THE CANADIAN PRESS

MONTREAL - Hydro-Quebec doesn't have to channel electricity from a future hydroelectric complex in Labrador, according to a ruling by Quebec's energy board.

Jeff McIntosh/THE CANADIAN PRESS

Newfoundland Premier Danny Williams said the ruling demonstrates Quebec’s ‘arrogance and discriminatory business practices.’

In its decision, released Wednesday, the board concluded that Hydro-Quebec "was entitled to refuse to negotiate" a contract with Newfoundland and Labrador Hydro to transmit power from the province to other parts of Canada and the United States.

Newfoundland's hydro utility, Nalcor Energy, had appealed Hydro-Quebec's earlier refusal.

Newfoundland Premier Danny Williams said the ruling demonstrates Quebec's "arrogance and discriminatory business practices."

"The blatant disregard of the Regie (de l'energie, Quebec's energy regulator) on the basic principles of open access and non-discrimination is staggering," Williams said in a statement.

"While we are disappointed by this ruling, we are not surprised as it is consistent with Quebec's history of attempting to stop this project from proceeding unless it is on their terms. The absurdity of their decision is embarrassing to Quebec. What Quebec has done today is to tell the people of Canada and the United States that they will go to any lengths to ensure they have market dominance over electricity markets in northeastern North America."

Williams added Nalcor was considering "what appeal avenues will be pursued."

The province wants to build a second hydroelectric complex of 2,800 megawatts on the Churchill River in Labrador. It had hoped to use Quebec's transmission lines to transport power to Ontario, New Brunswick, New England and upstate New York.

Newfoundland filed a motion to do so in January 2006. Hydro-Quebec rejected it the following year, citing a lack of capacity on its network.

Nalcor, which argues there is sufficient capacity on Quebec's existing network, claims Hydro-Quebec asked it to pay $3 billion to build the necessary transmission infrastructure.

Newfoundland said it is willing to pay for some upgrades but said the cost would be well under $3 billion. It also said it is willing to pay a $200-million annual tariff for a 30-year period.

"One can only be perplexed by the attitude of Hydro-Quebec, which is putting billions of dollars of investment and employment opportunities at stake," stated Nalcor president and CEO Ed Martin.

Nalcor argued the ruling is in contravention of Quebec's rules for open access, which were modeled after U.S. regulations that are designed to encourage competition.

"While there has been much detailed discussion around technicalities and legalities, it all boils down to a very simple question: Does Hydro-Quebec provide fair and reasonable access to its transmission lines as it is supposed to do under its own tariff rules which they've adopted from the United States? We strongly believe that the evidence is to the contrary," Martin said.

"This decision does not just have implications for Newfoundland and Labrador, it has broader implications for electricity trade across the country and throughout North America, and in particular for Ontario and the Maritime provinces."

Nalcor said the decision hasn't changed its plans to access markets for its electricity in other ways, including exporting power from Labrador to the island of Newfoundland and then into the Maritime provinces and the northeastern U.S. via a sub-sea link.

Martin said studies on the Maritime route are ongoing in New Brunswick and Nova Scotia, where Nalcor has filed applications.

The executive said he expects to have a detailed analysis of all route options and the associated costs before next winter when an environmental assessment of the hydroelectric project should be complete.

The company is also continuing to pursue a separate 724-megawatt transmission request it has filed with Hydro-Quebec.