Quebec government endorses rate hike

QUEBEC -- - The new Liberal government has endorsed a Hydro-Quebec request to increase electricity rates by six per cent by Spring 2004.

Jean Charest's cabinet adopted a decree at its cabinet meeting this week that overturns a price freeze imposed by the former Parti Quebecois government in 1998. The freeze was to continue until 2004.

Half the price hike would take effect in October, with another three per cent imposed next April.

The publicly owned utility requested on Wednesday that the provincial energy regulator approve the rate hike. A decision on the October increase is expected by September 12, following public hearings.

Hydro-Quebec said in its application that a rate increase was required because the utility's distribution division is facing a deficit of $425 million this year.

October's three-per-cent increase would reduce that shortfall by $65 million.

Natural Resources Minister Sam Hamad said in a news release that the goal of the increase is to "depoliticize the debate surrounding the question of electricity rates."

Hydro-Quebec president Andre Caille said there must be true transparency in prices so they better reflect energy costs.

"We want to avoid the price spikes that happened in some areas, notably California where increases were nearly 50 per cent," Caille said in an interview.

In 2001, Hydro-Quebec requested that rates increase after April 2004 and be tied to inflation. The utility anticipated that rates would increase by about 1.5 per cent in 2004, 1.6 per cent in 2005 and two per cent in 2006.

In the government's June budget, Finance Minister Yves Seguin said it wants the utility to provide an additional $600 million to the provincial coffers this year.

Hydro-Quebec vice-president finance said last week that the utility will earn $1.7 billion in profit in 2003, compared with about $1.5 billion last year. Half of last year's profit was relayed to the provincial government.