Also affected by the inflationary crisis, Hydro-Quebec agrees to make a “supplement of soul” by not opposing the 3% ceiling of the increase in rates that Quebec will impose on it. But sooner or later, these will have to be revised upwards, admits the CEO of the state-owned company.
“In the short term, 3% next year, it seems something that is sensitive given the evolution of the pressure on costs, given what is happening with inflation in general,” said the CEO of Hydro, Sophie Brochu, stating that collective choices will have to be made in the coming years.
Photo QMI AGENCY, MARIO BEAUREGARD
Sophie Brochu, CEO of Hydro-Quebec
For now, prices are subject to inflation and are reviewed every 5 years before the Régie de l’énergie. Due to the crisis, Quebec has decided that it will soon include in its law the prohibition to increase rates above 3%, even if inflation is higher.
Meanwhile, M.me Brochu stresses that inflationary pressures are real and that they weigh heavily on the energy sector.
But, in this time of uncertainty, it takes what she calls “extra soul” to think about ways to help people in the short term.
“I think that’s what the government did,” she said in a scrum following the appropriations Tuesday afternoon. “We at Hydro do anything we can do to help people consume less, that helps because it lowers the absolute level of consumption.”
Challenge for Hydro
However, she says, Hydro-Quebec has salaries and current expenses to pay which are also subject to inflation. The same goes for investments.
For example, transformers installed on utility poles cost 25% more than usual.
“We will amortize it over 40 years”, she specifies. “So this additional 25% will have a long-term impact, but it will be weaker.”
In the long term, however, Hydro will not be able to keep up this pace, especially with the many investments that will be made in the coming years, particularly with the major wind projects.
“Of course, if inflation remains very high for a long time, well, we will have to have a trajectory that will gradually lead back to inflation,” she mentioned, admitting that with the plan that the government corporation is proposing, pricing will have to be adjusted.
Investments and tariffs
“In our strategic plan, we say so. There are cost drivers. And one of the cost drivers, even before inflation is applied. Our investments, which were around $3.7 billion, will be around $5 billion to support the additional charges resulting from the energy transition. But also to invest all that we had not invested in maintenance in recent years. We got there and we are catching up. It puts pressure on the rates,” explained Sophie Brochu, maintaining that the costs are however amortized over many years. “We will see what the impact will be, in the end, of this inflation.”
She mentions that investments could be delayed because of the current inflationary crisis. “There will be decisions to be made,” she said.