Hydro-Quebec Flooded by Critics

HYDRO-Quebec, the government-owned power utility, has been charged with subsidizing power-hungry industries to attract new business and jobs to the province. The utility - and the Quebec government - is also under fire for plans to increase it's electric generating capacity by flooding land in northern Quebec, threatening the livelihood of Indians who hunt and trap there.

Robert Libman, leader of the Equality Party, a small political group, said in the Quebec legislature that Hydro-Quebec was selling electricity to selected customers at 40 percent below cost.

``Hydro is actually selling this power at 1.5 cents a kilowatt hour [Canadian] for the first two years, which is much less even than the 2.4 cents per kilowatt hour it costs to produce the power and much less than the 4.2 cents per kilowatt hour every single Quebecker pays,'' Mr. Libman said.

Hydro-Quebec, he said, has secret deals with big power users, singling out Norsk Hydro, which produces magnesium at a Quebec smelter. Magnesium, titanium, and aluminum smelters all use massive amounts of electricity to make raw metal from ore.

Hydro-Quebec admits that 13 firms, mostly makers of aluminum, titanium, and magnesium, benefit from what critics call subsidies. The power giant calls them ``risk- and profit-sharing contracts.''

``The idea is to give a high power user - a firm where it is 30 percent of costs - flexibility by offering different rates,'' says Joseph McNally, vice president of industrial marketing at Hydro-Quebec. ``The aim is to encourage industrial development in Quebec.''

Under the risk contract, the utility lowers the rates during the initial stages and when profits are poor, and raises the rate when the company is making money. ``Over the lifetime of the contract the price evens out,'' Mr. McNally says.

Hydro-Quebec refuses to discuss the amounts of the discounts involved, citing ``confidentiality.'' Indeed, there is a court order in Quebec that prohibits publication in Canada of the dollar amounts involved in the subsidy.

Electricity is cheap in Quebec, costing less in Montreal than in any city in North America except Seattle and Winnipeg, Manitoba.

Hydro-Quebec's critics - including Libman - say the utility should be passing on its economies to everyone, not just large power consumers.

``Hydro-Quebec is often called a state within a state,'' said Montreal politician Nick auf der Maur, who argues that giving cheap rates to selected companies does not create that many jobs. ``We export aluminum ingots and import finished products. Maybe we should ask these companies who get cheap electricity to make a few more products and jobs in Quebec.''

The other controversy Hydro-Quebec faces is the flooding of a huge area of northern Quebec in a project called James Bay II. It would provide 3,000 megawatts of electricity. It is this cheap, renewable hydroelectricity which forms the basis of Quebec's ability to provide itself with cheap power and to export it to the northeastern United States.

Power is sold to New York state, for instance, at 6.5 cents a kilowatt hour, 5 cents more than the 13 companies that signed `risk contracts' with Hydro-Quebec and 2 cents more than Quebec consumers pay. New York state power companies, including Consolidated Edison in New York City, say they are reassessing their need for power because of lower demand and conservation measures. Hydro-Quebec says it expects US demand to rise after the current recession and described the reassessment as ``completely normal .''

But some US conservation groups say buying Hydro-Quebec's cheap electricity may be damaging the environment in the US as well as Canada.

``Our major concern is that an energy glut, in this case caused by buying cheap power from Quebec, means there is not economic incentive for conservation measures in New England,'' says Lewis Milford of the Conservation Law Foundation, a New England environmental group.

The Canadian federal government, through the National Energy Board, wants Hydro-Quebec to go through an environmental assessment before it starts on the second phase of the James Bay Project. Hydro-Quebec has gone to a federal court saying it cannot afford the costs and delays involved in such an assessment.