Quebecers pay the price for cheap electricity

Op-ed published exclusively on our website.

In Quebec, we take pride in the fact that we enjoy some of the lowest electricity rates on the planet—so much so that we could expect an outcry if Hydro-Québec announced a price hike greater than inflation.

Last March, even the Premier called on the public corporation to moderate its increases, which were not that high. Nonetheless, higher rates could entail considerable benefits in terms of public finances, the economy, and the environment.

Why raise rates? Firstly, to limit our consumption. Globally, energy consumption is the number one source of greenhouse gas emissions.

But the electricity that we consume in Quebec is clean, some will reply. Alas, by overconsuming “clean” electricity that we could sell to Americans, for example, we force them to get their electricity from other, more-polluting sources. In the United States, nearly 50% of electricity comes from coal. In China, it’s 60%, and in India, almost 75%. In other words, additional energy conservation efforts here could accelerate the closure of coal-fired boilers elsewhere.

By wasting our electricity, we therefore help increase the quantity of CO2 emitted around the world.

Moreover, since we would sell our electricity to Americans for more than we pay here, we are depriving the Quebec government of substantial revenues.

These additional funds, which could be generated without having to build any new dams, could for example be used to reduce the debt and lower Quebecers’ taxes (still the highest in North America). And the cost for Quebec households? By combining rate increases with tax cuts, energy saving measures, and credits for lower-income families, the impact would be minor.

Think long term

For the moment, there’s no emergency, Hydro-Québec being in surplus. In the long term, the electrification of transportation and the construction of new transmission lines toward the United States should reduce those surpluses substantially. Ontario could also end up realizing that buying electricity from Quebec would be less expensive than renovating its nuclear plants.

Our abundant, reliable, clean, affordable electricity is also coveted by companies that host data—multinationals like Amazon, Google, Microsoft, IBM, and Ericsson have already set up shop here—and by manufacturers. The more of these we attract, the faster Hydro-Québec’s revenues and the economy will grow, and the more Quebec will help reduce the consumption of electricity produced from coal elsewhere.

Inflation plus 1%

What, then, should Hydro-Québec do? By increasing rates by 1% more than the rate of inflation each year, and by gradually introducing a pricing system that varies according to demand in order to reduce it during peak hours, consumers would have an incentive to change their behaviour, all while giving them time to adapt.

For example, they could replace incandescent light bulbs with LEDs, get in the habit of turning off devices and lights when leaving the house, shut windows in the summer when the air conditioner is on, lower the heat at night in the winter, and properly insulate the house in order to limit spending.

Acquiring smart devices both to reduce one’s consumption and to plan it outside of peak hours is particularly beneficial. It avoids having to build additional capacity just for those periods and allows surpluses to be sold outside Quebec at higher prices.

In the long term, rates paid by Quebecers would remain below market prices for decades, and increases in our spending on electricity would likely be minimal.

Obviously, if in the meantime we all have two electric cars in the garage and four computers in the house, our bills might be higher. But that’s one more reason to rationalize our consumption as quickly as possible.

Quebecers can no longer afford to sell the electricity produced here at such low rates, even if this is appealing and popular. In reality, we all pay the price for this, and it hurts our economic growth and contributes to the warming of the planet.

Luc Vallée is Chief Operating Officer & Chief Economist at the MEI. The views reflected in this op-ed are his own.

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