Quebec appellate court upholds 2014 ruling regarding sales from Churchill Falls hydropower plant

Churchill Falls Hydropower Plant

Efforts by Canadian province Newfoundland and Labrador met another legal wall this week when the Quebec Court of Appeal upheld a 2014 decision regarding power allocations from the 5,428-MW Churchill Falls hydroelectric plant.

The move is a response to an appeal made by Nalcor Energy to the Quebec Superior Court in September 2014 that would have opened a 1969 contract between Nalcor and Hydro-Quebec up for renegotiations before its expiration in 2041.

Under terms of the 1969 contract, Nalcor's purchase price is currently one-quarter of one cent per KWh. However, that changes to one-fifth of one cent under terms of an automatic 25-year renewal that go into effect September 1 of this year.

The deal has equated to about $1 billion total profits for Newfoundland and Labrador, according to Nalcor, while Hydro-Quebec has pulled in $22 billion, despite the plant being located in NL, and Nalcor owning the majority share of the project's operator, Churchill Falls Labrador Corp. Ltd. (CFLCo).

The difference in profits has caused Newfoundland and Labrador to argue for years that the deal is unfair given changes in the energy market that have transpired since the contract was signed.

Hydro-Quebec, however, claims -- and the Quebec Court of Appeal affirmed Monday -- that the deal is valid as it assumed all costs and risks associated with Muskrat Falls at the time the contract was signed.

"The uncontradicted evidence established that the parties knew that the value of hydroelectric power was to likely fluctuate and have voluntarily agreed fixed prices for energy," the court said in its judgement.

The dispute stems back for years, but escalated in 2009, when NL and Nalcor Energy asked Hydro-Quebec to renegotiate terms of the agreement to "establish a fair and equitable return to both [Nalcor] and Hydro-Quebec for the future."

Churchill Falls (Labrador) sent a letter to Hydro-Quebec in 2009 seeking a re-negotiation of the agreement but Hydro-Quebec did not respond. The Newfoundland utility then filed a motion in Quebec Superior Court commencing proceedings against Hydro-Quebec in March 2010.

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