Hydro-Québec (HQ) was created in the midst of the so-called Quiet Revolution (a Keynesian one, really) as a means to enrich “the (French) people” of Quebec, as electricity companies were owned by Anglophones before 1962. But looking at its track record, one can only wonder if being “Maitres chez nous” (Masters at home) has been such a great idea. (Photo Daniel Johnson Dam: Wikipedia/Bourcheci)

Indeed, the very first payout of profit HQ gave to government was in 1981, almost 20 years after the mass nationalization. There are few private corporations whose shareholders would be as patient as the Quebec government to wait two decades before reaping any profit.

Further, because the Quebec government is the sole owner of the company, it can (and has) used HQ as a political tool, notably by subsidizing electricity prices so Quebeckers would not pay market prices. Some have called it a “source of impoverishment,” especially when it comes to aluminium plants, that use a considerable amount of energy to function.

One can also call it a double standard; had any private energy company done the same, it would have been sued for unfair competition. Jacques Brassard, former Energy Minister at the end of the ‘90s, defended this “bloc patrimonial” (dams that had either been paid for or were about to be), which gave Quebec a (artificial) comparative advantage.

A Cash Cow Transforming into a Deadweight

This advantage is quickly fading away. For about a decade now, electricity production has been more or less deregulated. This has had the positive effect of encouraging additional production. However, because HQ has guaranteed small producers (mostly wind and hydro projects) that they will purchase their generation, the economics no longer make sense. 

HQ’s CEO, Thierry Vandal, says the combination of the economic downturn and the increase in additional private power production will cause huge electricity surpluses and a loss of about $1.5 billion through 2020 (thanks to the guarantees). This has resulted in the Quebec government stepping in this past winter to stop the building of six small dam projects. The losses from those dams were expected to be $24 million alone.

That’s not all. Not only can’t HQ manage its production, but it also works as a government make-work program. Indeed, over the past 40 years, it has doubled its number of employees. It is estimated that if HQ were to lower its employee to customer ratio to the same as comparable energy companies in New England, HQ could save $1 billion.

However, for the taxpayers, it would be better if electricity were privatized altogether. It works in Sweden: people have a choice of what kind of power is used (coal, hydro, wind) and how their tariffs are determined (daily with supply and demand or fixed through contracts). With such competition, customers are the masters of their wallets. In Quebec, people could have a choice between hydro, wind, or even natural gas, whose production is constantly increasing thanks to shale gas.

However, with moratoria on gas production and Premier Pauline Marois not wanting to share any resource windfalls with Ottawa, Quebeckers could be waiting a while for competitive (not subsidized) energy markets.