For decades, Quebec has attracted industry with the promise of nearly limitless quantities of clean hydropower at rock-bottom rates to power their plants and smelters. Much to almost everyone’s surprise, including the provincial government’s, those days have ended.
After the Quebec wing of Canadian Manufacturers & Exporters last month released a poll showing that more than a third of the province’s manufacturers do not have access to enough electricity to satisfy their demand, the province’s Economy, Innovation and Energy Minister, Pierre Fitzgibbon, blamed the problem on poor planning by Hydro-Québec over the past two decades.
To make up for the power shortfall and enable the province to become carbon-neutral by 2050, Mr. Fitzgibbon last week tabled Bill 69. The legislation aims speed up the development of new electricity projects and allow for more private production. But it will also lead to higher rates for businesses and, eventually, residential consumers.
“We practically have to double current electricity production, and we have 25 years to do it,” Mr. Fitzgibbon said at a press conference. “We need to develop in 25 years what it has taken Quebec 100 years to build, and our current processes are much too slow.”
It will fall mostly to Hydro-Québec chief executive officer Michael Sabia, who took over at the provincial utility nine months ago, to execute Mr. Fitzgibbon’s plan. Mr. Sabia has been shaking up Hydro-Québec’s management ranks to prepare for a construction spree and build public support for new power projects.
In March, Hydro-Québec hired Graham Fox, a former managing principal at public relations and strategy firm Navigator, as vice-president of public affairs and communications. Last month, the utility recruited Rio Tinto executive Michel Charron as its vice-president of construction projects. It also hired McKinsey energy consultant Joël Thibert as vice-president of energy planning and strategy.
New production cannot come fast enough for Mr. Sabia. Hydro-Québec has been forced to dramatically slash its electricity exports to the United States this year because of low water levels in its reservoirs. Exports fell by two-thirds to just $446-million in the first quarter of 2024, from $1.2-billion in the first three months of 2023. The utility’s overall first-quarter profit was down 30 per cent to $1.5-billion.
The question is whether Mr. Fitzgibbon’s bill is bold enough for Mr. Sabia’s liking. The bill calls for the development an integrated energy resources plan, likely putting off any decision on new large hydro and wind projects until next year or even later.
“We’re clearly not ready, because a lot of people do not want new dams, some people do not want to have wind farms next to their homes, some people probably don’t want to have solar panels either,” Mr. Fitzgibbon said.
“That’s fine. But at the same time, we want to decarbonize. We need to double up on production … we need to have the debate. And I think the debate will be interesting.”
The bill, which will not be adopted until the fall sitting of the National Assembly at the earliest, does give Hydro-Québec more leeway to commission new power projects without public tenders. It’s a provision that will speed up partnerships with Indigenous communities and private power producers on new mid-sized wind and solar farms.
The provincial utility will develop wind-power projects exceeding 1,000 megawatts in capacity on its own, with an overall goal of increasing wind-power production by 10,000 MW by 2035.
For the first time, private power producers will also be able to sell electricity directly to “adjacent” industrial customers, instead of only to Hydro-Québec, as is now the case. The provision is likely to accelerate the development dedicated power projects not connected to provincial grid, giving big industrial facilities access to an additional source of electricity.
Under Bill 69, the limit on the size on private hydro dams will also double to 100 MW, allowing dozens of existing privately-owned generating stations to expand capacity.
The price tag for all this new production will be hefty, however.
Quebec has offered the cheapest industrial power rates in North America – about five cents a kilowatt-hour – thanks to the low cost of production of Hydro-Québec’s own decades-old dams and its 1969 contract to purchase almost all of the power generated by the Churchill Falls hydro project in Labrador for 0.2 cents a kWh. That contract ends in 2041.
Bill 69 signals the party may soon be over. The legislation eliminates price freeze on a so-called “patrimonial” block of power from older generating stations that has insulated large industrial customers from most rate increases until now. The bill empowers the provincial energy regulator to raise rates for industrial consumers based on a cost-of-service increment starting in 2026.
The government has promised to cap annual residential rate increases at 3 per cent a year for the next two years, but it has so far not committed to extending the cap beyond 2026. That just so happens to be when the next provincial election is to be held.
