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Electricity meters are shown on the side of homes in Montreal, on Feb. 4. 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 agoGraham Hughes/The Canadian Press

Hydro-Québec generated a record profit last year as it tapped a near doubling of energy prices in its main U.S. export market as a result of the war in Ukraine. Demand for its power also increased at home, where temperatures in Quebec plunged to their coldest for January in more than a decade.

The utility, Canada’s biggest hydropower producer, also said it was hit heavily by extreme weather events. It spent $126-million to restore service to customers last year, the most since the 1998 ice storm.

“This was an absolutely remarkable year,” Hydro-Québec chief executive Sophie Brochu told reporters at a news conference, adding that results for 2023 should follow more historical patterns.

Ms. Brochu will step down in April after serving three years of a standard five-year tenure. She caused a political and media stir in January when she announced she will quit, fuelling speculation of a rift with Quebec Premier François Legault’s government over energy strategy. She has insisted there is 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 – more than half of its current annual generating capacity – if it wants to achieve carbon neutrality by 2050.

The government-owned utility reported $4.6-billion in profit for 2022 as soaring prices in export markets contributed to a nearly $1-billion increase in net income. The performance yielded a $3.4-billion dividend to the province, the largest ever.

Export sales in dollar terms ballooned nearly 60 per cent to $3-billion, the corporation said. Power sales volumes remained high, but the gain was fuelled chiefly by a sharp increase in the price of energy as the North American economy picked up steam after the COVID-19 pandemic eased and Russia invaded Ukraine.

“The economic recovery and energy crisis that hit Europe as a result of the conflict in Ukraine drove up natural gas prices, which led to an increase in electricity prices in the U.S. Northeast where gas-fired electricity generation is prevalent,” Hydro-Québec said in a statement.

As a result, the annual average of electricity prices in New England, Hydro-Québec’s main export market, nearly doubled over 2021. Because the price Hydro-Québec obtains for its power on export spot markets is tied to the price of natural gas, it reaped the benefits from higher prices of that fuel as well.

A different dynamic played out in the utility’s home market of Quebec. There, a cold winter contributed to Hydro-Québec selling an unprecedented 180.6 TWh of power. The first month of 2022 was the coldest January on record in the province since 2004.

Baseload demand also rose in Quebec by 2.4 TWh, or $202-million, the utility said. Energy consumption climbed in most segments of the market, especially among residential customers, as well as among commercial, institutional and small industrial clients.

About 15 per cent of Hydro-Québec’s power comes from the Churchill Falls hydro generation facility in Labrador, one of the world’s largest. Hydro-Québec is a minority owner of the site.

Mr. Legault is scheduled to travel to St. John’s this week for two days of talks with Newfoundland Premier Andrew Furey over the Churchill Falls pact. The two premiers will meet for supper Thursday, trying to find common ground and better understand each other’s positions ahead of more formal negotiations to renew the controversial 1969 contract, which expires in 2041.

Under the current contract, Quebec purchases more than 5,000 megawatts of Churchill Falls power at 0.2 cents per kilowatt-hour, a tiny fraction of the energy’s resale value. The agreement has generated decades of resentment in Newfoundland and Labrador, and successive governments of the province have pressed for a better deal, to no avail.

Speaking to reporters in Quebec City on Wednesday, Mr. Legault suggested he’s open to the idea of reopening the current agreement and hiking compensation to Newfoundland for Churchill Falls power on condition that Newfoundland offers favourable terms to Quebec starting in 2041. The Premier said he expects tough negotiations over the pact.

Newfoundland’s negotiating position has been unexpectedly strengthened by Quebec’s own looming supply problems.

On the flip side, however, Quebec’s position is bolstered by the fact Hydro-Québec owns the only transmission lines leading south, which means Newfoundland would need Quebec’s approval to export its power in that direction using existing infrastructure.