Hydro-Québec will have to prove each year to the federal government that the financial assistance from Ottawa for electricity production from which it receives actually reduces its customers’ electricity bills.
This is the condition imposed by Ottawa on provincial Crown corporations to have access to the 15% federal tax credit for investment in clean electricity production. This tax credit was announced in last year’s budget and the Minister of Finance, Chrystia Freeland, clarified the terms of application last Tuesday.
State corporations, which do not pay federal tax, will be able to claim federal financial assistance on the condition “that they report publicly, each year, on how the tax credit has reduced the bills of taxpayers,” the budget states.
Ottawa thus wants to ensure that its financial assistance is not used to increase the profit margin of beneficiary companies.
New electricity production facilities, hydroelectric power stations or wind farms, the renovation of old facilities, as well as transmission lines, are eligible for federal assistance.
There’s a lot of money on the table: Ottawa estimates that the clean electricity investment tax credit will cost it $7.2 billion within five years and $25 billion more between 2029-2030 and 2034 -2035.
A windfall
For Hydro-Québec, federal aid could not come at a better time. The Quebec state-owned company has just embarked on a historic investment program of 185 billion to increase its production by 9,000 megawatts. The construction of new power plants, the refurbishment of existing power plants and the construction of 5,000 kilometers of new transmission lines are on the agenda for the next 10 years.
Hydro-Québec is also planning massive purchases of wind energy through calls for tenders from private producers who have municipal and community partners likely to claim their share of federal aid.
To benefit from federal aid, Hydro-Québec will have to report to the federal government on its management, which would be a first. Questions also arise about how the calculation will be done to be reflected in Quebecers’ electricity bill.
Will it be the private producers who respond to calls for tenders or Hydro-Québec itself who will receive the federal tax credit? And how will the reporting be done so that it is clear that it reduces the electricity bill?
“This tax credit, no matter who is going to have it, the prices must reflect it,” assured the Minister of Energy, Pierre Fitzgibbon, in a parliamentary committee last week.
Asked about this too, the CEO of Hydro-Québec simply said that “this is not an issue for us”. During his time as Deputy Minister of Finance in Ottawa, Michael Sabia participated in the design of this tax credit for investment in green electricity which is accessible for the first time to Crown corporations like Hydro-Quebec.
But who will receive this tax credit? The question remains. Private producers grouped within the Quebec Association of Renewable Energy Producers (AQPER) do not know where to stand and are passing the buck to Hydro-Québec, which did not answer our questions.
“As for independent developers, we will adapt to the conditions set out by Hydro-Québec as part of a call for tenders,” said AQPER spokesperson Samuel Bergeron.