Quebec Proud to Stay Plugged In

Hydro-Quebec is as strong as its massive hydroelectric dams in resisting the worldwide trend toward breaking up and privatizing state-owned utilities.

So far in Canada the trend has gone furthest in Ontario and Alberta, and the early results have not been too happy in Ontario.

The reason Quebec can resist the wave is because its electricity rates are among the lowest on the continent, thanks to a huge base of low-cost hydroelectric power, most of it built many years ago.

In addition to this, Quebecers traditionally are more comfortable with state ownership and intervention than their neighbours.

Hydro-Quebec was officially created in 1962 with the nationalization of several private electricity producers. The Liberal energy minister at the time was nationalist Rene Levesque, who later became the first Parti Quebecois premier.

Blessed with a vast natural watershed, Hydro-Quebec become a symbol of French Quebec's pride and know-how as it developed into the largest single electricity producer in North America.

Now with 19,500 employees, the utility exports large quantities of power to northeastern states and next-door provinces from its 52 hydro power generators, including the huge project it controls in Churchill Falls, Nfld.

Now that the utility has largely resolved a reliability problem that once plagued the network, Quebec residential and business clients have little reason to complain.

Jean-Thomas Bernard, an economics professor at Laval University and a specialist in energy policy, said hell would freeze over before Quebecers would consent to seeing their utility sold to private interests.

The big reason for this is the Crown corporation's cheap rates.

"There has never even been a debate about this because there is no group in Quebec that has put forward that case," Mr. Bernard said in an interview.

"Nobody can threaten Hydro-Quebec and say 'I want a different electric service provider because I can get a better rate.' That can't happen."

All Quebec residents pay 6.03 cents a kilowatt-hour for retail electricity, said Hydro spokesman Nicholas Carette.

In Canada, only Winnipeg has comparable rates, said Mr. Carette.

Mr. Bernard says consumers are well served by the low rates, but it is difficult to determine how efficiently Hydro-Quebec is managed. It cannot be compared with others because it is unique among North American producers by its size and its hydro sources of electricity -- 97 per cent.

Mr. Bernard points out, however, that Hydro-Quebec's huge hydroelectric projects like James Bay, Churchill Falls and Manicouagan "did not have disastrous cost overruns, like we saw with nuclear plants in Ontario."

He notes that the Crown corporation's rate of return is smaller than that of other large companies like Bell Canada or Canadian National Railway Co., but this is partly due to provincial policy to cap rate increases.

Although Quebec remains Hydro-Quebec's owner, the company has adapted to the continental deregulated environment by lowering costs and focusing on improving profits.

It has allocated a small proportion of production to private companies and to "green" energy sources, like windmills.

And it has not hesitated to take advantage of other privatizations. Hydro-Quebec has become owner and manager of major transmission networks in 13 countries, including the entire grid of Chile.

Hydro-Quebec also controls Gaz Metropolitain, the major natural gas distributor in Quebec and the only one in the U.S. state of Vermont.

Mr. Bernard said the corporation is moving to become more diversified because most of Quebec's hydro power has been harnessed, and the remaining water-power sources usually face opposition from native and environmental groups.

Hydro-Quebec has ordered its first large natural-gas-fired thermal generator, to be built by two private companies from Quebec and Alberta.

Electricity from gas costs about six cents a kilowatt-hour to produce, compared with only two or three cents for hydro power.

"The era of hydroelectric development is pretty well over," said Mr. Bernard. To add new sources of power "it will have to start building gas units, and it doesn't have any particular advantage over other utilities."