“Economic terrorism” was a phrase coined by the late Geoff Stirling in a 2004 interview on the coming crisis — the automatic renewal of the Upper Churchill contract in 2016.
“Newfoundland is a nation. Period. A colony, the first in the empire. Well we have to regain who we are. We have been hoodwinked so badly we’ve lost our self-esteem,” Stirling said at the time.
Newfoundland and Labrador has fought for years to correct a deal with Hydro-Quebec over the revenue generated from the infamous Churchill Falls contract.
Former Premier Brian Tobin touched on the topic in a November 1996 speech.
“To get Churchill Falls power to market, it had to cross Quebec. But, Quebec in the 1960s said ‘no’ to the free movement of electrical power. Quebec said, you can sell the power to no one but us. You cannot ‘wheel’ Churchill Falls power through the Hydro-Québec power grid. And, you cannot build a power line to reach markets in the U.S. Once this was clear, Hydro-Québec could, and did, dictate the terms of the Churchill Falls agreement.”
In that same speech Tobin estimated that Hydro-Québec received windfall profits of $1.4 million a day from redistributing Churchill Falls power. He said Newfoundland and Labrador, the resource owner, received only $45,000 a day.
The Newfoundland company that developed the massive hydro project signed the extraordinary contract because Hydro-Quebec, after years of negotiating in goodwill, chose at the last minute to exploit inside information that the developer would go bankrupt without a deal.
In 1976, Quebec paid Newfoundland three tenths of a cent, per kilowatt hour. Today it pays us just over one quarter of a cent, while domestic consumers pay almost six cents per kilowatt hour. The increasing cost of electricity made it possible in 1999 for Hydro-Québec to achieve sales of $9.6 billion. By 2016, the price they pay us will drop to one fifth of a cent.
Our attempts to correct the deal using moral and ethical appeals came to a standstill in 1984 when a Supreme Court ruling stated Newfoundland and Labrador could not get out of its agreement with Quebec on selling power from the Churchill Falls hydroelectric plant.
Could Quebec have the answer we have been longing for? Did you know that in 1963, to eliminate rate disparities, Quebec decided to nationalize the electricity sector (effectively seizing control of outside investors’ assets) and bringing it under the control of Hydro-Québec. (Nationalization is the act of transferring assets into public ownership. It usually refers to the transfer of private assets, but may also mean assets owned by other levels of government.)
The renewal clause in the 1969 Churchill Falls contract will have immense consequences. It ensures that from 2016 to 2041 all the economic rent associated with CFLCo’s electricity sales to Hydro-Québec will accrue to Hydro-Québec.
The value of that economic rent is likely to be enormous. Twice the government of Newfoundland has challenged the contract in court, and each time the courts have upheld it. But no one has ever launched a legal challenge of the actual renewal clause.
While Muskrat Falls is a good starting point, we shouldn’t settle for scraps.
That being said we should also upgrade the power cables planned to transfer Muskrat power to handle all of Churchill Falls power potential and give us the option to bypass Quebec.
We need to let go of our “culture of defeatism.” It’s time for Newfoundland and Labrador to fight this “economic terrorism.”
In 2016 Newfoundland and Labrador (NL16) should follow Quebec’s example and nationalize the electricity sector, bringing control of Churchill Falls back to Newfoundland and Labrador.
It’s time to benefit from our resource, get some guts and save our future.