Hydro-Quebec May Keep Rates Capped in 2004

Provincially owned Hydro-Quebec, one of North America's largest power producers and distributors, is currently appearing before the Quebec Energy Board to present its case for a price hike next year.

A final decision is expected by autumn and would be the first time the energy board has ruled on power rates.

"The decision of the board will be final and without appeal," a board spokesman said. "The ruling will be released before April 2004."

The utility said last year it was eyeing a rate increase in May 2004. Rates have been frozen since April 1998.

"If there is a hike, it won't go beyond the inflation rate, or two per cent," Marc-Brian Chamberland, a spokesman for Hydro-Quebec, told Reuters.

According to Hydro-Quebec, an increase is justified because residential clients only pay about 73 percent of the real cost of electricity.

"Residential clients are not paying what they should be," said Chamberland, adding that Quebec consumers paid an average of 6.3 Canadian cents per kilowatt-hour (kWh). Business customers are paying between 3.6 and 4.8 Canadian cents per kWh.

The problem for the utility will be convincing the energy board -- and customers -- that it needs to raise rates. Hydro-Quebec had a record profit of CAN$1.2 billion (US$790 million) in the first nine months of 2002, well above the $1.1 billion reported for the whole of 2001.

Consumer groups as well as big businesses told Quebec Energy Board hearings this week they were outraged by the idea of a rate hike.

Hydro-Quebec said it was looking at changing the way it calculates distribution costs to its 3.5 million residential and business clients.

"The issue is the price of electricity delivery," Chamberland said, adding that Hydro-Quebec Distribution, a unit created in 2000 to distribute power, reported a net loss of $314 million in the first nine months of 2002.