Hydro-Québec

Hydro-Québec

75 Ouest Boulevard Rene Levesque
Montreal PQ H2Z 1A4
Canada
(514) 289-2211
Fax: (514) 289-3658

Wholly Owned Subsidiary of the Government of the Province of Quebec
Incorporated: 1944
Employees: 26,740
Sales: C$6.21 billion (US$5.2 billion)

Hydro-Québec and its subsidiaries constitute the third largest electric utility in North America, serving over 3 million customers in the Canadian province of Quebec through over 54 hydroelectric plants and 26 thermal plants. Hydro-Québec is also involved in energy-related research and testing through its high-voltage, high-power research center, IREQ, located southeast of Montreal. Hydro-Québec is one of the province’s largest employers, with over 25,000 temporary and permanent workers in 1991. The company was created in 1944 by an act of the provincial legislature.

The province of Quebec emerged as one of the world’s major producers of hydroelectricity in the late nineteenth century. Construction of the province’s first large dam began in 1898, just three years after completion of the world’s first hydroelectric plant at Niagara. Hydroelectricity was a powerful force behind the development of Quebec’s economy, since many other industries, including aluminum and carbide production, relied on the cheap, abundant power produced on Quebec’s raging rivers.

Montreal Light, Heat & Power Company (MLH&P) was formed in 1901 under the leadership of two powerful Montreal financiers, Louis-Joseph Forget and Herbert S. Holt. Holt was an Irish Protestant immigrant who began his engineering career as a contractor for the Canadian Pacific Railway. He made his fortune in Montreal as president of the Royal Bank and held directorships in 26 companies by 1912, including MLH&P. Forget and his nephew and partner Rodolphe Forget were securities brokers who made substantial fortunes and became shareholders in many companies by engineering corporate reorganizations and mergers.

Holt served as director of the Royal Electric Company and was elected president of the Montreal Gas Company in 1894. He began building the conglomerate that would become MLH&P with the acquisition of Consumers’ Gas Company, a competitor for the city’s gas streetlighting contract. While Royal Electric concentrated on commercial and industrial service, its rivals vied for the domestic suburban market.

The most threatening new force was the Lachine Rapids Hydraulic and Land Company. Lachine was able to produce power at much lower rates than Royal Electric, and in 1899 Royal was forced to cut its rates by 33 percent to remain competitive. Holt and other investors tried to build their own hydroplant on the Richelieu River, but their Chambly plant suffered from low water and defective construction. As Lachine continued to undercut Royal, a group of Royal Electric shareholders led by the Forgets took over the company in 1898. They began to build their hydroelectric empire by consolidating interests in the Chambly plant, the Montreal Street Railway, and the Royal Electric Company during the late 1890s. As financiers, the Forgets knew that centralizing ownership of the various electric concerns would enable them to generate more capital through the combined collateral of the subsidiaries.

Forget and Holt created the MLH&P system in 1901 from three electric companies (Royal Electric Company, Montreal & St. Lawrence Light & Power Company, and Imperial Electric Light Company) and one gas company (Montreal Gas Company) that soon monopolized power distribution in and around the city of Montreal. The industries complemented each other: after Chambly was upgraded, it provided cheap power to Royal, which distributed that power to the Montreal Street Railway and other industrial and commercial customers. The gas company brought profits in its own markets.

Competition among the many utilities around Montreal remained fierce, and the appearance of the Shawinigan Water and Power Company threatened to put MLH&P out of the running. The Shawinigan plant on the Saint-Maurice River Valley was the largest system in the area. The company offered to sell power to MLH&P, but Holt and Forget thought the asking price was too high, so they built another small plant at St. Therese. Then in 1902 a flood wiped out the St. Therese station and shut down the Chambly plant. Holt and Forget were forced to buy power from the rival Lachine plant and soon realized that the only way to put an end to the competition and come out ahead was to buy out their competitors.

In 1903 they raised C$4.5 million and purchased the Lachine Rapids Hydraulic and Land Company, including its generating station, distribution system, and the contract for virtually all the power that Shawinigan Water and Power could sell. After winning a monopoly over the Montreal power market, Holt and Forget did their best to buy out competition and control waterpower in the region.

In 1916 the Civic Investment & Industrial Company, a holding company, was created to acquire the capital stock of MLH&P and the Cedars Rapids Manufacturing & Power Company. The company name was changed to Montreal Light, Heat & Power Consolidated in 1918 to reflect the incorporation of practically all the gas, electric light, and power business in Montreal as one enterprise.

