Quebec Premier Francois Legault and Andrew Furey, Premier of Newfoundland and Labrador sign a memorandum of understanding during an announcement in St.John's, Thursday, Dec. 12, 2024.The agreement addresses the termination and replacement of the 1969 Upper Churchill contract and the co-development of Gull Island hydroelectric project. THE CANADIAN PRESS/Paul Daly

MONTREAL - Quebec and Newfoundland and Labrador have announced an agreement in principle that would overhaul the contentious Churchill Falls energy deal.

Hydro-Québec President and CEO Michael Sabia calls it a balanced deal that benefits both provinces, securing low-cost energy for Quebec at a price that is more beneficial to the Atlantic province compared to the previous 1969 deal.

Here are some of the details of the proposed pact:

What's in the new deal?

Quebec secures electricity from the Churchill Falls plant into the future at a fairer price for Newfoundland and Labrador. Hydro-Québec says the Atlantic province currently receives about $100 million yearly and that will rise to $1 billion.

A major part of the deal will have Hydro-Québec will pursue new developments, notably Gull Island, a 2,250-megawatt project targeted to be operating by 2034-2035. There will also be an expansion at the existing Churchill Falls site, with a new generating station built beside the current infrastructure, also by 2035, with a capacity of 1,110 MW. Better performing turbines at the current Churchill Falls site will allow for a capacity increase of 550 MW between 2028 and 2038.

Hydro-Québec will be project lead for the new developments.

Indigenous involvement

Quebec's provincially owned utility says discussions with Indigenous communities in Labrador and on Quebec's North Shore will begin immediately now that a preliminary framework between the provinces is in place. The First Nations involvement will include some 200 kilometres of new transmission lines to connect Gull Island to La Romaine, a hydroelectric complex in Quebec.

Locking in ahead of 2041 contract expiry

Even though the current deal was set to run until 2041, Hydro-Québec President and CEO Michael Sabia says it was important to lock in to a 50-year pact at a favourable rate for renewable energy amid an anticipated spike in needs over the coming decades. Quebec will buy electricity at 11 cents/kWh from future developments and will see the average price of electricity from Churchill Falls rise gradually from 0.2 cents per kWh to 4 cents/kWh.

The average energy price from Labrador will come in at 6 cents/kWh, and Quebec would have access to 7,200 MW over the next 50 years once all the projects are complete.

A massive complex

With a new generating station at Gull Island and upgrades to Churchill Falls, it would be the second-largest hydroelectric complex in North America behind Hydro-Québec's James Bay development.

What comes next?

Hydro-Québec and Newfoundland and Labrador Hydro have agreed on a non-binding agreement and are committed to negotiate a definitive agreement in the coming months. Sabia declined to put a time frame on when the final agreement would be delivered and until then, the original 1969 deal remains in effect. In addition to partnerships with Indigenous communities, there needs to be discussions with governmental and regulatory officials, including the federal government.

This report by The Canadian Press was first published Dec. 12, 2024.

Note to readers: This is a corrected story. A previous version said Newfoundland and Labrador receives about $100,000 per year.

News from © The Canadian Press, 2024