The governments of Newfoundland and Labrador (N.L.), Quebec and Canada met in St. John’s on August 17 to mark a significant milestone in the relationship between the two provinces: a new non-binding agreement on Churchill Falls, replacing the 2024 Memorandum of Understanding (MOU) between Newfoundland and Labrador Hydro and Hydro-Québec.
The new agreement makes several significant changes to the 2024 proposal, particularly around the amount of power available to N.L., access to export markets, and federal support.
Key takeaways
- The agreement is expected to deliver $49 billion in value to N.L. in 2026 net present value (NPV), compared with $36 billion under the previous MOU in 2024 NPV.
- N.L. could retain 2,350 MW from Churchill Falls and Gull Island, up from 1,990 MW under the 2024 MOU. Combined with 400 MW from a proposed 2,000 MW wind development in Labrador, this represents a 760 MW increase in power available to the province.
- N.L. would have access to up to 985 MW of transmission and export capacity, including routes serving New York and New England, giving Newfoundland and Labrador Hydro more options to sell electricity outside the province.
- The Labrador Trough Clean Power, Critical Minerals and Infrastructure Corridor will be referred to the federal Major Projects Office for review.
- The new Churchill River Electricity Rebate would save residential N.L. ratepayers 15 per cent on the first 2,000 kWh per month, representing estimated annual savings of $351 for the average household.
Ottawa’s role
One of the biggest changes from the 2024 MOU is the federal government’s involvement. Ottawa is expected to support several parts of the broader development plan, including up to a 40 per cent equity interest in the proposed 2,000 MW Labrador wind project, a loan guarantee for Gull Island and support for new transmission infrastructure in Labrador.
Federal financing and loan guarantees could reduce N.L.’s exposure to the substantial cost and financing risk associated with developing Gull Island and other infrastructure. Support for transmission could also help make additional electricity available for mining and critical-mineral development in Labrador.
Quebec’s energy equation
For Quebec, the agreement would secure a significant source of long-term electricity as the province faces growing demand from electrification and industrial development. Hydro-Québec has forecast significant growth in electricity demand in the coming decades, making access to Labrador hydro strategically important.
The revised agreement secures 6,915 MW of committed supply for Hydro-Québec, with additional generation potential under study, that could bring the total to approximately 10,000MW. Hydro-Québec has also emphasized the cost of the power, estimating an average price of approximately six cents per kWh under the new framework.
For Quebec, securing that long-term supply comes with considerably different terms than the historic Churchill Falls arrangement, including greater access for N.L. to its own power and to export markets.
What comes next
The fall will be an important period for both provinces. Premier Wakeham will reopen the House of Assembly on September 14 to review the agreement with MHAs, while Premier Fréchette must call a provincial election by October 5.
The Quebec election introduces political and implementation risk because the agreement remains non-binding and negotiators are seeking to finalize definitive agreements by year-end. With the Parti Québécois opposed to the agreement and currently polling strongly, a change in government could affect negotiations or the timeline for implementation. The agreement is likely to become an election issue, with parties facing a broader question about how Quebec should secure the additional electricity it needs for electrification and economic growth, and at what cost.
Beyond the political calendar, considerable work remains. Definitive agreements must be completed, major projects will require financing and regulatory approvals, and Indigenous participation and benefit arrangements remain under discussion. Those details will ultimately determine how much of the value outlined in the agreement is ultimately realized.
