Newfoundland: A Taken From Province

I was in Quebec this summer, driving through on the way home to Newfoundland, and I was impressed by the lovely, well-kept homes and the idyllic life lived by people in the Eastern Townships. It is a lovely place. Senior citizens live active social lives in well-maintained homes.

Then I continued my drive to Newfoundland. The difference in disposable income is considerable. Homes are smaller and more tightly packed together. There is a visible difference in the economic means of the respective citizens.

The economic difference is strongly influenced by the average cost of power for Quebec and NL residents. I produced an energy efficiency video to illustrate the role that power prices play in the relative costs of maintaining a home in different regions. The average purchase cost of power, when factoring in connection and other charges, is more than double in Quebec than it is on the island of Newfoundland.

In Quebec, residential residents pay approximately $0.075/kWh while Newfoundland residents pay over $0.16/kWh. On an individual level, that price differential has consequences. In Newfoundland, 50 percent of seniors and vulnerable citizens face tough choices between the cost of heat and the choice of food. While a heating bill in Quebec is unlikely to exceed $2000 per annum, a $4000 annual heating bill and peak monthly heating bills of $700 can be crippling to Newfoundlanders, especially the most vulnerable.

Only 20 percent of Quebec’s vulnerable citizens face decisions between warmth and food. When power costs are lower and not subject to massive swings in the coldest months, fewer people must make a difficult choice between fuel in the body or outside the body. The massive power cost difference is one of the most alarming ways Canada exploits Newfoundlanders.

Keeping Newfoundland Down

In business, the cost differences are as substantial. The additional cost of power depletes all economic advantages of processing materials or products in Newfoundland. Newfoundland companies cannot compete with companies whose costs of operation are far lower in Quebec and other states or provinces. Newfoundland remains restricted in using power generated from Churchill Falls, a crippling barrier to developing its economy. Not only did the Hydro-Québec deal rob Newfoundland of its wealth, but it put shackles on its opportunity.

When new economic opportunities came to the province, the yoke of the Hydro-Québec Deal drained Newfoundland’s capital, limiting its ability to capitalize on its abundant natural resources. Opportunities around Voisey’s Bay, Hibernia, and the Lower Churchill needed foreign investment to develop the resources, at a substantial cost to Newfoundland. Newfoundland’s long-term weak credit rating reduced its ability to negotiate better deals to enhance the benefits of resource exploitation.

Quebec was able to fund the James Bay project, a massive Hydro Project almost 3 times larger than the existing Churchill Falls project, 15,244 MW vs Churchill Falls’ 5,428 MW; Quebec had the resources to fund the investment internally.

NL Funded James Bay

How? Because under the structure of the Churchill Falls Deal with Newfoundland, they had the long-term revenues to support the James Bay expansion. Using the historical price yielded to Quebec Hydro customers, Hydro-Québec had the predictable revenues to self-finance the US$20B James Bay Project.

I mentioned in my last op-ed that I researched the historical price per kWh Quebec was able to charge its customers from 1972, $0.0188 when the Churchill Falls project first produced to $0.03/kWh in 1990, to $0.075/kWh in 2026. The cash flow from the deal produced an internal rate of return of 38.5 percent by 1990. Total revenue of $65B was generated for Quebec through 2026 versus the $3.5B paid to Newfoundland, less Hydro-Québec’s 34.2 percent. or less than $2.4B.

I ran an internal rate of return calculation, mimicking the capital investments in the James Bay project. A US$20B investment is not a $28B investment as it is at current exchange rates but would be closer to C$22-23B. For my calculation, I added a $2B capital cost annually from 1978 – 1988, or $22B over 11 years. Based on that calculation, revenue from the Churchill Falls deal with Newfoundland netted Hydro Quebec a positive internal rate of return by 1999.

Before the end of the last century, 26 years ago, the yoke of the Churchill Falls deal allowed Hydro Quebec to pay for its investment in the James Bay project. So, while Newfoundland was begging for investment in its vast natural resources, securing deals at the cost of not being able to support its own capital development, Newfoundland and Labrador’s riches were paying for Quebec to build James Bay.

