Hydro-Quebec's refusal to renegotiate the terms of the 1969 Churchill Falls power contract with Newfoundland and Labrador violates the "good faith" and "fair play" provisions of Quebec's Civil Code, the Atlantic province said in a motion presented Quebec's highest court Tuesday.
It is seeking a recalibration of rates that would see future Hydro-Quebec's payments for Churchill Falls power soar well above the current rate of 0.25 cents per kilowatt hour or a fraction of what Quebec consumers pay for it.
The new rate would better reflect current prices and be in force until the contract expires in 2041, Ed Martin, president of the provincial Crown corporation Nalcor Energy, said Tuesday.
Unlike previous failed court challenges, Newfoundland and Labrador would not be seeking retroactive payments.
"We are much more concerned with the implications for future generations," Martin said.
If the recalibrated rates were in place in 2008, Hydro-Quebec would have paid a Nalcor subsidiary between $600 million and $700 million instead of about $76 million, reporters heard.
Nalcor is asking that Hydro-Quebec pay a rate equal to one-third of the average rate it charges Quebec residential and commercial clients and equal to one-half of the average rate charged to Hydro-Quebec's export customers. Should the court not agree with that calibration, Nalcor is asking that the existing contract be cancelled.
Hydro-Quebec will challenge the motion, representative Marc-Brian Chamberland said.
"Hydro-Quebec assumed all the costs and all the risks associated with the project when the contract was signed in 1969," he said.
"The price for electricity [under the contract] was based on the costs of the project, not on the evolution of market prices."
About three months ago, Newfoundland and Labrador Premier Danny Williams signalled that the new round will be a long and bitter battle.
"The gross inequity of the agreement cannot be denied," Williams said in the province's House of Assembly Nov. 30.
The contract, signed by the governments of Joey Smallwood and Jean Lesage, states that it is subject to Quebec laws. Changes to the Quebec Civil Code in 1994 set the stage for what Martin described Tuesday as the final legal challenge to the contract.
The fresh offensive revolves around a Civil Code provision requiring parties to a contract to act in good faith during negotiations as well as the life of the contract.
