Sunday, November 04, 2018

Supreme Court rules definitively against Newfoundland in Churchill Falls case

Way back in 1969, Hydro-Québec entered into an agreement with the perennial have-not province Newfoundland and Labrador, under which the electricity utility agreed to assume the substantial risks of the huge Churchill Falls hydroelectricity project, and to finance any cost overruns. Essentially, the Quebec utility made the whole thing possible, as it would have foundered without their intervention. In return, Newfoundland allowed Hydro-Québec to buy the Hydro station's electricity at 1969 prices until 2041, and to sell it off to whoever it likes at whatever the market rate happens to be.
Given the surge in electricity prices since then, Hydro-Québec has made out like bandits from the deal, to the tune of an estimated $26 billion. When the contract expires in 2041, Newfoundland and Labrador will finally be able to reap the profits of the plant until its eventual demise, but in the meantime, the province is hurting financially and is desperate to prove in court that the 1969 deal was unfair and should be annulled. Every time, though, the courts have ruled against it, arguing that the deal was struck between competent businessmen, and if the Newfoundland negotiating team ended up with a bad deal, then that was their own problem.
This latest ruling - by a margin of 7-1, with only a Newfoundland judge dissenting - was by the Supreme Court of Canada, and Newfoundland now has nowhere to go and must accept the consequences (and wait for 2041!). It is time to stop kvetching, suck it up, and put it behind them.

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