Montreal, November 17, 2022 – To mark this week’s 60th anniversary of the election of the Jean Lesage government in 1962, the Montreal Economic Institute (MEI) published a short work of economic history looking at the national myth surrounding Hydro-Québec in this province.
“The national myth about Hydro-Québec does not stand up to scrutiny,” says Vincent Geloso, senior economist at the MEI and author of the study. “Far from benefiting Quebecers, it turns out that electricity from private companies in Quebec was actually less expensive than electricity from the Ontario monopoly that politicians of the day held up as a model.”
The popular myth about the Quebec electricity market before its takeover by the government echoes the arguments of politicians of the time like Philippe Hamel and Télesphore-Damien Bouchard, according to which private electricity companies took advantage of the Quebec market and electricity was much less expensive under Ontario’s government system.
However, adjusting for the high taxes charged to Quebec electricity companies, and the Ontario subsidies paid by taxpayers, the study finds that high prices in Quebec compared to Ontario were the result of government intervention rather than the supposed greed of producers.
The study also explains the rapid increase in electricity prices in certain regions of Quebec by their interconnectedness with Ontario. As prices in Ontario were subsidized, there was a dramatic increase in demand in that province, which turned to imports to meet its needs, thus pushing up demand for electricity in neighbouring Quebec regions.
“What the data show us is that the nationalization of Quebec’s electricity market was a direct consequence of the failings of Ontario’s nationalization,” says. Mr. Geloso. “If we want to find the best way to serve the interests of Quebec consumers of electricity, we should discard the scarecrow of a fictional past.”
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The Montreal Economic Institute is an independent public policy think tank. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
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