Hydro-Québec rates | A box of surprises expected at the Régie de l’énergie

For the first time in five years, Hydro-Québec will shortly appear before the Régie with a request to increase electricity rates for the 1^er next April. The context is particular, because the state-owned company has announced colossal investments and the government has decided that the annual rate increase will be limited to 3%.

This is the first time since 2019 that the Energy Board will have to approve an increase in Hydro-Québec rates. With Bill 34, the government of François Legault then abolished the obligation imposed on Hydro-Québec to justify and have its rate increases approved each year by the Régie, an independent administrative tribunal, to replace it with an accountability all the five years.

Between 2019 and 2024, electricity tariffs were to follow the rate of inflation, but the general surge in prices, which reached more than 8% in 2022, forced the government to legislate again to limit the tariff increase to 3 %.

In the meantime, the Quebec energy market has been completely turned upside down. Surpluses have disappeared to make way for a shortage of electricity, due to the government’s desire to attract companies looking for cheap, green energy to reduce their environmental footprint.

Hydro-Québec responded to the government’s wishes with a historic investment plan of 155 to 185 billion to increase its production by 9,000 megawatts and build 5,000 km of new electricity transmission lines within 10 years.

A sufficient increase?

The new electricity rate which will be approved by the Régie for the 1^er April 2025 will serve as a basis for the next five years and will then evolve annually according to inflation, as provided for by law.

If Hydro-Québec appears before the Régie with a request for a 3% increase in its residential rates, the Régie will have to judge whether such an increase is sufficient to avoid a rate shock in the future, taking into account the projected expansion for residential rates. next five years and beyond by the state-owned company.

Tariffs are set based on the cost of electricity, the cost of transportation and the costs related to the construction and maintenance of the distribution network. These components have all increased significantly since the last tariff case five years ago.

Added to this increase in service costs is a rate of return which guarantees profitability deemed “reasonable” for Hydro-Québec’s activities compared to similar companies and which is included in the calculation of the rate increase.

This rate of return, which is 8.2%, has not changed for several years. Could the state-owned company request an increase in its rate of return to accommodate its expansion plans?

A board without a president

Several other questions arise on the eve of the submission of Hydro-Québec’s tariff file, scheduled for this summer. Starting with the future of the Régie de l’énergie, whose mandate could be modified by the energy bill promised for months by Minister Pierre Fitzgibbon and which should be tabled before the summer adjournment of the ‘National Assembly.

Will the Régie de l’énergie see its mandate broadened or will it lose powers?

The Régie de l’énergie has no longer had a president since the departure of Jocelin Dumas, who held the position since January 2019 and left in 2023. It is Louise Rozon, manager and vice-president of the Régie, who has been acting in the interim since January 2024.

The current energy context poses new challenges to regulatory bodies around the world, which must decide on the distribution of costs associated with reducing polluting emissions without having benchmarks to guide their decisions.

The Régie de l’énergie has, for example, decided that all Hydro-Québec customers will have to pay financial compensation to the gas distributor Énergir for the conversion from gas heating to natural gas-electricity dual energy. Extremely rare, this decision was challenged in court and is now before the Court of Appeal, which will decide who to pass the bill on.