Inflation: Hydro-Québec will contribute in the short term

Hydro-Quebec, also hit by the inflationary crisis, has agreed to make a “soul supplement” by not opposing the 3% cap on rate hikes that Quebec will impose on it. However, sooner or later these would have to be corrected upwards, admits the CEO of the state-owned company.

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“In the short term, 3% next year, given how cost pressures are evolving and what is happening with inflation in general, it seems like something that is sensitive,” said Hydro CEO Sophie Brochu, explaining that collective decisions to do this will have to be made over the next few years.

Sophie Brochu, CEO of Hydro-Quebec


Sophie Brochu, CEO of Hydro-Quebec

Currently, prices are subject to inflation and are reviewed every 5 years by the Régie de l’énergie. Due to the crisis, Québec has decided to soon include in its law a ban on interest rate hikes above 3%, even if inflation is higher.

Meanwhile Mme Brochu stresses that inflationary pressures are real and are weighing heavily on the energy sector.

But in this time of uncertainty, it takes what she calls “extra soul” to think of ways to help people in the short term.

“I think the government did that,” she said during a press scuffle after Tuesday afternoon’s supply review. “We at Hydro are doing everything we can to help people consume less, which helps because it lowers the absolute level of consumption.”

Challenge for Hydro

However, Hydro-Québec has salaries and ongoing expenses to pay, which are also subject to inflation, she says. The same applies to investments.

For example, transformers installed on utility poles cost 25% more than usual.

“We will amortize it over 40 years,” she specifies. “So that extra 25% will have a long-term effect, but it will be weaker.”

In the long term, however, Hydro will not be able to keep up this pace, especially with the many investments that will be made in the coming years, especially in the large wind projects.

“Of course, if inflation stays very high for a long time, we have to follow a path that gradually returns to inflation,” she said, acknowledging that with the plan that the governing company is proposing, pricing will be adjusted.

investments and tariffs

“We say that in our strategic plan. There are cost drivers. And one of the cost drivers, even before inflation is applied. Our investments, which totaled approximately $3.7 billion, will be approximately $5 billion to cover the additional costs resulting from the energy transition. But also to invest everything that we had not invested in maintenance in recent years. We’ve arrived and we’re catching up. That puts pressure on tariffs,” explains Sophie Brochu, although the costs are amortized over many years. “We’ll see what impact this inflation will end up having.”

She mentions that investments may be delayed due to the current inflationary crisis. “There will be decisions to be made,” she said.

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