Electricity rates: Adoption of a simplified approach that will guarantee low rates

MONTRÉAL, June 12, 2019 /CNW Telbec/ - Hydro-Québec welcomes Bill 34, which will guarantee low electricity rates and simplify the rate-setting process.

The proposed legislation provides for the following changes:

• In 2020:
• Rate freeze that will generate savings of nearly $1 billion for our customers over the next five years.
• Reimbursement to our customers of some $500 million related to accounting mechanisms that will no longer apply under the new framework.

• From 2021 to 2024:
• Rate adjustments pegged to inflation.

• In 2025:
• Rates established by the Régie de l'énergie further to the filing of a rate application.

• 2026 and thereafter:
• Rate adjustments pegged to inflation for a new four-year cycle and filing of a rate application to the Régie de l'énergie in the fifth year.

Note that for almost 60 years, Hydro-Québec's rate increases have been in line with inflation. The company must nevertheless continue to improve productivity since revenue growth will be limited.

Hydro-Québec will continue to be accountable to the Régie de l'énergie regarding several major issues related to its distribution activities, including:

• Quality of service
• Customer service performance
• The handling of customer complaints
• The Electricity Supply Plan
• Energy efficiency

It should be noted that the new process will not apply to Hydro-Québec TransÉnergie, whose activities will continue to be regulated by the Régie de l'énergie.

Since rate increases will be equal to inflation, the company will have to keep up its performance improvement efforts to compensate for its limited revenue growth.

Abolishment of revenue variances

Under the current regulatory framework, revenue variances are recognized when the actual return on the rate base differs from the 8.2% rate of return authorized by the Régie de l'énergie.

The government's proposed legislation will put an end to revenue variances related to Hydro-Québec's distribution activities, given that the applicable rate of return will no longer be established on a yearly basis by the Régie de l'énergie.

In compliance with existing legislation, Hydro-Québec has been remitting its revenue variances to the Québec government and has shared a part of them with customers since 2017, in keeping with the rules established by the Régie de l'énergie.

SOURCE Hydro-Québec