By adjusting its rates to inflation instead of having them set by the Régie de l’énergie, Hydro-Québec would accumulate overpayments of $125 million next year, according to an analysis.
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“With inflation, the increase in Hydro-Québec’s revenues will exceed the increase in its costs. So they’re going to get more money than they need,” explains Jocelyn B. Allard, president of the Quebec Association of Industrial Electricity Consumers (AQCIE).
Under the regulations adopted in 2019, overpayments are recognized when there is a difference between the actual yield of Hydro-Québec and the yield authorized by the Régie de l’énergie (8.2%).
An effect of law 34
But also, since 2019, the rates that Hydro charges are no longer set by the Régie according to its needs, but rather according to inflation. However, the increases established by the Régie in previous years were systematically less than inflation.
“We have had a system in place since 2019 where the increase in rates to be paid by customers and Hydro-Québec’s costs do not follow the same curve,” said Jocelyn B. Allard.
It could happen again…
Based on Hydro-Québec’s costs and revenues in 2021 (the most recent data available), the AQCIE estimates that Hydro will thus accumulate “unshared overpayments” of $125 million. This situation could repeat itself if inflation continues to drive up fares.
Note that the increases planned for 2023 are 3% for residential customers and 6.4% for SMEs.
The overpayments of Hydro-Quebec had made the headlines when the CAQ of François Legault was in opposition. The political formation had then calculated that approximately $ 1.5 billion in overpayments had been embezzled since 2008, and that this money should be returned to Quebecers. Mr. Legault at the time described these overpayments as a “disguised and sneaky tax”.
In 2019, the CAQ introduced Bill 34, under which electricity rates would be frozen for the first year of application, before being increased in line with inflation.
Criticized figures
“You have to be careful with table corner calculations based solely on estimates,” corrects Maxence Huard-Lefebvre, spokesperson for Hydro-Quebec.
“Besides, our activities are also impacted by inflation. It is also important to underline that, according to the new regulations which determine our tariffs, the notion of “overpayment” no longer exists since the yield is no longer calculated annually,” he points out.
ADJUSTMENT OF HYDRO-QUÉBEC TARIFFS SINCE BILL 34, ADOPTED IN 2019
Between 2021 and 2024
- Depending on inflation.
In 2025
- The Régie de l’énergie will set the rates following the filing of a rate case.
From 2026
- Depending on inflation for a new 4-year cycle and filing of a tariff file with the Régie la 5e year.