Response to the National Post article “$1B sent over Muskrat Falls”

Hydro-Québec would like to offer some clarifications regarding comments in Andrew Coyne's column titled "$1B sent over Muskrat Falls" published in the National Post on December 6.

With regards to transmitting power through Québec, Hydro-Québec provides open and nondiscriminatory access to its transmission system to all qualified market participants. Access is regulated by an Open Access Transmission Tariff (OATT) that is approved by Québec's regulatory body, the Régie de l'énergie, and that complies with the open-access and reciprocity requirements of the U.S. Federal Energy Regulatory Commission (FERC).

To transmit large new amounts of electricity across the grid, investments need to be made. For example, Hydro-Québec is currently investing $1.8 billion for grid additions and upgrades to transmit hydropower from the Romaine River hydro project now under construction. Transmitting power from the Lower Churchill over a distance of 1,500 km through Québec to the United States and Ontario would require several billons dollars’ worth of investments on the Québec grid in the same way.

In compliance with the OATT and normal transmission industry practices in North America, it is up to the transmission customer to pay for the investments associated with new transmission service requests. Hydro-Québec informed Nalcor, the developer of the Lower Churchill project, of this fact in response to Nalcor's transmission request. Nalcor objected to this.

As for your allusion to the 1969 contract and the price at which Hydro-Québec purchases power from the Upper Churchill, it is worth recalling certain historical facts. The contract was negotiated to the satisfaction of both original parties, that is Hydro-Québec and CFLCo. At the time of the execution of the contract in 1969, the main shareholder (56.9%) of CFLCo was Brinco (British Newfoundland Corporation). Hydro-Québec was the other main shareholder at 34.2%. Brinco itself was a privately-owned corporation whose majority shareholder was a Canadian holding company owned jointly by Rio Tinto-Zinc Corporation Limited and Bethlehem Steel Corporation. Furthermore, the Province of Newfoundland and Labrador was fully aware of the terms of the contract when it acquired Brinco's shares in CFLCo in 1974. The terms of the contract reflect, among other things, the fact that the price was based on the costs of the Upper Churchill project and that Hydro-Québec assumed all of the risks of development of the Upper Churchill project.

Marc-Brian Chamberland
Director – Corporate Communication
Hydro-Québec