N.L. wants Upper Churchill hydro contract renegotiated

The government of Newfoundland and Labrador, through its energy corporation Nalcor, is asking Hydro-Qubec to renegotiate the Upper Churchill contract.

Premier Danny Williams told the legislature Monday, shortly after it opened for the fall sitting, that the request was made after the province discovered a "very legitimate and compelling" legal argument that has yet to be tested in the courts.

"It is our firm hope and desire that Hydro-Qubec will affirm their desire to renegotiate this lopsided contract," Williams told the legislature. He said under Quebec law, both parties in an agreement are to "enjoy equity and fairness."

The 65-year Upper Churchill contract, signed in 1969, has been the subject of several failed court actions by the province and continues to be at the heart of a long-standing resentment toward Quebec.

The deal allows Hydro-Qubec to buy power at inexpensive rates from Newfoundland and Labrador, at a quarter of a cent per kilowatt hour according to Williams, and then re-sell it for up to 36 times the price it paid.

Williams told the legislature that last year, Hydro-Qubec earned approximately $1.7 billionfrom the contract, while the Churchill Falls (Labrador) Corporation, known as CF(L)Co, received only $63 million. Williams said Newfoundland and Labrador is also responsible for the running, upkeep and maintenance of the Upper Churchill facility.

"The gross inequity of this agreement cannot be denied. It is without a doubt considered the biggest giveaway of resources by this province. In fact, I would venture to say there are no other similar agreements of such a disproportionate magnitude in the entire country."

Williams said the legal argument centres on Quebec's civil code.

"Under Quebec's own civil code, there is an obligation imposed by law for parties to act in good faith in all legal relationships, including the negotiation and ongoing performance of contracts."

TheChurchill FallsCorporationis nowa subsidiary of Nalcor. Its president has written to Hydro-Qubec asking that the deal be renegotiated.

Nalcor said it has a legal opinion from the Montreal law firm of Irving Mitchell Kalichman thatthere are grounds to renegotiate the pricing contract under certain provisions of the Quebec civil code. It said the basis of opinion is that circumstances have changed in a way that could not have been reasonably foreseen at the time the contract was initiated.

Williams said the letter to Hydro-Qubec asks that they enter into negotiations to amend the pricing terms of the contract for the future, so both corporationsget a fair and equitable return.

"This would be consistent with the good faith principle that is fundamental to the Quebec civil code."

Hydro-Qubec isn't commenting on the request.