The Churchill Falls MOU: Just the Facts 

The MOU laid out the framework and key principles for the definitive agreements. The final, definitive agreements will contain significantly more detail and serve as a contract that ensures maximum value for our province.

Some say Quebec is the only winner. That claim frames this as an “us vs. them” story and mixes up different numbers. It confuses revenue from the existing Churchill Falls power with the total provincial benefit, which hides the full picture.

The new pricing for the existing Churchill Falls plant alone is forecast to bring about $180 billion in nominal dollars to the province, and when you add Newfoundland and Labrador’s majority ownership stakes in the new developments (including Gull Island), the total benefit to the provincial treasury is projected at over $225 billion. This agreement both protects our energy future and provides generational revenue to support jobs and public services.

Some say this deal will saddle taxpayers with $24 billion in debt and double provincial debt. That’s misleading. Hydro‑Québec will lead and pay for the two largest projects and assume construction and cost‑overrun risk. Newfoundland and Labrador’s equity stake is covered by a $3.5 billion payment from Hydro‑Québec (net present value), not by taxpayers. Hydro‑Québec will also take responsibility for borrowing to develop Gull Island, while NL Hydro keeps majority ownership and will operate the new facilities. The 50‑year power‑purchase framework covers development, construction, operation and maintenance costs and includes an expected return on equity of about 8–9%.

A misleading narrative currently suggests the MOU sells our power for less than it’s worth. This ignores the fundamental correction that this deal makes to a decades-old imbalance. It offers a new, modern agreement in place of an outdated contract that everyone agrees was flawed.

It secures a fair, market-based price for our power. The price for our power will increase from 0.2 cents to an effective average of 5.9 cents per kilowatt-hour (in 2024 dollars), a thirty-fold increase. Also, because the price is not fixed and will escalate with the market, it ensures Newfoundland and Labrador will receive fair value for its electricity for decades to come.

Memorandum of Understanding Reference, Schedule F, Principles Underlying Volume Blocks

There is a misconception that electricity prices paid by Quebec will remain fixed, just like in the 1969 agreement. This is a misleading holdover from the old contract that ignores one of the most important parts of the new deal.

A key achievement of this MOU is the elimination of the fixed-price structure of the 1969 agreement. The new pricing model is dynamic and tied to market prices, ensuring the value of our power escalates over time. This modern approach protects the province’s interests and ensures we receive fair compensation that reflects changing market conditions.

In particular, the price for electricity will be connected to the price of electricity in several markets:

• Reflective of the wholesale electricity market value in Québec;
• Replacement costs in Québec; and
• Wholesale electricity market value in northeast export markets.

The final formula that will be used to reflect these markets is currently under negotiation.
Using several market indicators means current negotiators do not have to select the single best market for the long term. Making such a selection would not be prudent, however the method of using a ‘mutual fund” of pricing indicators de-risks selecting the wrong price now. Each of these markets is expected to increase over time and so the price for Churchill Falls power will also increase over time and so it is not fixed, nor bound by the forecasted value of payments.

Some have raised concerns that the 50-year term is too long. This is misleading because it omits a critical feature designed to protect future generations – flexibility. It suggests we are locked in, when in fact, we have built-in opportunities to adapt.  

While long-term agreements are standard for large hydroelectric projects, the new agreement includes strategic off-ramps in 2051 and 2061, which give our province the ability to adapt the deal to changing market conditions and ensure it continues to serve our best interests. These off-ramps are blocks of power that will be priced based on the value of electricity at the time, and NL Hydro will have the discretion to use the power or not.

Further, the price of Churchill Falls power is tied to several indicators for pricing for the duration of the contract. The block pricing approach is intended to provide pricing flexibility, capture changes in the market value and fairness over the term of the new power purchase agreements.

Market value and fairness of price over the duration of the term is embedded in the MOU and will carry into definitive agreements. The province would never sign a fixed value MOU or definitive agreements. Memorandum of Understanding Reference, Article 2, Section 2.1 (d)

A common myth suggests we should develop Gull Island ourselves and keep all the power. This is a misleading argument because it ignores the immense financial risk of going it alone. Going it alone would require the province to take on a $25 billion investment and to find customers large enough to double our whole current provincial demand for electricity.

The notion that that we should undertake this development alone or with an alternate third party downplays the massive and appropriately sized increase in power we have negotiated through this deal.

This agreement allows us to develop Gull Island without taking on the immense financial risk, while securing a significant portion of power from the existing and future generating assets for our own use. NL Hydro will gain access to 1,990 MW of electricity– nearly four times the capacity it has access to currently in Labrador. In fact, Labrador has used just over 500 MW in the last decades. This is a massive increase that will be available to power significant industrial development, contributes to economic prosperity for the whole province, and create jobs right here in Labrador and is the smartest way to unlock Labrador’s potential.

Memorandum of Understanding Reference, Article 2, Section 2.1 (a), and Section 2.3 (d)

You may hear the claim that there is no guarantee for jobs for people from our province and that the jobs from these projects will go to workers from outside the province. This is misleading because it completely ignores the hiring protocols that are a legal part of the project’s foundation. It creates a false narrative of local workers being left out.

The projects are expected to generate thousands of jobs and billions in economic benefits right here at home. For the Gull Island project, there is a clear, legally established hiring protocol: qualified workers will be hired first from the Innu Nation, then residents of Labrador, then residents of the island, and finally the rest of Canada. The same hiring protocol applied during Muskrat Falls and 85% of the hours worked were by people from this province. Application of the hiring protocol during Muskrat Falls will be examined for improvements during Gull Island.

Memorandum of Understanding Reference, Article 1, Section 1.2 (c)

You may hear this described as a “done deal” that was negotiated in secret. This is a misleading characterization of the process. It incorrectly frames a non-binding first step (the MOU) as the final word, creating a false sense of secrecy and shutting down legitimate discussion about the next steps.

But the signed MOU is a non-binding framework that allows negotiations to proceed on definitive, binding agreements. To ensure full public trust and transparency through this next phase, a new, independent panel, chaired by the Consumer Advocate, will oversee the ongoing negotiations. This ensures our province’s interests are protected every step of the way before any final agreement.

Memorandum of Understanding Reference, Article 5, Section 5.1 (b)

There is an assertion circulating that because Hydro Quebec are the project manager of Gull Island, Quebec businesses will be the beneficiaries of Gull Island construction. This is false. Full and fair opportunity for local businesses from Newfoundland and Labrador is engrained in the MOU.

Gull Island is part of the Lower Churchill project which also included Muskrat Falls. The environmental release for the Lower Churchill Project included a requirement to offer full and fair opportunity for Newfoundland and Labrador businesses as part of the construction of those projects. As project manager and as is written in the MOU, Hydro Quebec has to comply with legal requirements and this includes the requirements of the environmental release. 

During Muskrat Falls construction, this requirement to provide for full and fair opportunity for NL businesses resulted in over $3.6 billion of benefit to Newfoundland and Labrador businesses. Newfoundland and Labrador Hydro and Hydro Quebec have already started supplier sessions in the province to best equip local businesses for the opportunities to come. We are committed to continuing to maximize local procurement benefits.