Business

An Electric Chair

Brenda Branswell May 15 2000
Business

An Electric Chair

Brenda Branswell May 15 2000

An Electric Chair

Business

Hydro-Quebec’s CEO wrestles with critics—and weather

Brenda Branswell

Who could blame André Caillé for being a bit skittish about inclement weather? Since taking over as chief executive of Hydro Quebec, Caillé has grappled with major power outages caused by vicious ice and wind storms. And he became a household name in Quebec during the worst natural disaster in Canadian history. The devastating ice storm in January, 1998, battered the utility’s power grid, plunging millions of Quebecers into the dark. A biophysicist by training, Caillé, 56, insists Hydro Quebec’s network is sound, but the ice storm clearly left its mark on him. In the winter of ’99, Caillé planned to go golfing at Pebble Beach, Calif., and take a trip to Florida. But the weather forecasters got in the way. “I didn’t go anywhere,” says Caillé. “Each time I was ready to leave,” he recalls, breaking into his ubiquitous hearty laugh, “they would say, well, there may be some ice pellets but not much.”

Running the provincial utility with

19,500 employees isn’t a job for the fainthearted. Long a proud symbol of the Québécois know-how that emerged from the 1960s Quiet Revolution, Hydro Quebec is also no stranger to controversy. When Caillé was parachuted into the job in 1996, Hydro Quebec had been rocked by scandals and morale problems. Financial results were less than stellar. Instead of facing a smoother ride, Caillé led Hydro Quebec through its worst-ever crisis with the ice storm. He is still grappling with the fallout. The power company is locked in arbitration with a group of Vermont utilities that want out of their 30-year contract, arguing that Hydro Quebec couldn’t deliver the goods during the storm. It also faces critics from consumer and environmental groups clamouring for greater transparency. Even so, the giant that Quebec Finance Minister Bernard Landry recently dubbed “a moneyprinting machine” continues to churn out profits. Last month, company officials announced strong profits for 1999. Its earnings of $906 million

marked a 33.4-per-cent increase over storm-racked 1998.

In Hydro Quebec’s downtown Montreal headquarters—the same building where successive Quebec premiers have kept an office—Caillé professes less delight with the utility’s return on equity. While North American companies average about a 12-per-cent return, Hydro Quebec has historically lagged behind, posting 6.7 per cent last year. “It’s a situation I deplore,” concedes Caillé, a lively man who rarely sits still in his armchair. Electricity rates in Quebec, he notes, have long been among the lowest in North America.

A former provincial civil servant who rose to deputy environment minister in 1980 under René Lévesque’s government, Caillé headed up Quebec’s naturalgas distributor before landing the top job at Hydro. While at Gaz Métropolitain, he helped double the monopoly’s profits. Not surprisingly, he wants to boost Hydro Quebec’s return on equity to 9.8 per cent in 2004. What will the company do to address the situation? Caillé asks aloud. Develop profitable projects, he answers.

One of the few large projects on the horizon, however, is the controversial joint venture with Newfoundland on the Lower Churchill River. Newfoundland Premier Brian Tobin and Quebec Premier Lucien Bouchard had predicted a memorandum of understanding might be signed by February. But the two provinces are still haggling over a deal. The now scaled-back, $6-billion project began with a public relations disaster: in March, 1998, Innu protesters blocked a road into Churchill Falls and thwarted the premiers’ plans for a live televised news conference. “It’s a lesson,” concedes Caillé. “What I understood is that with partners you have to wait until you’ve come to agreement.”

Which helps explain why Caillé is close-mouthed about other hydro projects looming on the horizon. As for Churchill, some consumer groups fear that the project, which was initially touted for export to the United States, will be profitable on the backs of Quebec consumers by rolling the transmission costs into the rates paid by Quebecers. But Caillé emphatically insists the project won’t bump up rates.

The CEO is dealing with fires on other fronts. Arbitration hearings will resume this month between Hydro Quebec and the 15 Vermont electric companies that went 66 days without power from their northern supplier during the ice storm. Caillé won’t comment because the case is in arbitration. But he also faces opposition from local residents over Hydro’s urgent post-storm program to beef up its grid, including new high-voltage power lines running through the scenic Laurentians and Eastern Townships. Caillé insists such lines are necessary. “We simply did our duty,” he says.

Under his stewardship, Hydro Quebec has placed heavier emphasis on exports—sparking concerns about reservoir levels at Hydro’s dams. A recent energy board study said the levels—which are key to power generation—have dropped sharply. It blamed lower rainfall and Hydro Quebec’s export sales on the spot market, most of which went to the United States. Consumer groups question whether the exports are putting the domestic energy supply at risk. The report accepted Hydro’s assertion that the electricity supply is safe. “It isn’t a problem,” insists Caillé. The utility, he says, operates on the premise that it must be able to furnish electricity to Quebecers in the event of a two-year drought. Hydro Quebec won’t, however, make public its current reservoir levels, citing competitive reasons.

Some critics contend Hydro Quebec has become more opaque under Caillés stewardship. “It’s not Hydro Quebec that we attack,” says Eric Michaud, the head of a coalition of environmental groups. “It’s a type of management that is done in the absence of any transparency.” Caillé dismisses any notion that Hydro has an image problem, citing high customer satisfaction in surveys. And he reacts mildly to criticism of the company, keeping an even tone and peppering his answers with humour. He may not give away much, but his unflappability befits the man who shepherded the utility through its darkest days. EÛ3