Hydro-Quebec buys electricity from its own unregulated subsidiary at a very high price and may soon pass the bill on to its customers.
• Also read: Newfoundland’s Mysa with Hilo
Subsidiary Hydro-Quebec, which aims to better cope with consumption peaks, could end up costing all Hydro customers dearly.
During critical peak periods, Hilo can preheat its subscribers’ homes and remotely lower the temperature with smart thermostats to conserve energy.
In return, the subscriber to this service receives rewards from Hilo. The more homes connected, the more kW that adds up for Hilo, which sells those energy savings on to Hydro-Québec at a hefty price during peak periods.
The catch is that Hilo’s gains last winter averaged $136 per kilowatt (kW), according to data from Le Devoir.
The other tools available to Hydro, sourced from residential or industrial customers (e.g., aluminum smelters), cost $60 or less per kW.
The invoice to Hydro customers
“Because Hilo is a subsidiary and therefore not regulated by the Régie, it makes its profits at the expense of Hydro-Québec, and therefore at the expense of Hydro’s customers. Hilo will thus put pressure on all customers,” explains Jean-Pierre Finet, analyst at the Grouping of Environmental Organizations in Energy.
“When Hydro-Quebec pays $136 instead of $60, that reflects in their expenses. And if Hydro has to set its tariffs based in part on its spend, those high utility costs will be reflected in the tariffs customers pay,” adds Jocelyn Allard of the Quebec Association of Industrial Consumers of Electricity (AQCIE).
Due 2024
“If Hilo were a regulated entity, like Hydro-Quebec is, which provides you with electricity, profits wouldn’t automatically go to the government. Rather, they would push customers’ electricity prices down,” emphasizes Jean-Pierre Finet.
Currently, Hydro does not pass the bill directly to consumers as rates are capped for inflation. But in 2024, Crown Corporation will submit its costs to Régie, and then Hilo’s costs could increase Hydro-Québec’s customer bills.
“And 2024 is coming fast! », remembers Jocelyn B. Allard.
Can we expect changes soon?
“At the moment we are conducting an evaluation of Hilo, which should last three months,” confirms spokeswoman Cendrix Bouchard.
Fired CEO
Sebastien Fournier, former CEO of Hilo
Hilo CEO Sebastien Fournier was fired last week, three years after the subsidiary was formed.
While Hilo is doing good business with Hydro-Quebec, it only achieved half of its goal last winter.
Instead of the 28 MW expected with the Régie de l’énergie, the subsidiary generated a displacement output of around 14 megawatts (MW).
“Sébastien Fournier was replaced following a decision by Hydro-Québec to proceed with the merger of certain activities of its Hilo subsidiary and to continue analyzing its organizational model,” said Hydro-Québec, which refuses to disclose the amount of Mr. Fournier’s severance pay.
Hydro-Québec continues to believe in Hilo’s success. The state-owned company is sticking to its goal of generating more than 600 megawatts (MW) of peak output with Hilo by 2029.
Hilo shortly
- Introduced 2019
- target : help households to control their consumption
- employee : 150
- Hilo installs smart thermostats and switches in your home. During peak periods, Hilo lowers your heating in exchange for rewards. Hilo sells these saved kilowatt hours to Hydro-Québec for its own use.
Doubts about the Régie de l’énergie from the start
When Hilo was formed in 2019, Hydro-Québec turned down a bid, preferring to set up its own subsidiary.
It is worth remembering that this decision dealt a serious blow to smart thermostat companies in Quebec.
One of them, CaSa, even had to file for bankruptcy in the face of this “unfair competition”.
hubris?
Hydro-Québec said at the time it had confidence in its subsidiary and saw no need to consider whether other suppliers could provide Hilo’s services at a better price.
In 2019, when the Régie de l’énergie was reviewing Hydro-Québec’s 2020-2029 supply plan, there was an objection from a manager, Sylvie Durand, who believed Hydro should conduct a tender.
A dissenting opinion
“For the reasons below, I believe that a long-term contract for the purchase of electricity resulting from the reduction of customer demand through GDP measures constitutes an ‘electricity supply contract’ of the Act and that consequently the contract concluded with Hilo is the subject of a tendering procedure under section 74.1 of the law,” reads the Régie’s document.
lack of transparency
Until recently, it was impossible to know the cost that Hilo charged Hydro-Québec for each kW at peak times.
Even the number of clients Hilo has to date was information hidden from the public.
Why so many secrets?
“It was a strategic decision by Hilo from the start. We have provided a lot of information and today we can tell you that Hilo has 20,000 customers,” responds Cendrix Bouchard, spokesman for Hydro-Québec.
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