Premier Danny Williams lashed out Wednesday against a Quebec energy regulator that ruled against Newfoundland and Labrador. (CBC)

Quebec's energy regulator has turned down a request from Newfoundland and Labrador to intervene in an ongoing dispute over pushing power from a proposed hydroelectric megaproject across Quebec's power lines.

Nalcor, Newfoundland and Labrador's Crown-owned energy corporation, has been locked in a dispute with Hydro-Québec over the transmission of power from the $6.5-billion proposed Lower Churchill development in central Labrador.

Nalcor filed a complaint with the Régie de l'énergie, arguing that Hydro-Québec was not following open access rules that govern the fair use of transmission lines to bring power to market.

However, the regulator dismissed Newfoundland and Labrador's complaint, sparking a political furor at the Newfoundland and Labrador legislature, where Premier Danny Williams lashed out against what he called a "blatantly incorrect and unjust decision."

"This decision took my breath away," Williams told the house of assembly.

"I was at least expecting that this jurisdiction might finally give us some fairness and some equity and some justice," he said, noting that the decision falls in line with what he called "the arrogance and the discriminatory practices of Quebec."

Newfoundland and Labrador Hydro is aiming to develop two sites on the Churchill River. The route for Lower Churchill power, though, remains unclear. (CBC)

Nalcor said it will appeal the Régie decision, first to the regulator itself and then, if needed, to the courts. It also said it would head to the U.S. Federal Energy Regulatory Commission (FERC), which licenses Quebec to sell power in the United States.

Williams said he was astonished that the Régie said Newfoundland and Labrador should have resolved an open access agreement within 45 days before heading to the regulator.

"It took us four years to get to this particular point," said Williams.

"This application was denied on every single reasonable, legitimate ground that we put forward, and this will have to stand the test of scrutiny by people right across Canada, including the people in Ontario and the Maritimes who want this power, and the people in the United States," he told the house.

Nalcor has already invested heavily in developing the Lower Churchill project, which if built as proposed on two sites of the Churchill River would generate about 2,800 megawatts of power. That is enough power to supply as many as 1.5 million households.

Nalcor, however, does not have a route to bring power to potential customers in either the U.S. or in Ontario.

Ed Martin, Nalcor's president and chief executive officer, said Wednesday the corporation's fight to move power across Quebec is not over.

"We disagree completely with the conclusions and ultimate ruling announced today by the Régie de l'énergie and intend to aggressively pursue all revision and appeal options," Martin said in a statement.

Hydro-Québec has argued that it does not have enough space available on its transmission grid to handle the volume of power that the Lower Churchill would generate. Quebec estimates that it would cost about $3 billion to upgrade its electrical system to take on the extra load.

Nalcor's request has been watched closely from other jurisdictions. For instance, FERC requires that Hydro-Québec provide fair and open access to available space on its transmission lines.

An often fractious relationship

Newfoundland and Labrador has had a lengthy and often fractious relationship with Quebec over hydroelectric power, particularly about a 65-year contract involving the sale of power from the existing Upper Churchill project.

Under that deal, negotiated in the late 1960s, Hydro-Québec purchases power from Newfoundland and Labrador at inexpensive rates and pockets profits from resale to other markets.

Williams addressed that history during blistering comments he made Wednesday at the legislature.

"I find it really difficult to understand how they could have done us such a grave injustice back in the sixties, which carries on to this very day, which has cost us billions and billions of dollars, and prevented us from being a have province for decades, to turn around then and to be so small as to prevent us now from proceeding with the Lower Churchill project," he said.

The Newfoundland and Labrador government has frequently said that Quebec is not the only option for moving Lower Churchill power. However, an alternative route, such as using undersea cables and an overland route through the Maritimes, would be expensive and require the co-operation of other provinces, particularly New Brunswick.

Speaking to reporters after question period, Williams said he is now focusing on the Maritime route, and added that it was his preferred route all along.