What a great coincidence for the government of François Legault and his Piaster Cow Hydro-Québec! Hydro-Quebec’s profits have skyrocketed since the CAQ government decided to raise electricity prices to match inflation.
In just two years, Hydro’s net income has nearly doubled, going from $2.3 billion in 2020 to $4.56 billion in 2022, exploding by 97.8%. That electrifying profitability is all the more surprising given that gross sales grew just 21.9% over those two years.
Under the old system of electricity pricing, it was the Régie de l’énergie that set the increases. And it was “coincidence” that the approved increases were always (or almost) lower than inflation and especially the increases requested by Hydro-Québec.
If the Régie de l’énergie had not been cornered by the Legault government, it is by no means certain that Hydro would have posted such a dazzling increase in “profitability”: the inflation-based tariff increases in 2021 (+ 1.3%) and 2022 (+2.6%) likely to be lower.
Increases of 3% to 6.4%
Now, with new electricity price hikes taking effect tomorrow, namely 3% for homes, 6.4% for businesses and small businesses, and 4.2% for large corporations, Hydro-Québec has a good chance of continuing to post growth in its super profitability in 2023.
And this must be repeated, to the great benefit of the Legault government’s finances. It should be remembered that Hydro’s net profit is recorded in the state budget under the heading income from state-owned companies. In addition, the government keeps three quarters of said profits in its coffers, which are paid out in the form of a dividend.
Let’s go back to the 3% increase in housing rates. The Legault government is presenting it to us as a “gift” and claiming it is lower than inflation calculated from late September 2021 to late September 2022.
No present
I’m not at all sure if it’s a gift. Under the old tax regime, the Régie took into account the rate of return Hydro had to generate as a crown company.
Given the earnings explosion Hydro has reported over the past two years, my pinky tells me the increase would have been less than 3%.
In addition, the Régie would not have allowed Hydro to increase its corporate and small business tariffs by 6.4%.
Elimination of overpayments
With the new hikes, did you think of overpayments on the mountain that Hydro-Québec would have reaped at the expense of its customers? In setting rates by the Régie de l’énergie, overpayments were recognized where there was a difference between Hydro-Québec’s actual yield and the yield approved by the Régie de l’énergie (8.2%).
The Legault government has solved the problem of overpayments. There will be no more. How ? With his new regulations, he simply abolished the term “overpayment”. So no more “overpayments”, the CAQ magic made them disappear.
It is important to remember here that when François Legault was in opposition, he accused Philippe Couillard’s previous Liberal government of refusing to repay overpayments of more than $1 billion.
Returning to power, François Legault found the magic formula: he calculated that the price freeze he decreed in 2020 had a future value equal to the overpayments!
I take the ball at the bounce: Mr. Legault, have you considered the future value represented by each of your inflation-linked price increases?
It’s crazy bold!
