Hydro’s spending increases by more than $1 billion – Le Journal de Montréal

Last year, Hydro-Québec’s spending saw its biggest increase in at least a decade, rising by more than $1 billion. Experts believe Quebecers will end up footing the bill.

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The increase in total spending of the state-owned company reached more than 13% in 2022. Excluding electricity purchases, the increase was nearly 17%, or more than double inflation, which reached 6.7% last year.

In its annual report, Hydro cites several reasons for the increase in its operating costs. First and foremost: “the growth of the company’s activities to improve the quality and reliability of the service”, “the intensification of maintenance and servicing activities” and the development of “digital services to meet increasing business needs”. […] and to support technological development” by 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% in a year. Employee salaries were indexed by 3% in 2022 and by 3.5% this year.

In particular, Hydro has invested to increase the resilience of its production, transmission and distribution network, which is aging and has suffered from under-investment in recent years.

According to Hydro-Québec, the violent storms (“derecho”) of May 2022 and the storm of December, “extreme weather events”, also cost the state-owned company dearly.

“In both cases, more than half a million customers were left without power and significant work had to be carried out, resulting in a significant increase in costs, particularly in relation to overtime and associated fees. External vegetation control services and the use of specialized ones.” “The installation teams are there for us,” explains Hydro.

Finally, the company attributes some of the increase in its spending to its subsidiaries Hilo (energy efficiency) and EVLO (energy storage).

Exports are exploding

Hydro-Québec’s cost increase went relatively unnoticed due to the sharp increase in revenue in 2022. Electricity sales in Quebec rose 7.4% to $13.2 billion, while sales outside Quebec exploded 60% to nearly $3 billion due to a rise in energy prices resulting from the war in Ukraine.

Crown Group’s net profit was $4.56 billion, while the dividend paid to the government was $3.42 billion – both up 28%. A record.

Residential customers haven’t fully felt Hydro’s increased spending either. Their prices rose by 2.6% in 2022 and 3% in 2023, limited by electoral commitments from the Legault government.

However, the increase was more significant for commercial customers (+6.5%) and for industrial customers (+4.2%).

“Increasing influence on prices”

The limitation on tariff increases for residential properties must apply at least until 2025. However, experienced observers of Hydro-Québec believe that the state-owned company will have to significantly increase its tariffs in the medium term to cope with the ever-increasing bill for network maintenance and the increasing costs of purchasing electricity.

Unless, of course, the government agrees to a lower dividend.

“It will have an upward effect on prices, that is clear. Therefore, it is important to ensure this [Hydro-Québec] Don’t do more than necessary [au chapitre des investissements dans le réseau]. This must be done reliably, but it is also important that it be done in a transparent manner,” says Jocelyn B. Allard, president of the Quebec Association of Industrial Electricity Consumers.

Hydro-Québec needs to invest more and more to ensure the resilience of its network.

Jocelyn B. Allard Photo from LinkedIn

“Nothing is lost, nothing is created,” adds Jean-Pierre Finet, spokesman for the group of environmental energy organizations. Hydropower Quebec rates in general are expected to increase impressively in the coming years.”

In his opinion, the state-owned company would run a significant risk if it decided again to underinvest in its network.

“If you’re worried about energy stability because of repeated outages… It’s not what it used to be. Pride has taken on a little more importance,” 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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