Quebec energy board hikes rates by 3.6%, trumping the government's cap

Quebec's energy board has announced that residential Hydro-Québec clients will see the same 3.6 per cent rate increase as its commercial clients, despite a three per cent cap promised by the premier last year.

The Régie de l'énergie says the increase — set to go in effect April 1 — is due to the growth in demand, and inflation.

Hydro-Québec is investing billions of dollars over the next few years to double its generating capacity by 2050 and the board said the public utility's rates did not reflect the increase in revenue needed for that growth.

Premier François Legault said in a post to social media that the increase was "out of the question," adding that he'll work on a solution with members of government and Hydro-Québec, who for its part is also contesting the hike. 

"As long as I am premier residential tariffs will not increase by more than three per cent annually," Legault wrote. 

In a news release, Hydro-Québec announced it will appeal the decision, saying it's not coherent with the province's current social, economic and political context.

In its decision, the energy board says that a three per cent cap on residential tariffs will create a $60 million shortfall in 2025. It calls Legault's promise "informal" given that the government never embedded the cap in a decree.

The energy board's decision follows a series of hearings it held in early December 2024, where it heard from consumer, energy and business interest groups. 

Notably, consumer watchdog Option consommateurs said the shortfall created by the cap might lead to bigger rate increases down the line.

Though politically unappealing, hike makes sense: expert

Pierre-Olivier Pineau, HEC Montréal chair in energy sector management, says the board made the right call and that its rates are more on par with fair and sound economic reasoning.

He agrees with the board in saying that the government's cap was arbitrary, adding that the Régie de l'énergie is an independent regulatory body that should be insulated from political arguments.

"By capping [the] rate increase for one consumer group despite the rising cost, then basically other consumer groups will have to pay more and that will be unfair to the industrial and commercial consumer groups," he said.

He notes those two groups already pay more for energy in Quebec because they subsidize residential rates through cross-subsidization.

Industrial clients will see their rates go up by 1.7 per cent, which is about half the 3.3 rate increase Hydro-Québec had asked for.

"It sounds good for the government to cap rates at three per cent, but it actually creates a situation where industries will be unhappy and that will slow down economic growth because industries will pay more than their fair cost," he said. 

Amid the trade war between Canada and the U.S., Pineau says now is not the time to make the industrial sector unhappy in favour of scoring political points. 

With the rate increase, the board estimates the energy bill for a five-room dwelling will go up by $2.90 per month versus $2.42 at Hydro-Québec's proposed rate. 

Hydro-Québec's growth plan has previously led to concerns that energy rates could double in the next ten years.