Churchill Falls MOU review: deal 'not in the public interest' as currently drafted

The independent review committee report on the Newfoundland and Labrador / Quebec Churchill Falls memorandum of understanding landed Tuesday morning. Headline: the committee says the MOU "in its current form is not in the public interest" of N.L., and that several of the same structural issues that made the original 1969 contract one of the worst energy deals in Canadian history are reappearing in the new framing.

Specific committee findings (per the released text):

• Restricted access to Churchill Falls power for Newfoundland — N.L. would still struggle to repatriate generation for in-province use, the same flaw as 1969.
• Pricing and payment models with embedded inflation lag that favour Quebec.
• Hydro-Québec retaining significant operational control over the Churchill River cascade, which the committee flags as a conflict of interest given Hydro-Québec is also the principal customer.
• Expansion economics (Gull Island plus upgrades) tilted toward Hydro-Québec being the main beneficiary rather than N.L.

The MOU was supposed to be formalised in April; it didn't happen. Premier Tony Wakeham said in his press response Tuesday that he wants to "build on the parts that work and fix the parts that don't" and announced a three-person renegotiation committee: Barry Perry (former Fortis CEO), Jerome Kennedy (lawyer / former PC cabinet minister), and Jennifer Williams (current NL Hydro CEO). PM Mark Carney's reaction, also Tuesday, was that Ottawa supports a workable deal but that the negotiations are primarily province-to-province and federal-to-Hydro-Québec.

For the historical context: the 1969 Churchill Falls contract is the single worst energy deal in Canadian history by inflation-adjusted lost-revenue terms, with N.L. selling power to Quebec at fixed prices through 2041 that are now roughly 1/20th of market. The MOU was supposed to start undoing that distortion. The review committee thinks the current draft would extend it rather than fix it.

1969 contract is the textbook example of why long-term fixed-price energy contracts without escalator clauses are catastrophic. Hydro-Québec has been making roughly $1 billion CAD a year off the spread between contracted Churchill Falls price and market for the last decade. The 2041 expiry is the only reason this is being negotiated at all — N.L. has zero leverage until then under the original contract. The MOU was supposed to be a soft transition. The committee's right to flag this — Hydro-Québec doesn't suddenly stop being self-interested because of a political handshake.

Reading between the lines on the renegotiation committee: Barry Perry's an interesting pick. Former Fortis CEO so he understands both regulated utility economics and how the inter-provincial dynamics actually play out in practice. Jerome Kennedy was AG and Finance under the Williams PCs, knows the file from the 2010s when there was a previous attempt at renegotiation. Williams as sitting NL Hydro CEO gives them an operational seat at the table. Reasonable trio. Whether the federal government has any meaningful role beyond cheerleading is the question Carney didn't quite answer.

The Gull Island development is the part everyone in the energy sector cares about most. 2,250 MW of additional capacity, plus rehabilitation/expansion at Churchill Falls itself, plus a planned third transmission line through Quebec. If the financing and operational rights are structured the same way as 1969, N.L. is signing on for another 40-year mistake. The committee's flagging this is the right move — a province-by-province veto on long-duration deals before the next political cycle is reasonable governance.

From St. John's, this lands as a relief. The previous Liberal premier was clearly going to formalise this before the election in October and there was a lot of quiet alarm in the energy-sector and economist communities here that the same mistake was about to be made twice. Wakeham's response — accept the report's framing and reopen the file — is the politically correct move. Now we see whether he can actually push back hard enough at the table.