Performance of regulated activitiesHydro-Québec responds to TVA report: earnings variances benefit Quebecers

Hydro-Québec must yet again rectify certain information that was featured in a report by Michel Morin, which was broadcast yesterday on the TVA network, and that was the subject of an article that appeared in Le Journal de Montréal.

As Hydro-Québec has so often reiterated to this particular journalist over the past few years, the earnings variances noted by Hydro-Québec at the end of a fiscal year are not the result of “forecast errors” nor are they “surplus earnings”. Quite the contrary, the earnings variances in question are mainly attributable to Hydro-Québec’s excellent performance. Mr. Morin is therefore criticizing Hydro-Québec to some extent for having been more efficient than anticipated.

Since 2008, this efficiency has, both directly and indirectly, served to benefit our customers:

Directly: efficiency gains exert downwards pressure on Hydro-Québec rates, and this, in a recurring manner during the following rate years. Bear in mind that our electricity rates remain among the lowest in North America.
Indirectly: Hydro-Québec’s earnings are reflected in its net earnings, 75% of which are remitted to the company’s sole shareholder, the Québec government.

Thus, it is incorrect to suggest that the earnings in question remain “in Hydro-Québec’s coffers”.

Rate of return and earnings sharing

It also bears mentioning that the returns authorized by the Régie de l’énergie have, for several years, been significantly lower than those granted to similar companies in North America. In 2014, the Régie de l’énergie authorized Hydro-Québec to review its rate of return – so that it more accurately reflects the current North American market situation – and subsequently created an annual earnings sharing mechanism to benefit our customers.

Earnings variances could not therefore be shared with our customers prior to 2014.

As for the criticism that appeared in the same article regarding the suspension of the earnings sharing mechanism, we should mention that this sharing is temporarily being suspended until such time as Québec returns to a balanced budget, as provided for in the Act mainly to implement certain provisions of the Budget Speech of 4 June 2014 and return to a balanced budget in 2015-2016, which was tabled in the National Assembly in April 2015.

The surplus amount remitted by Hydro-Québec to its shareholder in connection with this suspension is simply part of the measures being taken to return the province to a balanced budget.

For Information :

Patrice Lavoie
Hydro-Québec
514-289-2097