Québec Residents to see Rate Increase

- Electricity rates are going up 3 per cent on Jan. 1, 2004.

In a recent decision, the Régie de l'énergie du Québec accepted Hydro-Québec's arguments for the increase, which amounts to $2.75 a month for the average residential customer and $4 a month for a single-family dwelling heated by electricity.

The hike will also apply to industrial and commercial customers.

The Parti Québécois opposition has characterized Hydro-Québec's rate increases, made possible when the Liberal government of Jean Charest lifted a five-year rate freeze, as a hidden tax increase.

Hydro-Québec Distribution had argued before the board it needed the 3-per-cent increase now and another 2.9-per-cent increase on April 1 to cover an expected $492-million deficit in 2004 in its electrical distribution costs.

"The board concluded that the 3-per-cent increase in the distributor's present tariffs satisfies the test for required revenues, as specified in Section 51 of the law," the board said in a statement.

"When the board compares this increase with the inflation rate, a 3-per-cent increase does not constitute a tariff shock."

Hydro-Québec is also seeking a 2.9-per-cent rate increase as of April 1. The board explained yesterday it wasn't ruling on the second half of the utility's request for a rate increase, because it was only dealing with 2003-2004 at this time.

But Hydro-Québec and other intervenors presented evidence for both increases and the board is expected to rule on the April 1 increase in coming months, without additional hearings.

The utility sought a first increase coming into force 15 days after it was handed down. Yesterday's ruling allows Hydro-Québec to start charging the additional 3 per cent on Jan. 1, as planned.

This marks the first time the rates of publicly-owned Hydro-Québec have been set by the board, which was created by the government of Premier Lucien Bouchard as part of a strategy to make Hydro-Québec resemble an American utility.

That strategy has allowed Hydro-Québec to cash in on the lucrative spot market for electricity in the United States.

Previously, Hydro-Québec's rates were set directly by the Quebec government, after National Assembly committee hearings.

Since 1998, Hydro-Québec's rates were frozen, with no increases allowed before May 2004. The board noted in its decision the freeze amounted to a 12.6-per-cent saving for Quebec consumers, compared with the cost-of-living increase in the last five years.

The new regulatory process was uncharted territory for Hydro-Québec.

The utility initially asked for the first 3-per-cent increase Oct. 1, a demand rejected by the board on the ground it wanted more time to study the issues.

Hydro-Québec filed an amended rate-increase demand and the board held a month of hearings ending last week, where Hydro-Québec and 17 other intervenors presented arguments.