2023-11-02 04:00:00
Last year, Hydro-Québec’s expenses saw their most marked increase in at least ten years, jumping by more than $1 billion. Quebecers will end up paying the bill, experts believe.
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The increase in total expenses of the state-owned company reached more than 13% in 2022. Excluding electricity purchases, the increase was close to 17%, or more than twice inflation, which reached 6 .7% last year.
In its annual report, Hydro gives several reasons to explain the increase in its operating expenses. In the first place: “the growth of the company’s activities aimed at improving the quality and reliability of the service”, “the intensification of upkeep and maintenance activities” and the development “of digital services in order to meet the increase in business needs […] and to support the technological evolution” of Hydro-Québec.
More employees
To carry out these projects, the state-owned company increased its spending on “external services” and its workforce, which increased from 21,168 to 22,051 people, an increase of 4.2% over one year. As for employee salaries, they were indexed by 3% in 2022 and 3.5% this year.
Hydro has notably invested to increase the resilience of its production, transmission and distribution network, which is aging and which has suffered from underinvestment in recent years.
The violent storms (“derecho”) of May 2022 and the storm of December, “extreme weather events”, according to Hydro-Québec, also cost the state company dearly.
“In both cases, more than half a million customers were without power and significant work had to be carried out, which resulted in a marked increase in costs, particularly in terms of overtime and associated fees. external vegetation control services and the use of specialized line assembly teams,” explains Hydro.
Finally, the company attributes part of the increase in its expenses to its subsidiaries Hilo (energy efficiency) and EVLO (energy storage).
Exports explode
Hydro-Québec’s increase in expenses went relatively unnoticed due to the sharp increase in revenues recorded in 2022. Its electricity sales in Quebec jumped 7.4% to reach $13.2 billion while its sales outside Quebec exploded by 60% to almost $3 billion, a consequence of the surge in energy prices in the wake of the war in Ukraine.
The Crown corporation’s net profits were $4.56 billion, while the dividend paid to the government was $3.42 billion – both up 28%. A record.
Residential customers have also not fully felt Hydro’s increased spending. Their prices increased by 2.6% in 2022 and 3% in 2023, limited by electoral commitments from the Legault government.
The increase was, however, more pronounced for commercial customers (+6.5%) and for industrial customers (+4.2%).
“Increasing effect on prices”
The limitation on residential rate increases must last at least until 2025. Seasoned observers of Hydro-Québec, however, expect that the state-owned company will have to, in the medium term, increase its rates significantly in order to face the ever-increasing bill for network maintenance and the increasing costs of purchasing electricity.
Unless, of course, the government agrees to receive a lower dividend.
“It will create an upward effect on prices, that’s clear. Hence the importance of ensuring that [Hydro-Québec] don’t do more than you have to [au chapitre des investissements dans le réseau]. It must be done to be reliable, but it is also important that it is done in a transparent manner,” says Jocelyn B. Allard, president of the Quebec Association of Industrial Electricity Consumers.
Jocelyn B. Allard Photo taken from LinkedIn
“Nothing is lost, nothing is created,” adds Jean-Pierre Finet, spokesperson for the Grouping of Environmental Energy Organizations. Hydro-Québec rates in general will be expected to increase impressively over the coming years.”
According to him, the state-owned company would run a significant risk if it once once more decided to underinvest in its network.
“When you start worrying regarding energy resilience because of repeated outages… It’s not what it used to be. Pride has taken the edge a little,” he says.
Hydro-Québec operating costs
2022: $3.84 billion, up 16.9% First six months of 2023: $1.96 billion, up 6.5%
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