Despite delays, Hydro-Quebec still ready to honor its Mass. contract

Provincial utility faces new challenges dealing with climate change

IT’S BEEN 3 ½ YEARS since Massachusetts utilities negotiated a massive power purchase agreement with Hydro-Quebec, and the electricity still isn’t close to flowing because of repeated delays in building a transmission line from the Canadian border down through Maine.

Hydro-Quebec officials say they are ready to deliver the power as soon as the transmission line is completed, but an upcoming change in administration at the Quebec-owned company and competing interests within the province itself are raising questions about the province’s ability to deliver down the line.

The Massachusetts contract with Hydro-Quebec is crucial to the state’s efforts to tackle climate change. Offshore wind is the homegrown industry grabbing all of the attention, but hydroelectricity from Quebec is the steady, reliable base on which Massachusetts can build a green electricity supply.

The contract with Hydro-Quebec promises a steady stream of electricity that should reduce the need for power generated by fossil fuels. The power comes from a series of 28 dammed reservoirs, and is not subject to daily fluctuations in wind or sunshine.

But getting the power into New England has not been easy. A bid to build a transmission line through New Hampshire failed to gain traction and a proposal in Maine has met strong resistance, including from a law passed by voters, but now the project appears headed toward approval after several key comeback victories in the courts.

Now concerns are surfacing north of the border. Sophie Brochu, the president and CEO of Hydro-Quebec, announced last week she would be stepping down on April 11 after serving three years of a five-year term. She said it was time for her to move on, but there was widespread speculation in the Canadian press that her decision reflected tension between her and the provincial government led by Francois Legault about the role of electricity in Quebec’s future economic development.

Sophie Brochu, who is stepping down as president and CEO of Hydro-Quebec.

For decades, Hydro-Quebec has produced far more electricity than it needs at very low cost. Residents enjoyed low electricity rates (five times lower than Boston in 2022), as did many energy-intensive businesses.

But those days may be coming to an end. A strategic plan released by Brochu last year indicates the years of surplus are coming to an end. Quebec is dealing with climate change the same way Massachusetts is, by shifting its transportation and housing sectors from reliance on fossil fuels to reliance on clean electricity. That will require a lot more electricity – and the power won’t be as cheap as in the past.

“While we’ve been able to rely on an abundance of available energy in recent years, an upswing in demand for our green electricity will tighten our balances,” the strategic plan says. “As a result, our priorities will shift from selling large quantities of energy [both within Quebec and abroad] to helping Quebecers become more energy efficient and maximizing the value of our energy by targeting the most promising uses.”

Legault has tightened his grip on Hydro-Quebec and has raised the possibility of using lower-cost electricity to attract new industries to the province. Brochu has raised some concerns about that approach.

“I don’t want to become the Dollarama” of utilities, Brochu told the Toronto Globe and Mail in October. “Let’s say an industrial company in Quebec develops a new technology and they’re able to mount a demonstration project out of it and that it creates new jobs and that it’s extraordinary. If the government decides to give them a discount on power, that’s not dumb. But if we systematically offer an inexpensive industrial rate to attract everybody, that’s a disaster because that puts undue pressure on the rates paid by all the others.”

Hydro-Quebec’s strategic plan projects a need for new energy supplies in 2027, and says the price of that new power (hydro, wind, and solar) will be roughly 11 cents a kilowatt hour, well above the 3-cent-a-kilowatt-hour-cost of its legacy hydro power.

Lynn St-Laurent, a spokeswoman for the company, said the tightening of balances referenced in the strategic plan comes with the inclusion of the electricity Hydro-Quebec will supply under its 20-year power contract with Massachusetts and a 25-year contract negotiated last year with New York.

Romaine-2 hydroelectric facility in the Côte-Nord region. (Photo courtesy of Hydro-Quebec)

The utility intends to meet the province’s growing internal needs and its contractual obligations to Massachusetts and New York through a series of measures, including increased energy efficiency by Hydro-Quebec customers, onshore wind and solar development, upgrades to existing dams, and more efficient operation of the utility’s 28 reservoirs.

St-Laurent said Hydro-Quebec is ready to move ahead with the Massachusetts and New York contracts, as well as stipulations in the Massachusetts contract promising to maintain a baseline of exports to the New England power grid to make sure the new contract represents an incremental gain.

“When we make a commitment, that’s rock solid,” she said. “If we don’t deliver, we face penalties.”

The contract spells out the hour-to-hour delivery schedule of electricity, and financial penalties that apply if that schedule is not met. In cases of transmission outages, the contract allows Hydro-Quebec to make up any shortfall in power deliveries over time.

Dan Dolan, the president of the New England Power Generators Association, which represents the region’s existing power generators, said the wiggle room on outages means the delivery of electricity is not guaranteed around the clock.

“I don’t understand how we can count on that resource,” Dolan said.

On December 24, the New England power grid operator faced a challenging situation when more than 2,000 megawatts of power that generators had promised to deliver never arrived. A relatively small portion of that shortfall was caused by Hydro-Quebec.

St-Laurent said Hydro-Quebec experienced problems when a major transmission line iced up, restricting the utility’s ability to transmit electricity within the province. Still, the utility met its long-term power supply obligation to the New England power grid (which is comparable to the contract obligations it will face when and if the Maine transmission line is built) and came up short only on the electricity promised in the so-called day-ahead market.

St-Laurent dismisses concerns about the reliability of Hydro-Quebec power and says New England should view the electricity contract as part of a long-term relationship.

She cites an MIT study suggesting the contract will yield a transmission link between Quebec and New England that will become a two-way street once the initial 20-year agreement ends. Hydro-Quebec could operate like a giant battery, delivering hydroelectricity to New England when the wind isn’t blowing or the sun isn’t shining while accepting excess energy from New England when wind and solar power are plentiful.