I recently caught wind of Hydro Quebec’s latest effort to control electrical utilities outside of its borders at the expense of the owners of those assets. [READ] The Premier of Newfoundland and Labrador is being overly polite in my opinion. Hydro Quebec fucked his province around the Churchill Falls hydroelectric project – a project that might have softened the blow of a dying fisheries industry was it not for Quebec.

If you’re not familiar with the Churchill Falls issue, here’s the Coles Notes version:

• The Churchill Falls project was started in Newfoundland in 1967 and had potential to be the biggest hydroelectric project in North America.
• Completed in 1971, the dam has the second largest capacity of hydroelectric dam in North American and has the potential to be the biggest with upgrades.
• Newfoundland geographically isolated from the rest of Canada and the US by Quebec.
• Normally, Provinces allow each other to transport electricity across each others borders for sale in other markets in what’s called a “wheeling agreement”
• Wheeling agreements typically allow the Province that is letting the power be transferred along its lines first rights to the power at a fair market price only so far as domestic supply doesn’t meet demand.
• The financial model for Churchill Falls depended on being able to sell power to the US market where better prices could be negotiated.
• After the project was completed, Hydro Quebec began to play games with the wheeling agreements by selling vast amounts of their domestic power to the US market at a healthy markup and then in turn claiming that they had a domestic shortage, giving them the rights to nearly all of Churchill Falls’ output at a much lower price.

This, in effect, is what ruined the potential of Churchill Falls for Newfoundlanders. The project ran into financial trouble early on because it couldn’t sell power to the US (because of Quebec’s maneuvering) and guess who swooped in to bail out the project for majority ownership? Hydro Quebec. The 50 year agreement gave Hydro Quebec exclusive access to all the power Churchill Falls produced at a price even lower than what they would have paid through the wheeling agreement.

That’s what the Premier of Newfoundland is referring to when he says that Hydro Quebec took out $22 billion and left $1 billion for Newfoundland. The $22 billion is likely the amount of profit that Hydro Quebec has generated since 1971 by selling Newfoundland power on the open market while claiming a domestic shortage. This is money that by all rights, should have gone into Newfoundland’s economy.

This is why New Brunswick Power should be wary – Hydro Quebec (and by extension the Quebec government) are like sleazy loan sharks. They give the appearance of helping out their impoverished neighbours when in fact, they are setting these “friends” up for failure. Those who do not learn from history are doomed to repeat it.