The Réseau Express Métropolitain coincides with Michael Sabia’s Aug. 1 start as CEO of Hydro-Québec.Sean Kilpatrick/The Canadian Press
On July 31, commuters in the Greater Montreal Area will finally get to hop aboard the Réseau Express Métropolitain, as the first leg of the light-rail transit system begins regular service between the south shore suburb of Brossard and downtown’s Central Station.
The REM is more than two years behind schedule and undisclosed billions over budget. Trains will not begin running on the 67-kilometre project’s main Montreal routes for at least another year, and a REM station at Montreal’s Trudeau Airport is not set to open until 2027.
No matter. That the project is materializing at all is no small miracle considering the political obstacles that had faced major transit projects in Quebec until 2015 – when then-Caisse de dépôt et placement du Québec chief executive officer Michael Sabia pitched the REM as a public-private partnership between the pension fund manager and provincial government.
It seems somewhat fitting, then, that the REM’s official launch coincides with Mr. Sabia’s Aug. 1 start as CEO of Hydro-Québec, after a nearly three-year stint as federal deputy minister of finance. Before that, he ran the Caisse for more than a decade, transforming the culture at the pension fund manager from that of an often-conflicted agent of nationalist Quebec governments into one of the world’s most disciplined and innovative institutional investors.
Now, it’s time to see what, if any, miracles Mr. Sabia can work at Hydro-Québec.
The Quebec-government-owned utility estimates it needs to increase capacity by 50 per cent to meet the province’s goal of carbon neutrality by 2050. Its current electricity surplus will dry up by 2027, requiring some swift stickhandling by Mr. Sabia to keep up with demand without sacrificing the province’s competitive advantage as a low-cost energy producer.
Energy planning is measured in decades, not years. Before figuring out how much new supply it needs to build within the province, Hydro-Québec will want to lock in the 5,000 megawatts of electricity (or about 15 per cent of its current capacity) it now purchases at a bargain price from the Churchill Falls generating station in Labrador after the current contract expires in 2041. Negotiations with Newfoundland and Labrador to renew the deal, and potentially jointly develop a new hydro project at Gull Island downstream from Churchill Falls, will mostly fall to Mr. Sabia.
Striking the right tone with Newfoundland and Labrador Premier Andrew Furey, and Innu communities in his province and Quebec, will be critical. At the Caisse, Mr. Sabia earned a reputation as a pushy negotiator whose tactics alienated some partners. Still, he usually ended up getting his way, and Quebec Premier François Legault is counting on Mr. Sabia’s negotiating skills to win over Mr. Furey and other stakeholders in Newfoundland.
In Ottawa, Mr. Sabia was the architect of a 15-per-cent refundable electricity tax credit for non-taxable entities unveiled in this year’s federal budget. The Conservatives have called for an ethics investigation into whether Mr. Sabia was in a conflict of interest in creating a tax incentive that stands to benefit Hydro-Québec, whose previous CEO announced her departure in January, more than two months before the budget was tabled. Mr. Sabia’s appointment as CEO of Hydro-Québec was announced in May.
In April, Hydro-Québec said it was assessing “sites with the greatest theoretical potential” for new hydroelectric development and advancing studies on a proposed 1,200 MW project on the Petit Mécatina River on the North Shore of the St. Lawrence River. Even if Hydro-Québec can overcome opposition from environmentalists, the Petit Mécatina project would supply only about 6 per cent of the additional 100 terawatt-hours of electricity that Quebec will need by 2050. Mr. Sabia will need to be creative in tapping other potential sources of energy. He may even have to turn to private hydro producers.
Under a policy introduced by former Liberal premier Robert Bourassa in the late 1980s, more than three dozen small hydroelectric generating stations were built by private operators in Quebec, each with a capacity of 50 MW or less.
Innergex Inc., Boralex Inc., Brookfield Renewable Partners and Algonquin Power currently own multiple hydro stations in Quebec built during a wave of construction in the 1990s. Subsequent Quebec governments put a hold on independent hydro developments, allowing only wind power projects in the province to be privately owned.
In a Montreal Economic Institute paper released this month, the think tank called on the Quebec government to lift the 50 MW cap on private hydro dams and to allow independent producers to directly supply industrial customers that have been denied access to larges blocks of power by Hydro-Québec because of the utility’s looming electricity shortages.
“There is a significant gap between the current power capacity for supplying companies with an economic development project and the multiple requests the government has received,” MEI analyst Gabriel Giguère wrote. “This represents a drag on the economic development of the province. … Furthermore, certain indigenous communities could contribute to this development, as they currently do in the wind power sector, since certain sites for potential dams could be located on their land.”
Mr. Sabia and Quebec Economy Minister Pierre Fitzgibbon, who oversees Hydro-Québec, are open to more private-sector involvement in hydro production. But the province’s main opposition parties have gone on the warpath against the idea, creating huge political risks for Mr. Legault’s CAQ government should it decide to allow more private production.
Still, if Mr. Sabia’s stint at Hydro-Québec is anything like his tenure at the Caisse, big changes are likely afoot at the provincial utility. Maybe even miracles.