Consolidation was the key word for the 1920s: by 1930 MLH&P owned or controlled six of its former competitors, an electric railway, and a coal and coke plant. The monopoly allowed MLH&P to set prices and reap big profits. From 1910 to 1930, domestic electric rates dropped from 9¢ to 3¢ per kilowatt hour, and costs fell even faster. Holt held Que-becers’ domestic rates at twice those offered in the province of Ontario.

Opposition to the “electricity trust” focused on these big profits and came primarily from local businessmen. Others were outraged at the perpetual land leases granted to the MLH&P along with rights to use the streets in suburbs within 100 miles of Montreal.

The Great Depression undermined the finances of many hydroelectric companies around Montreal during the 1930s. MLH&P gained control of Beauharnois Power Company, a large producer of energy on the St. Lawrence River, in 1933. It also took advantage of the economic opportunity to acquire municipal utility companies in Pointe Claire, Baie d’Urfe, and St. Anne de Bellevue. By 1941 MLH&P owned three hydroelectric plants and operated a fourth in cooperation with Shawinigan Water and Power.

The Lapointe Commission, formed in 1934, recommended the creation of an Electrical Commission in 1935. The Electrical Commission (later named the Provincial Electricity Board), regulated electric distribution, focusing on rates and services. In 1937 the provincial government adopted a bill that favored municipal control of electricity service.

The Québec Hydro-Electric Commission, better known as Hydro-Québec, was created on April 14, 1944, and took over the assets of Montreal Light, Heat & Power Consolidated the next day. The new commission compensated MLH&P shareholders in 1947, but did not settle contracts with minority shareholders in MLH&P subsidiaries Beauharnois Light, Heat & Power and Montreal Island Power until 1953. By 1948 the government had gone a long way toward achieving its goals of reducing rates and standardizing service: residential rates were cut by 20 percent and commercial power prices went down 26 percent.

In 1948 Hydro-Québec gave new impetus to its exports to the United States when it contracted with the Cedar Rapids Company, a subsidiary of Aluminum Company of America in Massena, New York. In the 1940s and 1950s, Hydro-Québec concentrated on developing the hydroelectric potential in the province. In 1957 the company sold its gas system to concentrate on hydro power. After that year, virtually all of Hydro-Québec’s generating capacity came from hydroelectric generators.

Demand for cheap power was driven by the defense industry. Aluminum, copper and nickel refining were in high demand during World War II and on into the military buildup during the Cold War. As a result, many major hydro projects were undertaken in the 1950s. By the end of the decade, the province of Quebec produced 48.9 percent of Canada’s hydroelectricity and was the greatest producer of power per capita in the country. Hydro kept costs low, too: the price per kilowatt hour in Quebec was 33 percent less than that of the United States.

Hydro-Québec’s first bond offering to American markets was used to finance the Bersimis River project. Twenty-five-year bonds were sold for a total of US$50 million to finance the generating station, which was completed in 1958. In 1953 Hydro-Québec undertook a project to widen the Beauharnois canal, which diverted water from the St. Lawrence River to drive hydroelectric plants. The project kept Quebec in the forefront of hydroelectric development in Canada. The next year, the company installed the world’s largest submarine power cable, connecting the Bersimis generating facility with the Gaspe Peninsula. The discovery of rich copper mines in this previously undeveloped region raised demand for inexpensive power. The area had been electrified by diesel generators, which cost two to three times as much as hydropower. The cables provided for the complete electrification of the area, 20 percent of which had been without power up to that time.

The 1960s were characterized by the purchase by Hydro-Québec of the private electricity distribution companies. The Shawinigan Water & Power Company, Quebec’s largest nongovernment hydroelectric company, was bought out in 1963 in an effort to standardize rates and services throughout the province. Between 1963 and 1965, 45 rural electrical cooperatives and 19 municipal systems came under government control. They had constituted about one-third of Quebec’s power sources. The 1960s also brought technological strides for Hydro-Québec. In 1963, the company cosponsored extra-high voltage experiments with Pittsfield Massachusetts’s General Electric Company. The 700-kilovolt tests surpassed U.S. voltage limits by 200 kilovolts.

During the 1950s an unfavorable balance of trade with the United States led the Canadian Exporters Association to discourage electric exports because of U.S. quotas and tariffs on many Canadian products. But in 1963 the Canadian government began to encourage the export of hydroelectricity to U.S. markets. In 1966, after two years of talks, Hydro-Québec entered into agreements with British Newfoundland Corporation (Brinco) to begin a massive project at Churchill Falls of Newfoundland, Canada. The falls at Churchill were a tremendous untapped resource: at 245 feet (50 percent higher than Niagara Falls), Churchill was considered the Western world’s largest single source of power. Work began at the site in 1967 and was completed in 1970. Hydro-Québec co-sponsored the project, which diverted the river above the falls into a tunnel to an underground powerhouse. When finished, the project produced more power than all the American and Canadian plants at Niagara Falls.

