Montreal Gazette
August 24, 2014

Editorial: Energy sales to Ontario could be mutually profitable

MONTREAL — Premier Philippe Couillard and his counterpart from Ontario, Kathleen Wynne, emerged from their first tête-à-tête this weekunderscoring how much their provinces have in common and pledging a new era of cooperation.

This is a positive thing on many levels. But one of the more promising avenues of this renewed partnership concerns energy.

Premier Wynne expressed interest in buying Quebec hydro power if Ontario can get a “good deal.” Quebec happens to be generating a significant surplus. If the next-door neighbours can reach an agreement, it has the potential to be mutually advantageous politically, economically, environmentally and socially for both provinces, where energy is a hot-button issue.

Quebec is at a crossroads after 40 years of economic policy based on building hydro capacity. Supply now outpaces flat demand. Prices for the renewable power source have hit bargain-basement prices in the U.S. due to the shale gas boom, undermining Quebec’s traditional market for exports. Meanwhile, the political decision to subsidize alternative energy sources, particularly wind, by awarding lucrative contracts to private operators to create jobs has proved costly.

A report released last year by a government-appointed panel on Quebec’s energy future, the Commission sur les enjeux énergétiques du Québec, warned that together all these factors are costing the Quebec government, the sole shareholder of Hydro-Québec, about $1.5 billion a year.

In July, Hydro-Québec made known its intention to seek permission for a rate hike of 3.9 per cent next year. This would come on top of a 4.3-per-cent increase that went into effect April 1.

There is growing concern that the “social contract” of hydro nationalization in the 1960s — the promise that power generation would help underwrite Quebec’s social programs — is fast unravelling and hurting the most vulnerable.

Ontario’s electricity problems are also fraught.

First, there was the gas plant scandal, when former premier Dalton McGuinty’s government suddenly cancelled two natural gas plants in swing ridings on the eve of a hotly contested election. Critics charged it was pure politics. Besides an ongoing police probe and McGuinty’s resignation, the cost to taxpayers in penalties, legal settlements and relocation fees ballooned to $1.1 billion.

Wynne is also grappling with the fallout from her predecessor’s green energy push. The province will be coal-free by the end of this year. But investments in wind energy and particularly solar power have proved less reliable, more expensive and less popular than anticipated.

Meanwhile, two new nuclear reactors at Darlington are on hold while the Pickering nuclear plant is to be decommissioned. But expensive refurbishments of both the existing Darlington and Bruce nuclear power plants are slated to start in 2016.

Thus, Ontario is also rethinking its energy future.

In this context, environmental groups Equiterre and the Ontario Clean Air Alliance laid out the ecological and business case for Quebec to sell hydro to its neighbour in a July research report. According to the brief, Quebec already has the capacity to transmit 24.4 billion kWh a year of electricity to Ontario, but only sells 2 billion kWh.

The environmental groups argue that if Quebec sold Ontario hydro at 5.7 cents a kWh (comparable to the 5.8 cents Quebec charges Vermont) and Ontario scrapped the Darlington overhaul, the economic benefits for each province would be $600 million a year, and $12 billion total over the life of a 20-year contract.

This is just one calculation and Ontario may have other reasons for keeping Darlington. But it seems clear that if an agreement can be hammered out on hydro power, it could be a good deal for both Ontario and Quebec.