Quebec's deputy minister of finance Michael Sabia takes part in a press conference in Ottawa in 2020. Mr. Sabia is expected to be appointed the next executive officer of Hydro-Québec.Sean Kilpatrick/The Canadian Press
The Quebec government is set to tap senior federal bureaucrat and veteran business leader Michael Sabia as the next chief executive officer of Hydro-Québec, a critical appointment that will set the direction of the Crown corporation at a time of dwindling power surpluses.
Mr. Sabia, one of the federal government’s most trusted economic advisers, is leaving his position as deputy minister of finance and finalizing arrangements to lead the utility, according to two senior government officials. The Globe and Mail is not identifying the officials because they were not authorized to comment on the appointment, which has not been publicly announced.
A central figure in federal policy since the 2015 election of Liberal Prime Minister Justin Trudeau, Mr. Sabia first served on an economic advisory council to the government, then as chair of the Canada Infrastructure Bank, before his December, 2020, appointment to the Finance Department.
Talks between Mr. Sabia and the Quebec government began in April after the release of the federal budget in late March, according to one official.
Mr. Sabia, 69, is one of the country’s most senior corporate leaders. He has navigated between the top echelons of business and government for decades, a path that will serve him well in a position that requires both political savvy and managerial rigour.
In 2019, he stepped down as CEO of pension fund giant Caisse de dépôt et placement du Québec after a decade at the helm. Through four changes of government in Quebec, he navigated the politically sensitive waters by defending the fund’s decision-making independence while boosting investments in local companies and real estate. He left an institution once marred by crisis on a stable footing when he took the job to lead the University of Toronto’s Munk School of Global Affairs and Public Policy.
The Legault government was caught off guard in January when Hydro-Québec’s former CEO, Sophie Brochu, announced that she was quitting three years into a five-year term. Ms. Brochu was the first woman to hold the top job at Hydro-Québec, a pillar of the province’s social and economic identity.
The government is again putting its confidence in Mr. Sabia at a pivotal time for Hydro-Québec, which is grappling with booming demand from industry for its renewable energy just as the province readies a transition away from fossil fuels by increasing electrification to meet climate targets.
Most of the province’s power supply is generated by Hydro-Québec’s network of dams and hydroelectric stations in the north, built decades ago. The utility is predicting an end to its electricity surpluses by 2026 and says it will need at least 100 terawatt hours (TWh) of additional power – more than half of its current annual generating capacity – if it wants to achieve carbon neutrality by 2050.
The utility reported $4.6-billion in profit for 2022 as soaring prices in export markets contributed to an increase of almost $1-billion in net income. The performance yielded a $3.4-billion dividend for the province, the largest in its history.
Quebec has long espoused a strategy of using its vast hydroelectric resources to lure investment. Today it is home to several energy-intensive industries such as aluminum production and mining, which pay among the cheapest electricity rates in North America.
Adding more industrial customers could require building new hydroelectric or wind projects at three or four times the cost of existing dams. Hydro-Québec’s incoming CEO will have to balance adding new power production and better utilizing existing resources.
“It’s a surprising choice,” said Pierre-Olivier Pineau, an energy expert at Montreal’s HEC business school. “Mr. Sabia is not known for his decarbonization credentials, nor for his ability to sell reforms to the public. He is not known as a communicator with stakeholders as diverse as First Nations, industrial users and the population at large.
“It’s therefore hard to see what the reasons are for selecting him. He is a respected business leader – but HQ needs an energy-transition leader,” Mr. Pineau said.
Mr. Sabia’s departure from government is well-timed as it relates to the federal budget cycle. Summer is when Finance Department officials largely begin the process of preparing the fall economic update and the next federal budget, which is normally tabled between February and April.
The March 28, 2023, budget announced the federal government’s intention to take a more activist role in electricity policy, which is normally an area of provincial jurisdiction.
The budget unveiled a new 15-per-cent refundable electricity credit that will be available to non-taxable entities such as Crown corporations, public utilities and Indigenous-owned corporations.
The exact timing of Mr. Sabia’s departure has not been confirmed. One source said he and Hydro-Québec are still working out the final contractual details of the role.
As deputy minister of finance during the peak of the pandemic, Mr. Sabia was a central decision-maker as the government crafted multibillion-dollar programs on the fly to quickly support individuals and businesses.
A 2022 Auditor-General’s report that looked back at the more than $200-billion in emergency support programs concluded that they succeeded in preventing a spike in poverty. But the report criticized the government for doing a poor job of identifying individuals and businesses that should pay back funds.
Robert Asselin, senior vice-president of policy at the Business Council of Canada and a former policy adviser to the Trudeau government, said Mr. Sabia is leaving behind some significant unfinished business.
Recent budgets have announced several ambitious new programs that have been slow to fully launch.
These include initiatives worth billions of dollars for a Canada Digital Adoption Program, a Canada Growth Fund and a new Canada Innovation Corporation.
“A lot of measures announced in the last budgets are still very tentative,” said Mr. Asselin, who worked on federal budgets in the early years of the Trudeau government.
Elliot Hughes, a former economic adviser to the Liberal government who is now a public-affairs adviser with Summa Strategies, said Mr. Sabia’s departure is a “blow” to the government in light of the fact that Canada faces a potential recession.
Mr. Hughes noted that Mr. Sabia brought private-sector experience to a position that is often held by a career public servant.
“A replacement for Sabia will be hard to find as the role of Finance deputy minister is unique,” he said. “It requires someone who understands how policy and politics interact at the highest levels. Not to mention the individual needs to get along with both the Finance Minister and Prime Minister.”