ENERGY

A power storm

Quebecers fume over Hydro’s foreign deals

D’ARCY JENISH May 13 1991
ENERGY

A power storm

Quebecers fume over Hydro’s foreign deals

D’ARCY JENISH May 13 1991

A power storm

ENERGY

Quebecers fume over Hydro’s foreign deals

He is an unlikely hero for French Quebecers. As leader of the Equality party, Robert Libman represents a largely English-speaking Montreal riding in Quebec’s National Assembly, and he is publicly committed to defending the rights of the province’s anglophone minority. But on April 16, Libman stood in the assembly and defied a court order by disclosing parts of a confidential contract between Hydro Quebec and Norsk Hydro Canada Inc., a Norwegianowned magnesium producer. Libman’s action came as opposition politicians, environmentalists and others pressed Quebec’s Liberal government to disclose details of contracts between Hydro Quebec and 13 industrial power consumers under which the power utility agreed to charge lower rates than most Quebec consumers pay for their electricity. Said Alfred Minos, a Quebec City insurance salesman who sent Libman a congratulatory letter: “People are for what he did. They do not want to pay more for electricity.”

For Hydro Quebec and its industrial clients, who mainly produce aluminum, steel or magnesium, what began as an embarrassing controversy could have serious long-term consequences. Officials of the U.S. department of commerce in Washington said that they may examine the contracts to determine whether preferential rates exist and represent an unfair subsidy under the Canada-U.S. Free Trade Agreement. As well, the disclosure provided ammunition for Quebec natives and environmentalists who oppose the proposed $12.9billion Great Whale project, part of the huge James Bay hydroelectric development. The project is a cornerstone of Premier Robert Bourassa’s economic policies. But critics say that the provincial government should cancel the project because Hydro Quebec wants it not to meet Quebec’s domestic needs, but rather to supply foreign-owned industries with subsidized electricity and to fulfil export contracts.

Controversy over those contracts flared early in January when the Montreal daily newspaper La Presse and two other news organizations obtained copies of the Norsk Hydro deal. Hydro Quebec, Norsk Hydro and the 12 other companies that have similar contracts obtained a Quebec Superior Court injunction in January to prevent the province’s media from publishing details of any of the deals, arguing that their competitors could use the information to undercut their prices in the marketplace.

But the dispute quickly took an embarrassing turn for Hydro Quebec. Newspapers in Norway, Australia and the United States pub-

lished details of the Norsk Hydro contract after receiving copies from environmental activist Karen Lohr, who lives near Albany, N.Y., and who has been involved in the fight to stop the Great Whale project. Later, the companies threatened to launch a civil suit against Libman

on the grounds that he had violated the court order. For her part, provincial Energy Minister Lise Bacon quickly came to the defence of Hydro Quebec, which is widely regarded as one of the most important players in Quebec’s economy. The utility has been a source of pride for Quebecers since 1962, when René Lévesque, then the minister of natural resources in the Liberal government of Jean Lesage, used Hydro Quebec to take over the province’s privately owned electrical utilities.

After Libman revealed parts of the Norsk

contract, Hydro Quebec and Norsk Hydro released the entire agreement at a joint news conference on April 29 in Montreal. Hydro Quebec president Claude Boivin conceded that the utility could lose up to $30 million in revenues between 1991 and 1993 because of discounts granted to Norsk Hydro, whose smelter is located at Bécancour on the south shore of the St. Lawrence River, about 150 km northeast of Montreal. Boivin insisted that Hydro Quebec will recoup its losses over the life of the contract, which expires in 2013, because Norsk Hydro will begin paying the full industrial rate in 2005.

Hydro Quebec officials contended that the 13 contracts were part of the utility’s mandate to contribute to the industrial development of the province. Joseph McNally, Hydro Quebec’s vice-president of industrial markets, said that the contracts, signed between 1984 and 1990, brought close to $4 billion worth of industrial investment to the province.

McNally denied that Hydro Quebec wanted to build the Great Whale project specifically to supply industrial power consumers. He said that Hydro Quebec is forecasting that demand for power, from both domestic and foreign customers, will grow by 9,000 megawatts between 1990 and 1999. The 13 industrial clients with the discount contracts will require an estimated 2,100 megawatts, or less than onequarter of the projected increase. And the Great Whale project, which will create reservoirs covering 1,750 square miles of land, rivers and lakes, will supply only one-third of the utility’s increased demand.

Disclosure of the terms of Norsk’s power deal did not end the battle over the confidentiality of the 12 other power contracts. Quebec’s Access to Information Commission has scheduled hearings for May 13 and 14, and May 27 and 28, to determine whether the contracts must be released. Until the hearings end and the commission hands down its report, the Quebec Superior Court injunction remains in effect and prohibits publication of the contracts. Meanwhile, officials representing eight Quebec-based news organizations said that because details of the Norsk Hydro contract had been made public, they would not pursue legal efforts to overturn the injunctions.

The controversy over Hydro Quebec’s contracts was just one of a series of problems besetting the powerful publicly owned utility. Two large New York state utilities are reassessing their need for electricity from Quebec. Laurence Freeh, assistant director of information with the New York Power Authority, a

government agency that negotiates import contracts on behalf of the state, said that Hydro Quebec is scheduled to begin delivering 1,000 megawatts of electricity in 1995. But the Long Island Lighting Co. and Consolidated Edison of New York Inc., which are committed to buying almost two-thirds of that electricity, now say

that they may be able to reduce their purchases because of conservation programs. Freeh said that the utilities have until Nov. 30 to decide how much Quebec electricity they will need.

Another large Hydro Quebec export contract may be jeopardized by a National Energy Board ruling issued last September. The board

approved the annual export of 450 megawatts of electricity to the state of Vermont beginning on Nov. 1, 1990. But the board stipulated that Hydro Quebec must agree to a federal environmental review of any new generating facilities required to fulfil the contract. Hydro Quebec is appealing the ruling in the federal Court of Appeal. Because of the uncertainty surrounding the contract, Hydro Quebec asked its nine Vermont clients for permission to extend the deadline for cancelling the contract without liability to Nov. 30, 1991. On April 30, that permission was granted.

Meanwhile, Quebec cabinet ministers have been trying to convince the public of the benefits of the Great Whale project, which would employ about 5,000 people during the peak construction phase in 1996. Energy Minister Bacon has launched a spirited defence of the project— and stinging attacks on its critics. In an April 12 speech, Bacon insisted that “Great Whale is an environmentally acceptable, economic necessity.” For those opposed to the project, Bacon’s speech provided clear evidence of the Quebec government’s determination to proceed with the Great Whale project—and the slender chances of stopping it.

D’ARCY JENISH

DAN BURKE