On March 9,1998, the Province directed Newfoundland and Labrador Hydro (NLH) to begin formal negotiations with Hydro-Quebec (HQ) to work out detailed agreements for the development of approximately 3,200 megawatts of additional power from the Churchill River system. The framework on which detailed negotiations will be based include the following components.
UPPER CHURCHILL ENHANCEMENTS
This portion of the proposal involves expanding the existing Churchill Falls project through the partial diversion of two Quebec rivers, the Saint-Jean and the Romaine, into the Smallwood Reservoir. A new generating system containing two 500 megawatt generators will be built to increase the existing capacity at Churchill Falls by 1,000 (MW). This project will be owned 65.8% by NLH and 34.2% by HQ.
The Development of the Gull Island site on the Lower Churchill, includes the construction of a 2,264 MW generating station, containing eight 283 megawatt generators. This project will be owned 65.8% by NLH and 34.2% by HQ.
To carry the additional power, two 735 kV transmission lines, one from Gull Island to Churchill Falls and another from Gull Island into Quebec will be constructed. The cost of these lines will be rolled into the existing Hydro-Quebec electricity grid. Transmission assets in Labrador will be owned 50/50 by NLH and HQ. Transmission assets in Quebec will be owned 100% by HQ.
TRANSMISSION LINE TO THE ISLAND OF NEWFOUNDLAND
1000 megawatts of power from Gull Island will be reserved for use in Newfoundland and Labrador (800 MW for the Island of Newfoundland, 200 MW for Labrador). To deliver the 800 MW of power to the Island from Gull Island, an 800 MW HVDC infeed is proposed to link Gull Island in Labrador to Soldiers Pond (near Holyrood). Canada and Newfoundland and Labrador have agreed to enter into a set of detailed feasibility and financing studies on the infeed to the Island over the next six to ten months.
Newfoundland and Labrador Hydro and Hydro-Quebec have agreed to jointly spend up to $20 million to examine the feasibility of this project. If developed, it is estimated that Muskrat Falls could be developed at a capital cost of approximately $2.1 billion.
130 MW Recall
Under the existing Upper Churchill Power Contract, Newfoundland and Labrador is entitled to recall up to 300 MW of power at Upper Churchill contract prices. To date NLH has recalled about 170 MW of this power for use in Labrador. Effective immediately (March 9) HQ has agreed to waive the three year notice on recalling the remaining 130MW. Newfoundland and Labrador will immediately sell this power to Hydro-Quebec at current market values until it is required in Labrador. It is estimated to be worth in excess of $20 million annually.
GUARANTEED WINTER AVAILABILITY CONTRACT (GWAC)
In addition to entering formal negotiations regarding the development of the above projects, NLH and HQ have agreed to finalize an arrangement on a guaranteed winter supply of power. This arrangement is expected to be in place by November 1998. Once the contract is in place, the existing Churchill Falls plant will have a contractual obligation to operate at peak capacity so that fluctuations in demand can be accomodated during the winter months. In return, Newfoundland and Labrador will receive approximately one billion dollars over the term of the agreement (1998-2041).
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