The end of cheap power in Quebec? - Macleans.ca
 

The end of cheap power in Quebec?

Jean Charest is looking for ways to erase a $4-billion deficit


 

The end of cheap power in Quebec?Things are always changing in Quebec, but for a long time the province’s citizens could count on at least one constant—cheap, government-subsidized energy. But with a $4-billion-plus deficit staring it in the face, Jean Charest’s Liberal government is looking for ways to save money, and one idea it has floated is to raise the price of electricity at the government-owned Hydro-Québec.

The province had a moratorium in place on rate increases between 1999 and 2003—since then, home energy prices have grown by 16 per cent. Now it looks like they might climb higher, perhaps significantly. The Liberal government is considering raising rates by an average of $265 per household per year—doing so could bring in revenues of $1.4 billion. It could also mean the Liberals might be able to avoid other proposed fee increases, including CEGEP tuition hikes and adding toll roads.

Raymond Bachand, Quebec’s finance minister, says raising energy fees is the simplest way to get the needed money: “If we have a choice of [how to use] . . . Hydro-Québec, do we use it to reduce our [energy] rates or do we use it to pay for the health services?”

But opposition leaders are rallying against any rate hikes. “The sad thing here is that [the Charest government] wants to take more money from those who already give their money honestly,” says Jean-Martin Aussant, spokesman for the Parti Québécois. “We think it’s a shame that we’ve gotten to this point.”

Aussant thinks the government can cut the deficit without any cost to taxpayers, simply by increasing efficiency at Hydro-Québec—a program he claims could save $2 billion. Cracking down on tax evasion across the province could create another $900-million windfall, he says.

And, of course, the PQ sees Ottawa as the ultimate villain. Aussant says the feds owe Quebec $8 billion in federal transfers, money that Charest refuses to fight for. “[Charest] doesn’t want to be on bad terms with his friends,” says Aussant. “Everybody knows his dream is to be prime minister of Canada, not Quebec.”


 

The end of cheap power in Quebec?

  1. Well, I may be mistaken, but I think characterizing energy costs in Québec as "cheap, government-subsidized" partly wrong. I mean, it is cheap, but…

    Hydro-Québec has been profitable for a very long time. And by profitable, I mean they sign a hefty check (around 2 billions last year) to the Québec state (the sole owner of the company) every year. This isn't the government subsidizing HQ so it can sell energy on the cheap, it's the exact contrary, that is HQ turning a profit that is in turn shoved in the governement's coffers.

    Now, it is understood that a large chunk of those profits (70%?) comes from the sales of electricity to american and ontario markets. But again, those aren't subsidies.

    I mean, I understand Quebeckers are generally understood as living off their (federally funded) government's subsidies, but HQ isn't such a case.

  2. Except that Quebec individuals and industry (hello Alcan) get power so cheap that there is zero incentive to be wise in the use of this resource. Waste it at cheap prices, and Hydro-Quebec has less power to export.

    A perfect example of the COST of "cheap" electricity.

  3. So. Are Quebeckers (and their industries; hello Alcan!) getting cheap energy because the government (funded by federal funds, of course!) is paying Hydro?

    Or is Hydro making a hefty profit (off his clients, that is quebeckers and foreign buyers), despite rebates to industries (hello madeyoulook!), and giving a hefty check to the quebec government?

    So, what is the COST of cheap electricity that explains Quebeckers unwiseness in electricity use compared to other canadians? I'm looking at you, madeyoulook.

    (damned RSS comments feeds, eh?)

  4. How will Quebeckers feel about their utility buying the debt-plagued NB Power?

    http://bit.ly/2JtdPZ

  5. Depends. As long as Hydro-Québec gets a 12% return on its $22 billion equity (that's the company's target), I don't mind.

  6. The Quebec government does not subsidize Hydro-Québec. Hydro-Québec is rather the government cash cow (the dividend check it sent to its sole shareholder was in the amount of $2.252 billion last year, or 3% of the provincial budget).

    As far as the "unwiseness" of Quebec customers with regards to electric consumption, it's a matter of debate. Yes, Quebec residential clients use more electric power than everybody else in North America (17,000 kWh/household), but they use less imported natural gas while cutting heating oil use in the last 30 years.

    In fact, the average Quebec household (97.3 GJ/household) used less energy than its Ontarian neighbor (110.1 GJ/household) in 2006, according to NRCan (http://oee.nrcan.gc.ca/corporate/statistics/neud/

  7. Heaven help New Brunswick…people of New Brunswick save yourselves and don't sell NB Power.

  8. I'd be cautious about comparing energy use by Quebec vs Ontario in the manner in which you have. It depends upon the efficiency of the equipment, and the fuel used (electricity vs natural gas).

    The two most significant energy consumers in a household are space heating (64% in Q)and domestic water heating(12.3%). If you use electricity for heating (baseboard) and hot water, you can get roughly 100% energy efficiency (you get out what you put in).

