Google the term "gas plant scandal" and you're inundated with links to articles about a politically motivated energy-policy mess that will cost Ontarians at least $1.1-billion and that recently led to charges being laid against two top aides to former premier Dalton McGuinty.
Almost everyone's heard about that one. But only an informed or wonky few seem to know about Quebec's far-costlier gas-plant fiasco, which will see the province's electricity consumers pay well upward of $2-billion for next to zero power. Maybe it's because this fiasco has little of the political intrigue, and none of the allegations of hard-drive wiping, that have made Ontario's scandal front-page news. But as an example of energy policy gone wrong, that doesn't make it any less galling.
Since 2008, Hydro-Québec has shelled out more than $1-billion to TransCanada Corp. to compensate the Calgary-based energy conglomerate for mothballing its hardly-used Bécancour gas plant across the St. Lawrence River from Trois-Rivières. Under a 20-year deal signed a decade ago, the provincial utility will continue these annual idling payments to TransCanada until 2026, costing Quebeckers hundreds of millions more with essentially no power to show for it.
Under a recent amendment to that contract, however, Hydro-Québec has now agreed to pay TransCanada an additional $389-million (in constant 2015 dollars) between now and 2036 for the right to receive power from the plant for up to 300 hours annually during periods of peak winter demand. It's hard to tell whether this latest development is a face-saving attempt by Hydro-Québec or evidence of yet more dicey demand forecasting on the utility's part.
The latter is what got Hydro-Québec into this pickle. In 2002, the hydroelectric colossus was predicting big power shortages ahead without new capacity. That provided the impetus for the construction of the 1,550-megawatt Romaine River hydro development now nearing completion, the contracting of thousands of megawatts of wind power from independent producers and TransCanada's decision to build the $500-million Bécancour plant.
Hydro-Québec undertook to purchase all the power from the 570-MW gas plant at a fixed rate for 20 years. But the plant ran for less than a year before being idled in late 2007 as the forecast energy shortages turned into surpluses, which have only grown larger since. Those surpluses, along with plunging natural-gas prices, have driven down the market price of electricity.
Hydro-Québec has found it cheaper to pay TransCanada not to produce power rather than to pay for electricity from Bécancour and resell it on the export market at a loss. What amounts to making the best of a bad situation for Hydro-Québec, however, remains a losing proposition for Quebec energy consumers, who have seen their rates rise more than 20 per cent in the past decade.
Quebec still has about the lowest residential electricity rates on the continent, thanks to the legacy of its older hydroelectric facilities and the massive Churchill Falls project in Labrador, whose power it purchases for a fraction of a penny per kilowatt-hour until 2041. But recent rate increases have begun to raise the ire of small businesses and manufacturers that don't qualify for the preferential rate given to large consumers of electricity, such as aluminum smelters.
Critics doubt Hydro-Québec's forecast that peak demand will rise to 40,300-MW in 2023 from about 38,000-MW in 2016, and wonder why the utility would extend beyond 2026 an agreement with TransCanada that has already proved disastrous. If the utility does need to contract for more power in the future, they argue, it should use an open-bidding process in order to get the best price.
The province's energy board rejected their pleas, recently approving the latest agreement between TransCanada and Hydro-Québec. The utility argued that being able to call on TransCanada to supply power during winter peaks would be cheaper than having to build new baseload capacity. But it remains possible that Hydro-Québec will never need that power at all.
The latest deal is no doubt a good one for TransCanada, better known as the promoter of the Keystone XL pipeline (rejected by U.S. President Barack Obama) and the Energy East pipeline (which faces a daunting approval process of its own in Canada).
TransCanada has hired an army of lobbyists to sell the provincial government on the pipeline, but Premier Philippe Couillard has been publicly cool to a project he suggests has limited direct economic benefits in Quebec. In November, the company abandoned plans for an Energy East marine terminal in Quebec after failing to come up with a site that could muster public approval.
The latest Bécancour deal won't help TransCanada's image in Quebec, especially since the gas plant's use of fossil fuels makes it an outlier in a province that currently relies exclusively on emissions-free power. Then again, all that's getting burned for sure under this deal is consumers.