Ed Martin is talking to Ontario officials about technical requirements of transmitting power from the Labrador site through Quebec and into Ontario. Under an application filed in July, Hydra corporation was seeking permission to ship power into Canada's largest province.
Under a proposal submitted by Quebec and Ontario in early 2005, cost of improving the connections between the two provinces would have been paid for by Ontario's Hydro One and Hydro Quebec. Martin's proposal would have the Newfoundland and Labrador Crown corporation pay for the upgrades. A similar requirement to expand the electricity grid in Quebec - also needed to get Lower Churchill power - was included in the Ontario/Quebec proposal but will now be paid for by Newfoundland and Labrador as part of what Danny Williams has termed the "go-it-alone" option.
In an interview with the Toronto Star [linked above] Martin said shipping power to market around Quebec is still under consideration by his company. Such a route would involve submarine cabling across the Strait of Belle Isle and the Gulf of St. Lawrence . The so-called Anglo-Saxon route has een estimated to add at least $1.5 to $2.0 billion to a Lower Churchill development already pegged in the $6.0 to $9.0 billion range. Every previous review of this option concluded that while it is technically feasible, the resulting cost of Lower Churchill power made it unsaleable.
A viable sale agreement for the Lower Churchill's estimated 3, 000 megawatts will be crucial to the project. Ontario energy minister Dwight Duncan told the Star:
"We are very interested in buying from them," Dwight Duncan, Ontario's energy minister, told the Star last week. "But I'm not going to put the ratepayers of Ontario at risk."In May 2006, Hydra vice-president Gilbert Bennett confirmed that financial issues will one of several major factors in determining whether the project is sanctioned.
He said Newfoundland will have to get transmission guarantees from Quebec to make the deal possible, and ultimately any deal will come down to cost.
"The challenge Ontario has is we simply can't blindly enter into an agreement and pay whatever. You're looking at long-term arrangements that involve price-sensitivity. I don't want my grandchildren to look back in 20 years and say `what were they thinking.'"
Another factor will be competition from other projects already under development in Quebec, Ontario and Manitoba. The Lower Churchill project - about a year behind schedule - would require project sanction in 2009 with first power being generated in 2015. Martin is talking to Ontario officials several months after Hydro Quebec officials started talking potential purchase agreements, according to Globe and Mail's Konrad Yakabuski in a May 2006 column.
Ability to guarantee delivery will also influence any decision to buy power from a Lower Churchill project. As Yakabuski noted, "[t]he buyers will not choose their supplier based on price alone; since the contracts must be signed before the first shovel goes into the ground, the buyers must have the confidence, if not assurance, the seller can deliver the merchandise."
Martin's Hydra corporation has never completed a project as large, costly and complex as the Lower Churchill on its own, raising questions about the company's ability to deliver on time.
Concerns about completion plagued the now-infamous Upper Churchill development. Ultimately, investors' need for completion guarantees coupled with the weak financial position of proponent BRINCO led the Newfoundland and Labrador company to sign a deal that saw Quebec buy virtually all the power from the earlier project at rock-bottom prices for 65 years. In exchange, the Quebec Crown corporation guaranteed investors the project would be completed.
At $9.0 billion, the Lower Churchill project would double the size of Newfoundland and Labrador's provincial debt.
