Court action targets lack of good faith in Upper Churchill contract
The operator of the Upper Churchill power plant is generating a court challenge to reopen its disastrous long-term electricity deal with Quebec.
"We have done extensive research on this particular action," Nalcor Energy CEO Ed Martin said at a news conference late Monday afternoon.
"We're confident. It's a very serious case. And we have no choice but to proceed."
Nalcor - the province's Crown-owned energy corporation - owns roughly two-thirds of Churchill Falls (Labrador) Corp., which runs the Upper Churchill power plant.
On Nov. 30, Martin sent a letter to Hydro-Quebec president Thierry Vandal asking him to re-negotiate pricing terms for the remainder of the agreement, citing "good faith" provisions of Quebec's civil code.
Hydro-Quebec did not reply by last week's deadline.
See 'ENTIRELY', page A2
"As a result of their failure to enter into discussions to re-negotiate the contract terms, I have instructed CF(L)Co's lawyers to proceed with legal action," Martin said.
"We will be filing a motion in the Quebec Superior Court in the coming weeks detailing the basis of our claim to have the pricing terms of the Upper Churchill 1969 power contract amended for the remainder of the contract."
Martin told reporters the matter could take two to three years to work its way through the court system.
He deflected questions about exactly what power rate CF(L)Co is seeking through its legal action, noting only that it would be a "substantial" increase.
The current purchase price of Upper Churchill power is roughly one-quarter of one cent per kilowatt hour. In 2016, that price will drop to one-fifth of one cent.
The contract runs until 2041.
According to Nalcor, those prices mean Upper Churchill power will be sold to Hydro-Quebec for less than five per cent of its recent commercial value over the contract's remaining 32 years.
Newfoundland and Labrador officials have contended the province nets only $63 million a year from the lopsided arrangement, while Quebec receives an estimated $1.7 billion annually.
"This inequity must be addressed and the legal opinions we have received support the legal action we are taking," Martin said.
Last month, Quebec Deputy Premier Nathalie Normandeau said there was "nothing new" in the request.
"This isn't the first time that Newfoundland has tried to challenge the agreement that was signed on Churchill Falls," Normandeau told reporters in Quebec City in early December.
"The Supreme Court ruled in 1988 in favour of Quebec. So, for us, there is nothing new, and I'm not going to comment any further."
Martin insisted the pending court challenge is "entirely different" from the issues previously examined by the Supreme Court of Canada.
The new action will be based in Quebec law, while the 1988 challenge dealt with actions by the Newfoundland and Labrador legislature.
Meanwhile, the Upper Churchill lawsuit plans are separate from another looming tussle between Nalcor and Hydro-Quebec.
Hearings are set to begin today at Quebec's energy regulator over Nalcor requests to transmit Lower Churchill power through Quebec to potential markets in Ontario and the northeastern U.S.