Hydro-Quebec is buying power from its own unregulated subsidiary at a very high price, and could soon pass the bill on to its customers.
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The Hydro-Quebec subsidiary, which aims to better manage consumption peaks, could end up costing all Hydro customers dearly.
During critical peaks, Hilo can preheat its subscribers’ homes and lower the temperature remotely using smart thermostats, giving it power to spare.
In return, the subscriber to this service receives rewards from Hilo. The greater the number of houses connected, the more the kW add up for Hilo, which resells these energy savings at a high price to Hydro-Québec during peak periods.
The catch is that, on average, Hilo’s gains last winter cost $136 per kilowatt (kW), according to information obtained by The duty.
The other tools available to Hydro, which come from residential customers or industrial customers (such as aluminum smelters), cost $60 or less per kW.
The bill to Hydro customers
“Since Hilo is a subsidiary and therefore not regulated by the Régie, it makes its profits at the expense of Hydro-Québec, and therefore at the expense of Hydro customers. Hilo will thus exert upward pressure on all customers,” explains Jean-Pierre Finet, Analyst at the Grouping of Environmental Organizations in Energy.
“If Hydro-Quebec pays $136 instead of paying $60, that is reflected in their expenses. And when Hydro will have to set its rates, which will be based in part on its expenses, these high supply costs will be reflected in the rates that customers pay,” adds Jocelyn Allard, of the Quebec Association of Industrial Consumers of electricity (AQCIE).
Maturing in 2024
“If Hilo were a regulated company, as is the case with Hydro-Quebec, which provides you with electricity, the profits would not automatically flow to the government. Rather, they would have a downward effect on the electricity prices paid by customers,” emphasizes Jean-Pierre Finet.
At this time, Hydro does not pass the bill directly to consumers, as rates are limited to inflation. But in 2024, the Crown corporation will present its costs to the Régie, and that’s when Hilo’s costs could increase Hydro-Québec’s customer bills.
“And 2024 is coming fast! », recalls Jocelyn B. Allard.
Can we expect any changes soon?
“For the moment, we are going to carry out an evaluation of Hilo which should last three months”, merely affirms spokesperson Cendrix Bouchard.
CEO sacked
Hilo CEO Sebastien Fournier was fired last week, three years after the subsidiary was launched.
Hilo may be doing great business with Hydro-Quebec, but it only achieved half of its goal last winter.
The subsidiary generated a displacement of power in the order of 14 megawatts (MW) instead of the 28 MW anticipated with the Régie de l’énergie.
“Sébastien Fournier was replaced following a decision made by Hydro-Québec to proceed with the merger of certain activities of its subsidiary Hilo and to proceed with the analysis of its organizational model,” said Hydro-Québec, which refuses to disclose the amount of Mr. Fournier’s severance pay.
Hydro-Québec continues to believe in the success of Hilo. The state-owned company maintains its goal of using Hilo to generate more than 600 megawatts (MW) of peak power as early as 2029.
Hilo in a nutshell
- Launched in 2019
- Aim : help households manage their consumption
- Employees : 150
- Hilo installs smart thermostats and switches in your home. During peak demand, Hilo lowers your heating in exchange for rewards. Hilo resells these saved kilowatt-hours to Hydro-Québec for its own needs.
Doubts from the start at the Régie de l’énergie
When Hilo was created in 2019, Hydro-Québec refused to go to tender, preferring to create its own subsidiary.
It will be remembered that this decision dealt a heavy blow to Quebec smart thermostat companies.
One of them, CaSa, even had to declare bankruptcy in the face of this “unfair competition”.
Overconfidence?
Hydro-Québec said at the time that it had confidence in its subsidiary and did not feel the need to check whether other suppliers could fulfill the services that Hilo was to provide, and this, at a better price.
In 2019, while the Régie de l’énergie was examining Hydro-Québec’s 2020-2029 supply plan, there was dissent from a manager, Sylvie Durand, who felt that Hydro should go call for tenders.
A dissenting opinion
“For the reasons set out below, I am of the opinion that a long-term contract, for the purchase of power resulting from the reduction of customer requirements by GDP measures, constitutes a ‘power supply contract’. electricity” within the meaning of the Act and that, consequently, the agreement entered into with Hilo had to be the subject of a call for tenders procedure under section 74.1 of the Act”, can we read in the Régie’s document.
Lack of transparency
Until very recently, it was impossible to know the cost charged by Hilo to Hydro-Québec for each kW during peak periods.
Even the number of clients Hilo has to date was information hidden from the public.
Why so many secrets?
“It was a strategic decision by Hilo from the start. We provided information on a host of things, and today we can tell you that Hilo has 20,000 customers,” replies Cendrix Bouchard, spokesperson for Hydro-Québec.