A Hydro-Québec truck on a street following an ice storm in Montreal, on April 6. The utility on Friday reported net income of $2.2-billion for the first three months of 2023.Graham Hughes/The Canadian Press
Hydro-Québec has posted the biggest quarterly profit in its 79-year history, but warns it probably won’t be able to keep up that pace as lower spot market prices for power start biting into earnings more significantly in the months ahead.
The utility, Canada’s biggest producer of hydro electricity, on Friday reported net income of $2.2-billion for the first three months of the year, an 8-per-cent increase over the same period in 2022. It said it saw significant growth in revenue from power sales outside Quebec as it used hedging strategies to offset declining market prices.
“Although energy market prices have fallen, our risk management strategy helped offset this setback,” Hydro-Québec chief financial officer Jean-Hugues Lafleur said in a statement. “That said, it’s unlikely that we will perform as well over the remaining fiscal year, as lower market prices are expected to have a greater impact in the coming months.”
Prices for electricity on U.S. spot markets have dropped this year because of warmer temperatures in winter and spring, to an average of 3.9 cents per kilowatt-hour. But Hydro-Québec used hedging strategies to obtain an average price of 13.2 cents per kWh for the power it exported during the quarter.
The corporation signs forward contracts extending about a year ahead, typically for as much as half its export volume. Such deals shield it from price drops and, in this case, allowed the company to profit from last year’s higher spot market prices.
That won’t last, Mr. Lafleur said. He said the company expects full-year profit to come in at about $4-billion, down from last year’s record $4.6-billion.
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The provincial Crown corporation is now being helmed by interim chief executive officer Pierre Despars after the departure of former CEO Sophie Brochu last month. A new CEO is expected to be named before the Quebec legislature breaks for summer.
Ms. Brochu served only three years of a standard five-year tenure and caused a political and media stir when she said she was quitting. Outside observers have speculated that a rift with the Quebec government over energy strategy played a part in her decision, but she has insisted publicly that there was no such conflict.
Quebec is facing mounting pressure on its power supply, most of which is generated by Hydro-Québec’s network of dams and hydroelectric stations in the province’s north that were 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 if it wants to achieve carbon neutrality by 2050.
That pressure is raising questions about how the Quebec government intends to secure more supply. It’s also prompting critics of Hydro-Québec’s long-term supply pact with Massachusetts to voice their opposition again, this time on the grounds that Quebec might simply not have enough electricity to power the state.
Four Maine lawmakers penned a letter this week to Massachusetts Governor Maura Healey, urging her government to launch a review into whether Hydro-Québec can meet its contractual obligations for the New England Clean Energy Connect project. The proposed 233-kilometre, high-voltage conduit would carry Quebec power through western Maine to its ultimate destination in Massachusetts.
“Hydro-Quebec’s claims about a vast power surplus and low-risk energy are proving to be false,” the lawmakers wrote. They sent a similar letter to Quebec Premier François Legault.
Ewan Sauves, a spokesperson for the Premier, dismissed the letter as yet more criticism from individuals whose opposition to the Clean Energy Connect project is well-documented. “There’s nothing new here,” he said. “Hydro-Québec has enough energy to fulfill its contractual obligations.”