The rising cost of living has become a major concern of the political class in Quebec and elsewhere. A few days ago, Prime Minister François Legault promised that his government, through the next budget, would help Quebecers deal with this surge in inflation, and the opposition parties went there with their own proposals. . However, due to the changes made in 2019 by the CAQ government to the setting of Hydro-Québec rates — they are blindly increased according to the consumer price index (CPI) — the automatic increase in the price of electricity is now contributing to the inflationary spiral that is hitting the population.
In June 2019, the Minister of Energy and Natural Resources, Jonatan Julien, introduced Bill 34 to exempt Hydro-Québec Distribution (HQD) from its obligation to have its annual rate increases approved by the Régie de l’ energy. Instead of being determined by the costs assumed by the Crown corporation, the rates would simply be pegged to inflation. Hydro-Quebec was relieved of a regulatory burden that bothered it. It would have carte blanche to develop its network, whether for the electrification of transport or even dual-energy programs.
At the time, Jonatan Julien repeated that the rates, authorized by the Régie de l’énergie, had increased at the rate of inflation for 15 years. This was a half-truth, since this figure included a catch-up in 2003-2004 made necessary following years of rate freezes and the higher cost of electricity produced by wind turbines, an energy which no need HQD.
In fact, in 2019, the year the bill was passed, the rate increase approved by the Régie was 0.9%, half of inflation. Before the application of the law, from 2017 to 2019, the average annual increase was 0.63%. For the following three years, even taking into account the rate freeze in 2020, which constituted a form of partial reimbursement of overpayments by Hydro-Québec since 2005, the annual increase is 1.3% on average, twice as much than the previous three years, when the law was not in force. From 1er April, Quebecers will pay 2.6% more for their electricity, the equivalent of the CPI and four times more than the annual rate between 2017 and 2019.
At the time of the consultations in the parliamentary committee, Bill 34 had received no support from consumer representatives, whether they were residential or industrial customers. No economist had praised the government for its discovery.
At the National Assembly in February, just before the parliamentary recess, Jonatan Julien released his 2019 tape, saying that for 20 or 30 years, Hydro-Québec rate increases, approved by the Régie, had been correlated with inflation. The truth is that there is no correlation between the price of electricity and those of butter, vegetables or gasoline and all the other products and services that enter the list of ‘CPI. The minister sees a correlation in what is just happenstance. Besides, there is every reason to presume that he does not believe himself.
With the surge of inflation, the whole edifice of the law is shaken. What was supposed to be a long calm river turned into a roller coaster, and the war in Ukraine is not the only cause: price pressures existed even before the unspeakable invasion.
As Canadian radio economics journalist Gérald Fillion explains, the law provides that Hydro-Québec’s rates as of January 1er April 2023 will be increased according to the average CPI — excluding alcoholic beverages, tobacco and cannabis — between September 30, 2021 and September 30, 2022. Inflation data is now available for the months of October , November, December and January and show a jump of 5.1%. And we can expect an acceleration in inflation due to the Ukrainian conflict: some economists foresee a rate of 6, 7 or even 8% for the period.
Next September, we will know approximately by what percentage Hydro-Quebec’s rates will be “automatically” increased in 2023. And in September, Quebec will be in the election campaign. What was not the idea of the century at the start has become a handicap for the caquists who seek to be re-elected. We bet that thanks to the Girard budget tabled next week, the Legault government will happily walk on the paint. It’s not like it’s the first time.