Quebec and Newfoundland seal $70 billion hydro deal as election threatens to upend it

Quebec and Newfoundland and Labrador unveiled a revised agreement Monday to jointly develop untapped hydroelectric resources on the Churchill River, a tentative deal worth potential investments of $70 billion in new hydro, wind, and transmission projects. The pact would nearly double the scope of a 2024 Memorandum of Understanding that had stalled under political pressure.

The crux involves constructing a $30 billion, 2,700 megawatt hydroelectric generating station at Gull Island, downstream from the existing 5,400 MW Churchill Falls facility. The existing station's capacity would increase by 1,275 MW at a cost of $4 billion, with another $10 billion spent on new transmission. Half the projected 9,000 MW total capacity hinges on two contingent projects—a 2,000 MW wind facility and a 2,500 MW generating station at Churchill Falls—that would require years of feasibility studies.

The revised deal would resolve a decades-long dispute over the 1969 power-purchase contract under which Hydro-Québec buys 90 per cent of Churchill Falls electricity at extraordinarily low rates. Hydro-Québec currently pays 0.2 cents per kilowatt-hour; under the new agreement, it would pay an effective price of 7.4 cents per kwh over 50 years, or 6 cents net after accounting for Hydro-Québec's 34.2 per cent ownership stake. Newfoundland would also gain the right to sell up to 985 MW of power at market prices.

Prime Minister Mark Carney's federal government greased the deal's wheels with billions in clean-energy tax credits and loan guarantees exceeding $20 billion for Gull Island alone. Federal Natural Resources Minister Tim Hodgson framed the unprecedented federal involvement as essential to Canada's electricity strategy in an increasingly divided geopolitical landscape.

But the deal faces political jeopardy. CAQ Premier Christine Fréchette, who inherited the job after winning the party leadership in April, rushed to announce the revised terms Monday as her government trails far behind the sovereigntist Parti Québécois in polls ahead of an October 5 election. The PQ has signalled it would demand compensation from Newfoundland over a 1927 Privy Council decision on the Quebec-Labrador boundary, and a PQ government could theoretically back out before year-end, when Hydro-Québec and Newfoundland and Labrador Hydro aim to finalize terms.

A PQ pullout would be economically risky. Alternatives to new Labrador hydro would be more expensive and likely face Indigenous opposition. Hydro-Québec's own reservoirs have seen cyclically low water levels; in 2025, the utility became a net power importer for the first time, importing 15.2 terawatt-hours while exporting 11.8 twh. That forced it to cut profitable exports and import U.S. power during demand peaks.