Hydro Quebec and Henry Adams

Pauline Marois included in her almost Stephen-Harper-like determination to fulfil election promises, the immediate closing of the ageing nuclear power facility at Gentilly. While nuclear power has become unfashionable again since the Fukushima disaster, this final writeoff in Quebec is still an ironic reversal for the PQ, compared to how its leaders once sounded. Especially as long as conventional hydroelectric expansion was associated with Robert Bourassa, the Pe’quistes once smiled warmly on nuclear power. They were oddly allied with several Canadian federal governments; Atomic Energy Canada had pressed for large-scale nuclear development ever since the days of Lester Pearson. Jacques Parizeau, some years before he became Premier, once told Le Devoir that “We don’t have to dam every single river just because they’re French Canadian and Catholic”.

Nonetheless, in power the PQ let the dams continue to multiply, Bernard Landry’s government signing another agreement with waterlogged northern natives in 2002. The Charest Liberals took the same route. The one example of a slightly less rosy view of has been Francoise Legault’s claim that it is overstaffed, and that he could get rid of several thousand expensive employees.

He has a case; Hydro has one of the lowest numbers of clients served per employee of any power-generating enterprise, in all of North America. It can claim with some justification that the location of the generating plants, unusually remote from their main Quebec and New England markets, and imposing harsh climatic conditions on workers, explain this. But it is no mere ordinary state monopoly.

I always found it a fascinating one. When I was an Equality Party Member of the Quebec legislature in 1989-1994, I served on the committee then considering the future of the James Bay project, and was the usual critic on Hydro issues in Question Period. I learned a fair amount about the economics of hydroelectricity in general, especially by making detailed comparisons of Hydro’s annual reports with those of B. C. and New Brunswick. Quebec was far more secretive than they were,, always pleading the need to keep ‘competitive’ information confidential., Sometimes I found this comic. In one Question Period, I asked why ‘our’ utility could not provide us with the same kind of output breakdowns readily available in the case of B. C. Electric. Jacques Parizeau slapped his desk and bellowed, in English, “Damned good question!” Even more memorable was a comment made to me in the hallway later by Lise Bacon, then the Liberal Minister responsible for Hydro. “That was a good question,” she agreed, “but you know, they’re not the easiest people to get information from… “

It was my colleague and EP Leader, Robert Libman, however, who enjoyed a moment in the sun in April of 1991, becoming a hero for a while for the general francophone public, who repeatedly congratulated us on the streets of Quebec City. A useful contact in the U. S. had passed on to us information being openly debated in an American Congressional committee, but which Hydro had tried, with a court order, to keep out of Canadian newspapers and TV news. Robert, using his parliamentary immunity, broadcast in Question Period the embarrassing news that Hydro was secretly selling electricity to selected customers at 40 per cent below cost.

The power was being sold to big aluminum and magnesium smelting firms, which use huge amounts of electricity to extract metal from ore, Norsk Hydro had been identified as a typical example, paying 1.5 cents a kilowatt hour, a lot less than the 2.4 cents it cost to produce, and much less than the 4.2 cents then being paid by ordinary Quebec residents. Then as now, electricity was still very cheap here, costing less in Montreal than any cities in North America but Winnipeg and Seattle. But the public had not much previously realized that low electricity bills were more than counterbalanced in taxes.

The characteristically arrogant attempt to muzzle the Canadian media had become ludicrous several days before Robert belled the cat, since Washinton was openly discussing the exact size of the subsidies. Pressed to respond, Hydro’s VP of industrial marketing admitted that 13 big industries, those for which electricity made up 30 per cent or more of their costs, benefited from what Hydro liked to call ‘risk and profit sharing contracts’, but which everyone else called subsidies. Supposedly, the lowered rates would be provided for the initial stages of poor profits, then raised when the company started making money, with the price ‘evening out’ over the life of the contract. This claim was met with scepticism by several economists, one estimating that Quebecers were paying well over $100,000 for each job actually being created by the policy.

Everyone really interested in Hydro knew that Hydro made its real money in two quite different ways. First of all, to the fury of Newfoundlanders, unable to break a disastrously long-term contract going back to 1949, Hydro was getting several thousand Megawatts from the shared project at the Little Churchill, for which they had to pay only a quarter of a cent per kilowatt hour, conveniently mixed in with the much higher James Bay costs. Secondly, they were exporting power to the northeastern U.S., charging New York State, for example, 6.5 cents a kilowatt hour, 5 cents more than what it was charging the favoured 13 companies, 2 cents more than Quebec consumers paid. These comparisons enraged American and Canadian environmentalist groups, not only objecting to all the flooding in northern Quebec, but seeing the cheap power as a disincentive to conservation measures in both Quebec and New England.

I met the top executives of Hydro in their presentations before the legislative committee, all highly articulate. Robert and I had also flown up to James Bay, talking to the Cree leader, Chief Bill Diamond, but also touring one of the giant facilities. I couldn’t help but be impressed by its grandeur, and the engineering talent that had gone into the construction. The James Bay project alone, costing well over $20 billion to build, and spread over an area as large as New York State, is one of the largest electricity generating systems in the world. It produces 16,000 megawatts, three times more than all the plants at Niagara Falls, and eight times the power of the colossal American Hoover Dam.

Nonetheless, I was not at all overwhelmed by the economic claims for the monopoly. Hydro appeared to me as having an opaque and imperial magnificence, not so much a sacred cow as a giant sacred cattle ranch. From the 1980s on, a few free-market economists were already making heretical sounds about the disadvantages of state monopoly ownership, and by 2009, Claude Garcia, writing for the conservative Montreal Economic Institute, even provided a detailed plan showing how a gradual privatization could take place, offering some calculations that this could bring several billion dollars of real increase in wealth for the people of Quebec. I did not have comparable detail available to me two decades ago, but what I could see led me to think then, as I still do, that privatization would serve the public interest, not just private industry developers.

I must admit, however, that I suspect that only a great general crisis in Quebec finances could lead to effective political thinking about the unthinkable. All the fuss I observed in the 1990s did have some consequences: Matthew Coon Come, the young lawyer who had become the new Grand Chief of the Cree, successfully blocked the Great Whale project. But overall, the great sacred cattle ranch grazed on unchanged, as it still does. Outside the pur et dur IEM libertarian economists, there is litle talk of privatization, or even some small steps like raising domestic rates to correspond to real costs. The worldwide drive to privatization and market discipline that began in the mid-1970s lost much of its force with the 2008 Crash, even in far less ‘collectivist’ milieux than this one. Watching the world of Hydro close up, I was strangely reminded of Lenin, who was himself so intoxicated by technological dreaming that he once wrote that ‘soviets plus electrification = Communism!” Slightly more modestly, those linked visionaries, Rene’ Le’vesque and Robert Bourassa, created our own local variant: ‘State monopoly + electrification = Le project collectif. Jacques Parizeau, as usual better at amusing utterance than government, had it right. Hardly anyone remembers any more how much the whole vast creation started as the work of that tough anglo engineer, Sir Herbert Holt, and every new river dam remains one more expression of nationalist public identity. Henry Adams would be stunned: the Virgin has married the Dynamo.