Newfoundland and Labrador Hydro is set to forge ahead with plans to move electricity from a potential Lower Churchill development across Quebec, Premier Danny Williams said Friday.

Crown-owned Hydro, which is taking the lead on the province's behalf on developing power on the lower Churchill River, will be submitting an application to Hydro-Québec TransÉnergie, the transmission division of Hydro-Québec.

Newfoundland & Labrador Premier Danny Williams

Williams emphasized his aim to avoid the pitfalls of a ruinous 65-year contract on the Upper Churchill megaproject.

"It's very strategic," Williams told reporters Friday. He says the application shows Newfoundland and Labrador is prepared to develop the Lower Churchill on its own.

Williams added that the province is using a "market approach" to avoid the pitfalls of the Upper Churchill contract with Hydro-Québec. In the past, Newfoundland and Labrador has tried but always failed to launch the project as a partnership with Quebec.

Political sore spot

The spectre of the Upper Churchill megaproject hangs over any talks concerning the lower Churchill River.

A Lower Churchill hydroelectric project could supply power to 1.5 million homes.

Under the terms of the Upper Churchill deal, which were negotiated in the late 1960s and do not include escalator clauses, Hydro-Québec purchases hydroelectric power from Newfoundland and Labrador at cheap rates and can pocket profits on resale of energy to other markets.

Powerful deal

The Upper Churchill deal, which Newfoundland and Labrador says has cost billions of dollars over the years, has been a sore spot politically for more than three decades.

The Lower Churchill project would generate more than 2,800 megawatts of power, or enough energy to supply about 1.5 million households, the proposal shows.

The project is poised to put Quebec and Newfoundland and Labrador into a political dance, given the often-bitter relations the two have had over the years.

Until last year, Newfoundland and Labrador's attempts to develop the lower Churchill River have been tied directly to Hydro-Québec. All attempts have come to nothing.

Bids sought for megaproject

Last year, Williams appealed to private companies and government jurisdictions to put bids on developing the Lower Churchill project, which has been pegged at $9 billion.

The government narrowed down the list of bidders to a shortlist of three last summer.

Williams reserved the right to reject all bids, and have the province proceed on its own.

• FROM AUG. 9, 2005: Williams keeps Churchill options open

Level playing ground

Williams said this approach is different, in that Hydro-Québec will be asked to use the same market-driven terms that it uses with other clients.

"If Quebec goes into the [United] States, then they have an open access arrangement with the transmitters in the States … it's a reciprocal type of arrangement," Williams said.

"That's exactly what we're saying to Quebec. We want to be able to have the right to wheel through and we certainly don't feel you can deny us that because you have a reciprocal right with people you deal with on the other side," he said.

"This was the reason why we were held for ransom in the old days of Upper Churchill. Now, this process is available and again it gives us another lever."

However, Newfoundland and Labrador must still persuade Hydro-Québec that a new deal is in its interests.

The application, which will include extensive engineering work, will cost about $17 million to prepare, in part to asses the impact on Hydro-Québec's grid and infrastructure.

Charest contacted "as a courtesy"

Williams said he contacted Quebec Premier Jean Charest Thursday "as a courtesy, just to let him know we're doing this, because obviously this will have an impact on him as premier of Quebec."

One of the finalists in the Lower Churchill shortlist is a consortium that includes Hydro-Québec as well a Crown agency of the Ontario government and the SNC Lavalin engineering firm.

Ed Martin

Hydro-Québec has been asked to come back with an estimate of the cost of wheeling power within a couple of months said Ed Martin, president of Newfoundland and Labrador Hydro.

The application effectively tells Hydro-Québec that it is not the only buyer of power, Martin said.

"We still have the option of not selling to Hydro-Québec. However, we haven't decided that yet," Martin said.

Hydro will be applying through Hydro-Québec's open access transmission tariff, for the possible sale of power to markets including Ontario, Quebec, the maritime provinces and the northeastern U.S.

The application doesn't necessarily mean that Newfoundland and Labrador Hydro will export all power generated from a Lower Churchill project, Williams said.