Hydro-Québec: Power from the North

By Colin McGregor

The Great Depression, the economic crisis of the 1930s, hit Quebec hard. Millions were left poor, unemployed, hungry and often homeless. One of the complaints that many citizens had was against those who provided their electrical energy.

Electricity production was divided among 13 private companies, as well as dozens of other municipalities, cooperatives and “self-generators,” large corporations like Alcan who generated their own electricity for their factories from nearby rivers. Each of the companies that generated electricity were in effect monopolies in the region where they were established, which means that they had no competition.

Power cuts were frequent, and the quality of service was pitiful. Nobody was happy with the situation – except the electricity companies, which enjoyed huge profits because of the high tariffs they charged consumers. For example, the Montreal Light, Heat and Power Company enjoyed a monopoly on all electricity and natural gas supplied to Montreal, and did not give the provincial government permission to even look into their account books.

Anglo Power

These monopolistic power companies were almost entirely English-speaking, and family-owned. If you notice carefully when you’re in Montreal, you can still spot a Montreal building or two with “Montreal Light, Heat and Power” chiseled into exterior walls.

In 1934, the provincial government created the Lapointe commission to investigate the pitiful state of Quebec’s electric grid. The commission condemned the monopolists and recommended the nationalization of the grid, which meant that the government would buy the companies and run them as a single public utility.

But it would be a decade before the government of Adélard Godbout took possession of Montreal Heat, Light and Power. Godbout did so in 1944, despite a vicious publicity campaign by the company. This is how Hydro Quebec was born.

The province would add the rest of the grid to Hydro-Quebec in 1963. René Lévesque, future premier of the province, was Minister of Natural Resources in the government of Jean Lesage, first elected in 1960. Lévesque said the situation as for electricity was an “impossible and costly mess,” with parts of the province not electrified. Also under dispute was the appalling service in some areas of the province; the very small number of management jobs available to Francophones in electricity companies; and the overlapping and complex responsibilities of all companies, municipalities, etc., including companies like Alcan that provided their own electricity.

Lévesque convinced the rest of Lesage’s cabinet to nationalize the entire grid at a closed meeting at Lac-à-l’Épaule in the Laurentians. To this day, a “lac-à-l’épaule” is a term used in Quebec for a strategic planning meeting, especially when it is held in a remote location.

The Lesage government ran an election campaign on the nationalization of Quebec’s electricity grid, including all electricity and natural gas suppliers, and won a landslide victory in 1962. Afterwards, the government acquired the hodgepodge of electricity suppliers in Hydro-Québec, by acquiring 80 companies, private distributors, electrical cooperatives and municipal systems.

Black Thoughts

In the English-speaking community, some members believed that French-speaking Quebecers lacked the technical ability to run a huge electricity service, and that it would fall apart sooner or later. Additionally, many members of the Anglophone financial elite on St. James Street (St-Jacques Street today) believed that when Francophones went to Wall Street to borrow money for their plans for the Bay James power project, they would be rejected by American bankers. Jacques Parizeau, another future Prime Minister and one of the economists who worked with Hydro-Québec in the 1960s, found that, on the contrary, Wall Street bankers opened their check books to finance the project. Money has no language.

When these companies were nationalized, there weren’t always smiles and giggles. In the offices of Shawinigan Water and Power, the largest company acquired by the province in 1963, the offices were vandalized, with anti-French graffiti painted on the walls.

Hydro-Québec has erected an impressive array of facilities since its creation. The James Bay project, which took 25 years to complete, is one of the largest hydroelectric systems in the world and covers an area equivalent to the state of New York. The nine plants cost $20 billion to build, and together produce power equivalent to that of all the power plants in Belgium.

The electricity that Quebec consumers do not use is sold to the United States and Ontario.

Backs of the Poor

Is Hydro-Québec a money-making machine for the Quebec state off the backs of the poorest citizens?

According to Hydro-Québec, Quebec consumers pay the lowest rates in all of North America for electricity: 7.39 cents per kilowatt hour (kWh). The average production cost is 1.93 cents per kWh, which is also by far the lowest cost in North America. You have to add the distribution cost to the bill, Hydro says.

But is it still too much? Yes, according to Jean-François Blain, an independent regulatory analyst.

Until the end of the 1990s, the price of electricity was controlled by the Quebec government. But a wave of deregulation left Hydro charging what it wanted. Result: Hydro-Quebec’s profits rose from $500 million to $3 billion in 2010. Hydro-Quebec declared a record profit of $3.546 billion in 2021, a large part of which is paid to the government.

“Why is the government no longer setting the price of electricity,” Blain asks, which would allow Quebec consumers, their “captive market,” to be charged less than the current rate of 7.39 cents.

Electricity production costs are also low, “because Quebecers have decided to invest collectively in nationalization since the 1960s.”

“When a government chooses to seek their income through user fees,” Blain explains, “workers pay with their net income, after paying their taxes. A company will subtract their electricity expenses like any other expenses from their gross profit at the end of the year to determine their net profit. A greater proportion is paid by citizens while companies contribute less. It is socially regressive as a mode of distribution.”

Blain observes that households that live in the least efficient housing pay the most: “Low-income citizens generally occupy either housing they do not own, or old buildings, and they heat with less efficient equipment. They need more energy for the same number of occupied square feet than higher-income citizens who have the ability to buy or rent homes in newer, better-performing buildings with less waste.”

Also available on the Reflet de Société website December 16th, 2022

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