ST. JOHN'S, N.L. - Newfoundland and Labrador's Crown energy corporation says it will launch a legal challenge with the Quebec Superior Court in a bid to reopen the 1969 contract to develop the Churchill Falls hydroelectric project.
In November, Nalcor Energy requested Hydro-Quebec to reopen the deal - a plea the Quebec government swiftly rejected.
But Nalcor Energy CEO Ed Martin said Hydro-Quebec has not formally answered the request, leaving no option but to file a challenge.
"We have no choice but to interpret that as a refusal to enter into discussions and I have instructed our lawyers to proceed with legal action," Martin told a news conference Monday.
"The legal opinion that we have received indicates that under the principles of good faith there is an obligation for Hydro-Quebec to renegotiate the pricing arrangement."
Martin said the challenge would rely on Quebec's Civil Code and be launched in that province's Superior Court.
The Newfoundland government has previously challenged the fairness of the deal all the way up to the Supreme Court of Canada and lost.
Premier Danny Williams has said the deal has so far reaped about $22 billion for Quebec but only about $1 billion for Newfoundland and Labrador.
The office of Quebec Premier Jean Charest referred calls to that province's energy minister, who was not immediately available for comment.
Martin said the deal should be renegotiated given its "dramatic inequities," citing its length - it doesn't expire until 2041 - and the fact that power prices have soared since it was signed in 1969.
"For the remaining years of the contract, Upper Churchill Power would be sold to Hydro-Quebec for less than five per cent of its recent commercial value," said Martin.
Under existing terms, the purchase price of Upper Churchill power is roughly one-quarter of a cent per kilowatt hour while a renewal contract that takes effect in 2016 cuts it to one-fifth of a cent.
Martin called the timing unfortunate but said he wanted to make it clear that there was no link between this action and an upcoming appearance before Quebec regulators to apply for access to Hydro-Quebec's transmission system.
That access is considered critical to the development and export of power from the proposed develop of the Lower Churchill hydroelectric project.
"They are separate and distinct actions arising from a completely different set of circumstances," said Martin.
Martin says he hopes to have the challenge filed within a couple of weeks.