OC Brief - Bill 2 - Hydro-Québec Rates

In December 2019, the French National Assembly adopted Bill no.o 34, An Act to simplify the electricity distribution rate-setting process1. Among other things, this Act amended the Hydro-Québec Act and the Act respecting the Régie de l'énergie. It removed the Régie de l'énergie's previous role in setting Hydro-Québec's annual electricity rates. It also created a new rate-setting process. From now on, the Régie de l'énergie will set rates only once every five years. In the meantime, the new electricity distribution rate-setting method provides for rates to be indexed to the Consumer Price Index. The next rate case is therefore scheduled for 2025-2026.. These changes were intended to bring greater predictability to electricity rate fluctuations..

Option consommateurs and many others had opposed this major change in the way tariffs are set. In particular, we pointed out that tying electricity rates to the rate of inflation made them sensitive to variations in volatile components that could be far removed from the reality of the electricity market. This change also put customers at risk in the event of significant increases in inflation.

Major upheavals have occurred since the law was passed. The COVID-19 pandemic and the war in Ukraine have turned the world economy upside down; the Quebec economy has not been spared. The Consumer Price Index reached 6.9% in October 2022. Without legislative amendment, electricity rates would rise by 6.4% from 1st April 2023.

It is against this backdrop that the Bill 2. This bill amends the Hydro-Québec Act by capping the rate of indexation of domestic rates at the top of the Bank of Canada's inflation-control range.

Although this measure is intended to protect Quebec consumers from excessive electricity rate increases, Option consommateurs believes that Bill 2 misses the mark and fails to establish reasonable electricity rates for Quebec society as a whole. In addition, the new regulatory powers granted to the government and the discretionary powers granted to the Minister are too broad.