January 25, 2013

Cold snap and energy consumption


---- — Whenever we have a cold snap like the one that invaded our part of the world this week, I think of my fellow Canadians in Alberta, who supply the natural gas that fuels our furnace, whose blue flames heat the water that flows through pipes and radiators and heats our house.

I think of Gaz Metro, the company that distributes that Alberta gas throughout Quebec (and part of Vermont) and to which we will pay a significant chunk of our household income this winter.

I try not to think of who actually owns Gaz Metro because it gets very confusing, but it seems it’s mostly owned by my Quebec-administered pension plan. A minority owner is continental pipeline giant Enbridge.

I also think of the political situation in Quebec, where there seems to be a very great ambivalence about the province being potentially self-sufficient in natural gas and oil.

In fact, there’s a lot to think about when one looks at the energy situation of Quebec.

For starters, there is the recent revelation that the provincially owned electrical utility Hydro-Quebec (which used to be a major shareholder of Gas Metro) has what analysts say is a staggering surplus of power. Or rather, it is committed to pay for electricity generated by privately operated wind, bio-mass, natural-gas and water-power projects.

In one instance, according to a published report, Hydro-Quebec will pay a major natural-gas utility some $150 million this year to not operate its power plant between Quebec City and Montreal, and that will most likely be the case for another three years. This has been going on since 2008.

In another case cited in the same report, Hydro-Quebec is on the hook for a hefty loss in its resale of wind power generated by several private operators. One example shows HQ paying nearly 12 cents per kw/hour for juice that it sells for 7 cents.

All in all, the report, based on the research of a noted energy analyst, projects Hydro-Quebec may need to pay some $4.5 billion over the next seven years to cover the surplus power it is committed to buy. And there are still many more energy projects in the planning stages or coming on line in the coming years, which were launched on the basis of HQ’s commitment to purchase the power produced.

This abundance of power at the command of Hydro-Quebec perhaps helps explain, in part, a couple of other energy policy decisions made in the past few months by the new Parti Quebecois government.

Last month, the province’s one and only nuclear power plant stopped generating power, the fulfillment of a PQ election campaign promise. The process of “decommissioning” and dismantling the 29-year-old Gentilly 2 facility is expected to take more than 50 years and cost an estimated $1.8 billion. Refurbishing the plant, according to government figures, would have cost more than twice that.

Then there is the relatively nascent oil and gas industry in Quebec. One of the initial acts of the PQ when it came to power in the fall was to slap an indefinite moratorium on development of the province’s potentially enormous shale-gas resources.

The natural resources minister who imposed the fracking freeze is Martine Ouellet, a former engineer with Hydro Quebec with strong credentials as an environmentalist but someone who also knows her way around the boardroom.

Ironically, the moratorium riled former PQ Premier Lucien Bouchard, now an oil and gas industry lobbyist. It also provoked a U.S. energy company doing exploration in Quebec to launch court action, claiming the moratorium violates NAFTA rules.

So, for the foreseeable future at least, it seems we’ll still have our friends in Alberta to thank for keeping our house warm during the winter deep freeze. And the longer the freeze lasts, generating what we’ve been told is record consumption in a province where two-thirds of homes are heated with electricity, the less of a surplus Hydro Quebec will have.

But, to paraphrase critics, hell may freeze over before that surplus is burned off.