2014 will be a very busy year for Quebec's energy sector

January 17, 2014

As I discussed in an earlier post, Quebec’s Minister of Natural Resources struck a committee and issued a consultation paper last summer as part of a process expected to result with a new energy policy for Quebec. The public consultation process was completed last October and the commission’s report is expected in early 2014. Barring any early elections, a new policy should be released later in 2014.

As outlined in my previous post, the government’s objectives are ambitious and require significant capital. While it is highly unlikely that any policy objective would be dropped by the current government, it will be interesting to see the priority and the resource allocation assigned to each objective.

Electricity

  • More generating capacity: Hydro-Quebec (HQ) will be adding hydro and wind power generating capacity to its network. HQ will take delivery of the first of four hydro stations being built on La Romaine river (Romaine-2: 640MW), and at the end of 2014 will hook up approximately 400MW from eight wind power projects currently under construction.
     
  • New call for tenders: HQ will issue a call for tenders for an additional 450MW of wind power to be delivered in 2016 and 2017. The registration deadline for the call for tenders is April 18, 2014, and the bid submission deadline is September 3, 2014.
     
  • Transmission: HQ wants to increase exports to the U.S. and will continue openly supporting and working on three transmission solutions: the Northern Pass projectlinking Quebec to Massachusetts via New Hampshire, the Champlain-Hudson Power Express project between Quebec and New York City, and the New England Clean Power Link. Although these are long gestation projects subject to the lengthy U.S. regulatory and political processes, it is hoped that 2014 will provide regulatory closure and allow the sponsors of at least one of the projects to begin planning construction and commissioning.
     
  • Price: The current government is of the view that electricity prices in Quebec are low and lead to waste and lost government revenue. As of January 1, 2014, the cost of heritage pool electricity has gone up by 0.8%. In addition, HQ applied to the Régie de l’énergie for a rate increase of 5.8%. This increase is historically very high for Quebec and it is being challenged by consumers and business alike.
     
  • Industrial policy: Quebec has been trying for some time to move away from electricity pricing as a competitive advantage, preferring instead to focus on supply security and the green credentials of its electricity. Unsurprisingly, large electricity users in Quebec have another viewpoint and many have asked for lower prices in order to remain globally competitive. With large electricity surpluses predicted until at least 2027, anemic 2014 and 2015 economic growth predictions relative to the U.S. and the rest of Canada, and the very possibility of an early election in 2014, there is little doubt that the government will have to accede to these demands.
     
  • Cap-and-trade: As of January 1, 2014 California and Quebechave harmonized their carbon markets. This is a North American first and should serve as a valuable test bed for future markets. It will also infuse much needed liquidity in the Quebec carbon market.

Oil

  • More exploration: The Quebec government and the two major National Assembly political parties have a longstanding bias in favor of Quebec oil. Quebec’s yearly petroleum import bill stands at around $14 billion. Domestic oil production would greatly improve Quebec’s economic picture. To this end, Quebec will allow oil exploration to proceed in Gaspesie and Anticosti Island without lengthy prior environmental impact assessments.
     
  • Oil and Gas Legislation: Currently, oil and gas exploration and production is a legislative afterthought in Quebec. There is strong consensus that the sector needs a proper legislative and regulatory framework, and it is anticipated that the Minister of Natural Resources will propose legislation in the first half of 2014.

DISCLAIMER: This publication is intended to convey general information about legal issues and developments as of the indicated date. It does not constitute legal advice and must not be treated or relied on as such. Please read our full disclaimer at www.stikeman.com/legal-notice.

Stay in Touch with Knowledge Hub