MONTPELIER – Hydro-Quebec and Vermont's two largest electrical utilities announced Thursday that they had reached a preliminary deal for a new power contract that could see the state buy energy from the Canadian company for another 26 years.

Central Vermont Public Service and Green Mountain Power signed a memorandum of understanding with the Canadian company this week that executives say "sets the stage" for a multidecade business relationship for energy.

Both Vermont companies have contracts with Hydro-Quebec, a provincially-owned utility, but they expire between now and 2015.

"Hydro-Quebec will make a solid anchor in our energy portfolio going forward," said Robert Young, president and CEO of CVPS. "This agreement represents all our expectations that Vermont and Hydro-Quebec will continue to have a long and positive relationship."

The agreement signed Thursday is nonbinding, so if the three parties don't come to a final agreement, none of them will be held to the terms.

But the memorandum does lay out some critical details about the proposed contract, including that the contract would last for about 26 years starting in 2012 and that GMP and CVPS would buy up to 225 megawatts of energy from Hydro-Quebec, a number that is slightly less than the amount they are buying now.

"Our long-term energy plan calls for using less Hydro-Quebec and less Vermont Yankee as we diversify our portfolio," explained Mary Powell, CEO of GMP.

The Vermont utilities say they hope the final contract will be signed in June, approved by their respective Board of Directors a month after that and finally submitted to the Public Service Board for approval in August 2010.

Key details about the proposal – including exactly how much Vermonters will pay for this energy – are still being decided. Young and Powell both said negotiations over energy prices are confidential. Right now, the utilities pay around 6.5 cents per kilowatt hour for electricity from Hydro-Quebec.

Among the details in the memorandum of understanding is an agreement that the power will have a "price-smoothing mechanism" attached to it. The utilities said this deal will avoid the ups and downs of the energy market and keep prices stable during fluctuations.

"I think some people might be pleasantly surprised," Young said about the final power price.

Gov. James Douglas was on hand in Quebec for the announcement as part of a trade discussion with the state's Canadian neighbor. He praised the agreement, saying it is in the "environmental and economic best interest of Vermont."

"Hydro-Quebec is an important source of power for Vermont," Douglas said during a phone call on his way back from Canada. "Vermonters and Quebecers share a desire to reduce carbon emissions."

Jean Charest, the premier of Quebec, said in a statement that the agreement is an example of the continued collaboration between Vermont and his province.

"Today, Quebec strengthens its commercial ties with Vermont … together we continue to pursue the fight against climate change," he said.

The announcement arrives at a time when Vermont is grappling with its energy future. The prospects of relicensing the Vermont Yankee nuclear power plant, which supplies one-third of the state's energy needs, appears dim amid tritium leaks and allegations that company officials lied to state regulators.

Late last month, the Vermont Senate voted 26-4 against renewing the operation of Vermont Yankee beyond 2012, when its license expires. But that vote can still be reversed by the Legislature next year or in early 2012.

Both CVPS and GMP said they would like Vermont Yankee's power to be part of their portfolio after 2012 if the plant is found to be safe and reliable. But they also plan to buy about one-third of the power from the plant they get today as the utilities shift to more renewable energy.

Still, some are holding out hope for Vermont Yankee.

The Vermont Energy Partnership, a business group that includes Entergy Nuclear Vermont, the company that owns the troubled Vernon plant, released a statement Thursday saying the Hydro-Quebec deal is "the strongest argument yet" for keeping nuclear power in the state's energy mix.

"The next piece of the puzzle for Vermont's economic recovery is to cut a good deal with Vermont Yankee," said Brad Ferland, the president of the group.

daniel.barlow@rutlandherald.com