The costly indexing of electricity

Hydro-Quebecians, be aware that historical electricity price indexing will cost you ugly butter for years to come.

In the five fiscal years from 2022-23 to 2026-27, we will have to pay a total of $5.1 billion for indexation of so-called heritage electricity tariffs, which is earmarked for the Generations Fund.

What do I rely on to make such an astronomical $5.1 billion in income that Hydro-Quebec is taking out of the pockets of its customers and then putting it into the government coffers through the dividend it pays to them annually will be transferred from Quebec? ?

On the generational fund revenue forecasts released in the pre-election report on the state of public finances released last week by Treasury Secretary Eric Girard with the endorsement of Quebec Auditor General Guylaine Leclerc.

Strong increases

Here is the breakdown of that $5.1 billion hydroelectric revenue, the amount for each of the tax years, with, in parentheses, the percentage increase from one year to the next.

  • 2022-23: $550 million (+12.7%)
  • 2023-24: $780 million (+41.8%)
  • 2024-25: $1,125 million (+44.2%)
  • 2025-26: $1,260 million (+12.0%)
  • 2026-27: $1,385 million (+9.9%)

In percentage terms, you will find that the annual increase in income from the indexing of old electricity is quite significant.

A technical question now: How is the amount of this annual income from the indexing of electricity determined?

According to the Hydro-Québec Act, Section 15.1.1, from the dividend paid by Hydro-Québec, the Treasury Secretary must pay into the Generational Fund the amount “that the government allocates to indexation of the average cost of utility electricity from heritage pools since 2014 for each off fiscal year ending this year”.

Additional Posts

In addition to this income from heritage stream indexing, there are two other sources of income for Hydro-Québec that are also earmarked for the Generations Fund.

Under the Hydro-Québec Act, Crown Corporation is required to pay an annual sum of $215 million through its dividend to the Quebec government “for each fiscal year beginning in 2017 and ending in 2043.”

This will bring in a pot of around $1.1 billion over the next five years.

Hydro-Québec’s other revenue stream that will go to the generational fund? These are hydraulic charges, a bill that Hydro has to pay and that is of course passed on to us in the electricity tariff.

In the current fiscal year 2022-23, the water fees that Hydro will pay to the government amount to US$782 million. For the full five years (2022-2026), Treasury Secretary Eric Girard plans to collect $4.2 billion in royalties from Hydro.

The countdown

So that’s a total of $10.4 billion ($5.1 billion in indexing; $1.1 billion in additional contributions; $4.2 billion in royalties) that Hydro has should pay to the Quebec government over the next five years to replenish the coffers of the Quebec Generations Fund.

This amount, taken from our Hydro-Québec accounts, represents 48% of government revenue that will be transferred to the generational fund over five years.

As a consolation prize, tell yourself that this $10.4 billion is destined to save the national debt!

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