Hydro-Quebec says U.S. export deal will keep local power rates below inflation
MONTREAL -- Quebecers won't get a break on already low hydroelectricity rates but a massive export deal with Massachusetts will give the public utility flexibility to keep increases below inflation, Hydro-Quebec's CEO said Friday.
"It relieves some pressure," Eric Martel said at a news conference. "It gives us a certain flexibility for things to come."
The biggest export contract in Hydro-Quebec's history, run by Hydro-Quebec and U.S. partner Eversource Energy, would bring up to 9.45 terawatt hours of electricity per year from Quebec's hydroelectric plants to Massachusetts.
Hydro-Quebec promised several years ago to keep domestic power rates below inflation and to increase the utility's profitability.
It kept the rate promise over the last three years with annual increases of 0.7 per cent while the $10-billion deal over 20 years with the New England state will generate higher returns, he told reporters.
Martel wouldn't provide the rate Massachusetts would pay but said it is above the three cents per kilowatthour cost to produce and transport the energy.
He told reporters Friday that the contract will be profitable, largely because electricity prices are stable and it already has the available production capacity.
That's good news for all Quebecers because the government will receive a larger dividend from the Crown corporation, added Energy Minister Pierre Moreau.
"Whenever the profit goes up it's good news for the shareholders, which is the government of Quebec and basically all Quebecers," he added.
The contract expected to be signed in March could generate up to $500 million in annual revenues for Hydro-Quebec.
In 2016, Hydro-Quebec's exports represented $803 million of its $2.86-billion profit.
The contract will also help the utility achieve its goal of doubling revenues to about $27 billion by 2030.
Massachusetts officially selected Northern Pass on Thursday out of 46 submissions presented to the state last year, including six by Hydro-Quebec and partners.
The project has faced intense opposition in New Hampshire, but Moreau and Martel said that has mostly been resolved after Hydro-Quebec and Evercore agreed to put more than 100 km of the transmission line underground in environmentally sensitive areas.
"Social acceptability is always a challenge for that kind of project but now it seems that it's not a problem anymore," said Moreau.
Despite the size of the deal, Martel said Hydro-Quebec still has room for one or possibly two more deals of such size.
He said the contract could put pressure on neighbouring jurisdictions like New York and Ontario to decide if they want more of the province's hydroelectricity.
"The impact of this signature will stimulate people because it's sure that our energy capacity isn't infinite."
Ontario currently has a surplus of power but could use Quebec's clean power to replace other sources along its current interprovincial transmission line, Martel said.
He said there is a risk for Ontario if it waits too long to decide but Moreau said in an interview that he believes Quebec has the capacity "to answer their needs."
Even though the project received approval from former president Barack Obama, Martel doesn't foresee any objections from the current administration because the $2 billion that will be spent in the United States will create thousands of engineering and construction jobs.
Spending in Quebec is forecast to be more than $680 million.
"The president is very favourable to infrastructure investments and this is a significant investment in infrastructure."
The project still needs to be approved by New Hampshire as well as by Canada's National Energy Board. Construction of the line is expected to start this fall with electricity flowing in 2020.