Supreme Court of Canada to review 1969 Churchill Falls energy deal

The Supreme Court of Canada says it will review the 1969Churchill Falls energy deal that has been highly profitable for Hydro-Quebec but much less so for Newfoundland and Labrador.

• Nalcorseeking Supreme Court of Canada appeal after recent Churchill Falls decision

Under the deal, Hydro-Quebec agreed to buy almost all the energy generated by a hydroelectric plant to be built on the ChurchillRiver in Labrador.

The contract, which had a 65-year term, set a fixed price for theenergy that would decrease in stages over time. The project has generated more than $26 billion for Hydro-Quebec, compared with about $2 billion for Newfoundland and Labrador.

Churchill Falls (Labrador) Corp. Ltd. went to Quebec SuperiorCourt in 2010, arguing unsuccessfully that the sizable profits fromelectricity were unforeseen in 1969 and that Hydro-Quebec had a dutyto renegotiate the contract.

• $6.5M legal bill for failed Churchill Falls contract challenge

The Quebec Court of Appeal upheld the 2014 lower court ruling,agreeing the provincially owned power utility has no obligation toreopen the agreement.

Under the 1969 agreement, Hydro-Quebec may purchase theelectricity at low prices before reselling it at a much higher priceon the domestic market and to export, which Nalcor Energy, theparent company of Churchill Falls (Labrador) Corp. Ltd., says isunfair.

The company argued the contract was broken by "unpredictable events" that have transformed the energy market and obligesHydro-Quebec to revise the original terms of the agreement in orderto regain balance.

But five appellate court judges that heard the appeal felt NalcorEnergy was trying to "redefine the initial balance" agreed tobetween the parties.

"The uncontradicted evidence established that the parties knewthat the value of hydroelectric power was likely to fluctuate andhave voluntarily agreed fixed prices for energy," they wrote in a61-page judgment.

The court also found the general principle of "good faith" asfound in the province's civil code doesn't apply to Churchill Fallsas the contract has remained "profitable" for Newfoundland.The benefit generated by Hydro-Quebec is the result of changes in the electricity market, the ruling said.