Opposition Members of the House of Assembly received a briefing on Tuesday (August 18) on the latest Churchill Falls and Gull Island MOU, led by former Conservative Cabinet Minister and Muskrat Falls architect, Jerome Kennedy. While much of the agreement remains consistent with the 2024 MOU signed by our former Liberal government, the Official Opposition has serious concerns about several significant changes made by Premier Tony Wakeham.
“Premier Wakeham has repeatedly told Newfoundlanders and Labradorians that this is a better deal. But there are important changes that appear to make the deal worse for our province, particularly when it comes to pricing,” says Opposition Leader John Hogan.
Gull Island Price Will Not Increase for the Life of the Deal
One of the most concerning changes is the loss of an escalator on Gull Island power sales.
Our former Liberal government fought hard to secure an escalating price for Gull Island to ensure the value of the power increased over time. Newfoundlanders and Labradorians know all too well the consequences of the 1969 Churchill Falls contract, which failed to include an escalator.
Under the new MOU, the price Quebec pays Newfoundland and Labrador for Gull Island power does not increase with time. In fact, the price is structured to decline over the life of the agreement.
“After everything we learned from the 1969 contract, it is hard to believe that Premier Wakeham would agree to another 50-year agreement without an escalating price for Gull Island,” says Hogan. “Newfoundlanders and Labradorians deserve better than another deal where the value of our electricity declines over time.”
Premier Wakeham Gives Up Market-Based Pricing for Churchill Falls Power
The Official Opposition is also concerned that the Conservative government has given up market-based pricing for Churchill Falls power.
Under the 2024 MOU, all of the Churchill Falls power was subject to market-based pricing, meaning Newfoundland and Labrador would benefit when electricity prices in the U.S., and other markets, increased. Under the new agreement, that pricing mechanism has been replaced with a price tied only to the Consumer Price Index. Historically, electricity prices have increased at a significantly faster rate than CPI, raising serious concerns about the long-term value of the agreement to Newfoundland and Labrador.
For example, if the 1969 deal had been tied to CPI, Newfoundland and Labrador would receive less than 2 cents/kWh, far behind the 6 cents/kWh it can attract today.
The Conservative Government has also claimed that it secured the ability to wheel power through Quebec. However, what has actually been secured is “synthetic transmission.” As per the agreement, “NLH may elect to sell to HQ” a small portion of power based on US Prices, minus transmission charges.
This provides market-based pricing for a limited amount of electricity sold to Quebec, less than 10% of the total power Quebec will receive, in place of the market-based pricing the 2024 MOU had for all Churchill Falls power.
This agreement does not give Newfoundland and Labrador the ability to sell power through Quebec directly into United States markets as the Conservatives’ claim, and as the Premier’s review panel called for.
“The government knows this is complicated and is counting on people not looking closely at the details. The Premier is hoping the public trusts his word, which he has already demonstrated cannot be trusted” says Hogan.
Importantly, the latest agreement remains a non-binding MOU. That means there is still an opportunity to address these concerns before any final agreement is signed.
The Official Opposition will continue to press the Conservative government for transparency and accountability and will seek answers to these questions in the House of Assembly in September.
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