That is the essence of the Taken From province. Yes, Joey Smallwood’s government signed a bad deal. Hydro-Québec knowingly entered a deal that was not in the best interests of Newfoundland. Worse, the then Trudeau government of Canada vacated its fiduciary responsibility to the best interests of all Canadians to strengthen its Quebec political base.

No Guardrails on Interprovincial Commerce

Successive Canadian governments have ignored the harm done to Newfoundland, content to mock stupid Newfies rather than face the true predatory nature of confederation. In the US, the Interstate Commerce Commission ensures the fair conduct of interstate commerce.

Instead, in Canada, in a country founded on colonization and immigration, Newfoundlanders, like Indigenous people, are neither colonist nor immigrant, not part of Canada’s internal definition, and fair game for abuse. Or if you follow CBC, or sites like QalipuPretendianNation, or experience rulings in the HRTO that confirm that Qalipu rights in Ontario are subject to the sovereignty of local Indigenous nations, Newfoundlanders exist at the bottom of that pile.

The deal offered to Newfoundland by Mark Carney is proof. Mark Carney, the “Liberal” prime minister who opened his Quebec leadership campaign with the Cataractes de Shawinigan, used his experience as the former vice chair of Brookfield Asset Management, owners of Brookfield Renewable Partners, to argue that $0.0188 is a fair place to start under a revised power deal.

He never mentioned that he is aware of the hydro power market in Quebec. He would be aware that the market for small power producers like Hydro Mega achieves $0.06 – $0.10/kWh on hydro power purchase agreements in Quebec. Brookfield Renewable Partners achieve a higher average rate of $0.1074 in deals governed by Carney’s fiduciary responsibility. Yet, Carney recommends $0.0188 /kWh for Newfoundland, with 34.2 percent of that going to Hydro-Québec.

Strengthening the Yoke

And then Hydro-Québec gets to increase its share in all Churchill Falls projects, as Canada partially covers the capital Newfoundland loses in a one-sided deal, whilst the yoke of Hydro-Québec’s becomes heavier for another 50 years. This is not a fair deal. It is like a guy shaking hands with a minority trying to appear inclusive in a den of racism.

This is Canada allowing Hydro-Québec to continue to impose itself on Newfoundland sovereignty. Hydro-Québec can continue to limit how we can use the power generated by Churchill Falls whilst they impoverish the vulnerable in Newfoundland while subsidizing the security of Quebec’s citizens. Canada is mandating theft from Newfoundland’s Peter to pay Quebec Paul. Then providing unequal benefits to Labrador electricity customers to make it easier to separate NL and Labrador whenever it suits.

Build All Canada Strong

A fairer deal would look at this on a national level. Rather than building interlinks to the US to “permit” Newfoundland to see a few profits on its own resources, the focus should be national. Newfoundland should be given 100 percent ownership of its resources and should be able to sell its power to Quebec at a fair price; the price I am suggesting is the average price of power sold to Quebec customers, which is stabilized in the interest of Quebec’s citizens.

Then build a major interconnect to Ontario that would allow Quebec and Ontario to share power transmission to strengthen all of Canada’s economy.
With a 5 GW two-way direct current link to Toronto, Quebec could make up its losses on a fairer Newfoundland Deal by offering power to Ontario at rates that are lower than Ontario can generate whilst allowing Ontario to maximize its nuclear assets.

Links to the Maritimes, Quebec, Ontario, and the US, Canada’s overall competitive advantages increase for all citizens. With a strong Atlantic economy, Canada could strengthen its link to European partners and diversify its economy.

Partnerships with the US can still be enhanced whilst protecting Hydro-Québec from the solar power-influenced duck curve, or mid-day dip in electricity prices, which is threatening the long-term viability of Hydro-Québec’s spot market profits.

Build Canada Strong is a nice idea, but it would be better if it included Newfoundland as a valued partner in its national vision.