If you want proof that the Canadian Energy Strategy the premiers unveiled this month was but an empty gesture, an attempt to paper over the parochialism that governs provincial energy policies, consider the news that Ontario is looking to buy power from Newfoundland.
The ink on the CES wasn't even dry when Ontario Energy Minister Bob Chiarelli announced that his province is exploring the idea of purchasing electricity from the 824-megawatt Muskrat Falls hydro project now under construction in Labrador and the still-hypothetical 2,250-MW Gull Island development farther up the Churchill River.
Both projects are dicey economic propositions that would produce power at several times the market rate – about 15 cents a kilowatt-hour in the case of Muskrat Falls, which is even higher than Ontario's long-suffering consumers now pay. How Mr. Chiarelli can square that with his vow to put "price and respect for [Ontario] ratepayers" above all else would require some particular form of magic. For it to be a good deal for Ontario, it must necessarily be a bad deal for Newfoundland.
Then again, there may be no good options for Muskrat Falls, only a series of poor ones that will saddle Newfoundland taxpayers with a legacy of debt and higher electricity rates, all in a vain effort to get back at Quebec for fleecing the province on the 1969 Churchill Falls deal.
Under that deal, which expires in 2041, Hydro-Québec buys virtually all of the power from the massive 5,400-MW Churchill Falls hydro dam at a fraction of a cent a kilowatt-hour. It sells that power to customers in Quebec and the United States at 20 times to 50 times the purchase price. Newfoundland has repeatedly, and unsuccessfully, challenged the deal in court. It is currently appealing a 2014 Quebec Superior Court ruling that upheld the terms of the 1969 contract.
Hydro-Québec and Nalcor, the energy arm of the Newfoundland government, are also fighting over the management of water rights on the Churchill River. The Quebec utility fears that Nalcor's desire to maximize the power generated at Muskrat Falls, by allowing water to build up in its reservoirs, will compromise the ability of Churchill Falls to operate at full speed.
By signalling its desire to do a deal with Newfoundland, Ontario is effectively taking sides in a bitter interprovincial battle. Not only does this fly in the face of the spirit of the Canadian Energy Strategy, but Ontario is considering a circuitous route to import Newfoundland power that bypasses Quebec altogether and instead would wheel electricity through four states en route to Ontario.
None of this makes sense, which suggests that Mr. Chiarelli is not really that serious about doing a deal with Newfoundland. Rather, it's all a head fake to try to get a better price from Hydro-Québec on a big block of electricity Ontario wants to import while some of its nuclear reactors undergo repair.
Hydro-Québec is sitting on big surpluses that are set to grow bigger as the last of four new generating stations on the Romaine River starts operating in 2020. The Romaine project is costly by Quebec standards, but will still produce power at less than half the cost of Muskrat Falls.
Ontario had a stronger bargaining position as long as the Canadian dollar remained at parity with the U.S. currency and electricity prices in the northeastern U.S. market stayed low. But with the loonie below 80 cents (U.S.), exporting power is an attractive proposition again. And new Quebec-United States interconnections mean that Ontario faces increasing competition for Quebec's power.
Ontario talks a good game about its efforts to promote interprovincial energy co-operation, touting a 2014 agreement with Quebec under which each province will make 500 MW of power available to the other during their respective peaks – Ontario in the summer, Quebec in winter. But all they're really doing is implementing standards set by the North American Electric Reliability Corp., which ensures the flow of power between jurisdictions to avoid bottlenecks and outages.
Similarly, the Canadian Energy Strategy stipulates that the provinces will "ensure open and non-discriminatory access to [each other's] electricity transmission systems, consistent with the [U.S.] Federal Energy Regulatory Commission Open Access Rules." Here, again, it's a United States-based agency that determines the rules of the energy trade. Canada's provinces merely follow them.
Under a true Canadian energy strategy, Ontario, Quebec and Newfoundland would sit down at the same table to develop and share their energy resources in a manner consistent with the national interest.
No, we didn't think so, either.