 2013 and said she was confident it would fail. She called it a “desperate” and “arrogant” attempt by Quebec to thwart the Muskrat Falls dam and powerhouse now under construction farther down the Churchill River near Happy Valley-Goose Bay.

Cost overruns and delays described as a “boondoggle” by new Nalcor head Stan Marshall have pushed the project’s estimated price tag with interest to $11.4 billion – up $4 billion since 2012. Marshall, who took over after former Nalcor president and CEO Ed Martin said he was voluntarily stepping down in April, has vowed to get Muskrat Falls back on track.

Despite Dunderdale’s public comments, Nalcor in its statement said the court ruling won’t compromise the project.

“The Churchill River will be managed under the terms of a Water Management Agreement established by the Public Utilities Board,” it said.

“The (agreement) optimizes production for facilities on the Churchill River and ensures that Muskrat Falls and CF(L)Co. can meet their contractual obligations while ensuring that the provisions of the Churchill Falls renewal contract are not adversely affected.”

But vocal critics of the project, including several lawyers who called themselves the 2041 Group, repeatedly questioned whether Hydro-Quebec might challenge how Nalcor intends to manage water flows between the Upper Churchill dam and the downstream Muskrat Falls site with its relatively small reservoir.

They were among skeptics who said the province was vulnerable to potential legal snags as it forged ahead with the project.

Newfoundland and Labrador earlier this month also lost a separate ruling to Hydro-Quebec over the woefully lopsided 1969 Churchill Falls power deal.

The Quebec Court of Appeal upheld a 2014 lower court ruling, agreeing the provincially owned power utility has no obligation to reopen the agreement. It has steadfastly refused to renegotiate original terms, which did not reflect rising energy values and do not expire until 2041.

Nalcor has estimated Hydro-Quebec has reaped more than $22 billion from Churchill Falls since the deal was signed, compared to about $1 billion for Newfoundland and Labrador.

Hydro-Quebec spokesman Serge Abergel said the provincially owned utility welcomed Superior Quebec Justice Martin Castonguay’s decision and says it upholds the terms of the 1969 deal.

“The decision confirms that we have exclusive rights to buy all the power available to the plant,” Abergel said.