    If you use natural gas – older furnaces would get 80% efficiency (newer up to 97%) whereas hot water heaters are typically 62% efficient.

    Also, if you generate electricity from natural gas (as they do in Ontario) – you can only get 30-40% thermal efficiency for gas turbine, or upwards of 50-60% if it is a cogen facility. However, these losses would not show up in the numbers you cited.

    So, you're comparing apples and oranges in the statistics you cite. (Notice how Ontario households use 21% of their energy to heat water whereas Quebec uses 12.3%? Most likely due to the manner in which water is heated, lower efficiency with gas, not that Ontarions take hotter, longer and more frequent showers)

  9. Of course, you're right; natural gas and heating oil are much less efficient than primary electricity. And you could have added that other factors influence the equation, such as the average size of a family unit living in a dwelling (approx 2.5 in QC compared to 2.8 in ON) or the physical size of the space to heat in each dwelling. On the other hand, winters are generally colder in Montreal than in Toronto. And it could go on…

    My basic point was to show the flaws of the original poster's point (see oliver's message above) questioning the "wisdom" of Quebec households in their use of electricity. Considering the structure of the utility business in the two provinces, I contend that the use of electricity for space heating in Quebec is "wise enough" from an economic (the money spent on electricity stays in the provincial economy) and environmental standpoint (4.65 Mt CO2 eq. in 2006). Could they be wiser, more efficient? Probably. So can anyone.

    In Ontario, natural gas makes more sense for space heating for a few reasons: it is more efficient to burn gas to heat the air and water than to generate electricity, electricity prices are higher and 20% of your power comes from coal, which is even less efficient than gas to generate power.

    • A relative of mine, who lives in Ontario, heats their house with electricity (heat pump/electric furnace and electric water heater). Their avg annual consumption over the past 5 yrs was 25,800 kWh at an annual cost of approx $3300.

      The same electricity in Quebec would have cost approx $2100 (64% of Ontario costs) using the rates outlined here:
      http://www.hydroquebec.com/residential/tarif-resi

      I happened to known their numbers as they have participated in the EcoEnergy retrofit program where you have a consultant come in and audit your energy use and make recommendations on becoming more efficient.

      Now, the economics of adding insulation, replacing windows is dictated strictly by payback. So, say adding insulation in the attic can reduce space heating costs 15% and costs $3000. In Ontario, (assuming 50% space heating/heat pump), the payback would be 12 yrs, whereas in Quebec, it would take almost 19 yrs. Who do you think would be more likely to invest in insulation?

      Ontario's spot price rates are determined by the market. The bidding process is described here:
      http://www.ieso.ca/imoweb/siteShared/wholesale_pr

      So, as gas becomes more expensive, it largely sets the spot price (cheaper nuke , hydroelectric and coal get the same market price) which will drive up prices. And, if you add a carbon tax, the price of electricity goes up again.

      In Quebec you have a monolpoly with regulated rates – determined by a cost of service and return on equity formula. They are not market based (ie what could you sell the electricity at if it was generated by gas, or what could you get if you exported it to the US states). Hence the differential – which will only grow as carbon taxes are added to fossil fuel generated electricity, but not to hydroelectric.

      In this situation(with artificially low electricity rates) I wouldn't be surprised to see a lot of wasting of electricity – more so than if the prices were higher, and there was more of an economic incentive to conserve.

      • Btw, the historical Ontario costs were based upon GST @5%. Next yr, HST comes into place in Ontario, so I should have added 8% Ont sales tax. New numbers – Ontario annual electricity cost $3560. Quebec $2100 (already included 7.5% QST) $2100/ $3560 = 59%

        Payback on insulation, Ontario = $3000/$267 = 11.2 yrs. Quebec = 19 yrs.

  10. Wow, honestly I'm really impressed by the level of discourse here! Stickin' to the issues. It's great!

  11. They are supposed to be in debt and they are forking out 4.75 billion to destroy Nb. Sorry no pity from this voter from Nb. As far as we are concerned our government just signed our soul to the devil himself !! Guess that is not saying much about our wonderful Liberal Government is it ….

    • New Brunswick has to keep our assets…and lose our liberal government…election anyone???__

  12. I will make a decision when I have the facts from all sides

    • you won't get a chance to make a decision, the government will make it for you

  13. 4 Billion dollar deficit is not correct., if you add to the the 16 billion dollars in federal transfer payments the deficit for Quebec this year is almost 50% of the national deficit. When provinces provide figures on their budgets they need to be more transparent and include transfer payments if they are a have not province such as Quebec. Seems to me that Hydro Quebec has been subsidizing the average hydro customer long enough.

  14. Correct Oliver, HQ isn't a case of living off federal subsidies. It's one that lives of Newfoundland and Labrador subsidies. I say this because, as you noted, 70% of their profits from from teh sale of electricity to American and Ontario markets. Meanwhile 75% of their overall profits (including those you mentioned) come from the power they buy at rock bottom prices from Churchill Falls. This according to a study commissioned by the Montreal Industry association.