Large industrial companies in Quebec scrambled last year to take advantage of the government's generous 20% discount on electricity. The bill will be high for taxpayers.
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“There was a race. It was crazy. Everyone was upset,” summarizes Jean-François Blain, independent energy sector analyst.
In 2023, the Ministry of Finance received no fewer than 117 applications for eligibility for the Investment Financial Support Program (PAFI). In total, Quebec has received 355 applications since the program was launched in 2016. So far, 225 of them have been approved by the government.
The PAFI enables large industrialists who already benefit from the advantageous tariff L to receive a discount of up to 20% on their electricity bills. To be eligible, companies must undertake a significant investment project.
With the 20% discount, large industrial companies only pay 4.04 cents per kilowatt hour (kWh), while for tariff L it is 5.05 cents per kWh. Private customers pay 8.48 cents per kWh and commercial customers pay more than 10 cents per kWh.
Last fall, Treasury Secretary Eric Girard announced that the PAFI would not be extended beyond 2032. Companies would have until December 31, 2023 To for the program, which largely explains the influx of inquiries.
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A mountain of gourmet projects
In addition, in recent years, Hydro-Québec has received several requests for electricity supply from the industrial sector for expansion or decarbonization projects. There were also projects in the battery sector, including those of GM-Posco in Bécancour (188 MW) and Northvolt in Montérégie (352 MW).
The future Northvolt power plant alone could receive more than $200 million from PAFI over eight years, according to Mr. Blain's calculations.
Jean-François Blain photo from LinkedIn
According to an internal document from the state-owned company seen by Le Journal, Hydro has approved 49 industrial projects with a total capacity of around 2,670 MW in the last two to three years.
More than $300 million a year?
In 2022-2023, the PAFI cost Quebec $179 million. Taking into account requests received last year and Hydro's planned increase in electricity sales to large industrial consumers, Le Journal calculated that the annual cost of the program could exceed $300 million from 2028 to 2031.
That means the total bill for PAFI's remaining 10 years (including the 2023-2024 fiscal year ending March 31) could reach $2.6 billion or even $3 billion. This amount would be added to the $896.2 million in expenses associated with the program since 2017.
It is interesting to note that the government finances the PAFI from the dividend that Hydro-Québec pays it every year. For 2022, Hydro paid a dividend of $3.4 billion to Quebec.
The latter will be significantly less important in 2023. For the first nine months of the year, Hydro's net profit was $3.1 billion, down 15%. The main reason for the decline is low rainfall in northern Quebec last summer, which forced the state-owned company to limit its electricity exports to the United States.
We will know the facts on Wednesday morning when Hydro-Québec presents its 2023 annual report to the National Assembly.
– With Francis Halin
Towards an annual increase in Tariff L of more than 5%?
In a January 2023 presentation to Minister of Economy and Energy Pierre Fitzgibbon, Hydro-Québec mentioned an “inducer pays approach” that would result in Tariff L (Large Industry) being increased significantly more than those of recent years . By 2050 the increases would then reach 4.2 to 5.3% per year. For at least a decade, Tariff L increases have never exceeded 4.2% per year. According to some experts, Tariff L is likely to rise even faster because the new electricity supplies that future industrial projects will require will cost Hydro at least 11 cents per kWh, if not more.
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