We, consumer rights associations present across Quebec, express our deep concern about the privatization project and the end of Hydro-Québec’s monopoly on the sale of electricity. With many households already struggling to pay their electricity bills, this privatization risks resulting in higher prices for consumers, and thus exacerbating the current crisis of rising costs of living.
Liberalization of the electricity market, far from being a trivial solution, presents significant risks. We can already predict that competition for resources between Hydro-Québec and private companies will increase production costs. Indeed, the deposits available for wind power and the rivers that can generate hydroelectricity are limited. According to its 2035 Action Plan, Hydro-Québec needs an additional 8,000 MW to 9,000 MW. If private companies take over the best deposits, Hydro-Québec will have to develop this new capacity on less profitable sites, which will considerably increase prices.
Several countries have already implemented a process of liberalization of their electricity sector. Although each private electricity market model is different, one trend emerges: liberalization leads to a considerable increase in tariffs, in addition to requiring costly state interventions.
In California, the liberalization of the electricity sector led to a major energy crisis, marked by skyrocketing prices and long shortages. In France, electricity prices increased by 60%, while inflation was only 15%. In Ontario, the opening of the electricity market to the private sector in the 2000s also led to a significant and rapid increase in prices. The Ontario government was forced to respond by gradually reinstating measures to regulate and control electricity prices.
Rising prices, a real problem
Some defend the idea that prices are too low in Quebec. According to this logic, it would therefore not be a big deal — even it would be desirable — for rates to increase in order to send price signals encouraging Quebecers to reduce their energy consumption.
However, this argument neglects a crucial aspect: electricity is a good with low elasticity of demand. Indeed, price variations lead to little change in consumption due to consumers’ dependence on this essential service. Electricity meets basic needs, such as heating, hot water, cooking and preserving food, lighting, etc., which limits the ability of individuals to adapt their consumption. In addition, this consumption largely depends on factors beyond individual control, such as weather conditions or the energy performance of buildings and household appliances, which particularly affects low-income households.
One in seven households already has difficulty paying their electricity bill or has to make sacrifices to do so. In 2023, approximately 178,000 households will have to enter into a payment agreement with Hydro-Québec to avoid being disconnected.
It is therefore unlikely that simply increasing prices will make it possible to reduce Quebecers’ electricity consumption. The most immediate consequence of a rate increase will be to once again increase the economic burden on low-income households.
The government should instead consider granting aid to improve the energy performance of buildings, first targeting rental housing. This win-win option would reduce the pressure placed on Hydro-Québec to develop its electricity capacity while improving the situation of households, particularly the most disadvantaged.
What do we really need?
Although a direct privatization of Hydro-Québec, through the sale of its assets to private actors, seems unlikely, there is nevertheless a real risk of liberalization of the electricity sector, transforming an essential public service into a industry subject to market fluctuations. This endangers Hydro-Québec’s fundamental mission, which is to provide Quebecers with access to affordable electricity.
Undertaking privatization without in-depth analysis of the consequences for Quebec households is imprudent. Consumer rights associations in Quebec are dismayed by the current approach, characterized by a lack of transparency and the absence of integrated planning. We call on the government to open dialogue in order to ensure that we take the full measure of the risks incurred for Quebec households and to plan Quebec’s energy development with the civil community, not for industries, but according to the interest of Quebecers above all other considerations.
* Co-signed this letter: ACEF des Bois-Francs; ACEF of Eastern Montreal; ACEF Estrie; ACEF of Lanaudière; ACEF of Laval; ACEF of the Peninsula; ACEF of Quebec; Consumer Research and Information Center; Coalition of consumer associations; Mauricie Consumer Assistance Service; Lac-Saint-Jean-Est budgetary service; Saint-Félicien budgetary service; Budget Plus Solutions, Sherbrooke; Consumers Union.