In 1971 the James Bay Development Corporation was created by an act of the Quebec National Assembly to develop natural resources. Increased demand for electricity inspired a plan—known as the James Bay project—to develop generating stations on La Grande River. The venture has been controversial since its inception and throughout its development, with plans calling for the construction of over 200 structures that would alter the courses of 19 waterways in northwest Quebec near the James and Hudson bays.

The James Bay project consisted of three different complexes hundreds of miles apart. The La Grande Complex, commonly referred to as James Bay 1, consisted of a series of dams and dikes stretching a total of 41 miles, guiding regional rivers through three generating stations. Despite efforts to stop the project the undertaking was completed in 1985. James Bay 2, commonly known as the “Great Whale” project, began in 1987. The C$13.5 billion plans called for the construction of a hydroelectric plant on the Great Whale River and the construction of facilities on the Nottaway, Broadback, and Rupert Rivers.

The project drew opposition from Cree and Inuit Indians, and from international environmentalists, who cited the possibility of higher mercury levels in fish, destruction of caribou habitat, and the unpredictable geological impact of massive man-made reservoirs on the earth’s crust as reasons to stop the project.

Utility and government officials, on the other hand, pointed out that hydropower does not produce air pollution or wastes, and that if the equivalent of the annual production of the Great Whale complex was produced by thermal power stations, it would be necessary to burn at least 26 million barrels of oil per year. Furthermore, the James Bay Project has created thousands of jobs and opened up more than 1,000 miles of roads in previously inaccessible areas. Utility officials also dispute the impact of the project on the environment. Hydro-Québec’s increased generating capabilities have also enabled the company to sell surplus electricity to neighboring provinces and to export power to utilities in Connecticut, Maine, New Hampshire, Massachusetts, Rhode Island, Vermont, and New York.

Hydro-Québec took a variety of steps to resolve the problems that impede the conclusion of the James Bay projects. In cooperation with the provincial government and native groups, the company has participated in environmental impact studies and drafted agreements to hire Native Americans and to award contracts to Native American firms. Negotiations may continue during the early 1990s—the target startup date for the Great Whale plant is 2001.

Another issue faced by Hydro-Québec in the early 1990s was the prospect that the province of Quebec would secede from the Canadian confederacy. Although the company could become a major exporter in the event the Quebec becomes a sovereign nation, secession would also damage the company’s credit ratings, which are based largely on those of the province.

Over the years Hydro-Québec has formed a number of subsidiaries. Hydro-Québec International was created in 1978 to export technological and engineering expertise. Nouveler, a management consulting firm created in 1974, became a wholly owned subsidiary in 1987. It was brought on to market technologies developed by the company.

Hydro-Québec has maintained an impressive record of performance since its inception. Between 1944 and 1979 the company doubled its electric production capacity every ten years. In 1990 Hydro-Québec implemented a five-year total quality management project that the company calls Deft-performance. The program’s goal, total customer satisfaction, focuses on customer service, reliability, and cost effectiveness. Hydro-Québec has also introduced programs that seek to promote energy efficiency and open up dialogue on major issues like energy conservation, the environment, economic advantages of hydroelectricity, and exports.

Principal Subsidiaries

Hydro-Québec International; Nouveler; Societe 2312-0843 Quebec; Societe d’energie de la Baie James; Cedars Rapids Transmission Company; HydrogenAL (50%); HydrogenAL II (50%); ArgonAL (50%); ACEP (50%); Churchill Falls Corporation (34.2%).

Further Reading

Linteau, Paul-Andre, et al, Quebec: A History, 1867-1929, Toronto, James Lorimer & Co., 1983; Armstrong, Christopher, and H.V. Nelles, Monopoly’s Moment: The Organization and Regulation of Canadian Utilities, 1830-1930, Philadelphia, Temple University Press, 1986; Bolduc, Andre, Clarence Hogue, and Daniel Larouche, Hydro-Québec After 100 Years of Electricity, translated by Sheila Fischman, Libre Expression, 1989; Selby, Beth, “Hydro-Québec’s Big Power Play,” Institutional Investor, February 1992; Coffee, Hoyt E., “James Bay Power Project Hits a Dam,” Site Selection, February 1992; “People,” Electrical World, February 1992.

—April S. Dougal