Hydro-Québec fights to save US power contracts

8 October 1999

In an effort to salvage a thirty year US$2.72B contract to supply electricity to a number of utilities in Vermont, US, Hydro-Québec is asking the Canadian government to intervene under the terms of the North American Free Trade Agreement (NAFTA). The proposed action was revealed during hearings into the contract dispute, in Burlington, Vermont, by an international panel of arbitrators.

The Vermont utilities are asking the arbitrators to scrap their contracts with Hydro-Québec, as the Canadian utility failed to deliver the required power for 66 days during last year’s ice storm. Hydro-Québec’s transmission lines were knocked out during the January 1988 ice storm, preventing the utility from fullfilling its contract commitments. The Vermont utilities claim they need a reliable source of power and the ice storm interruption showed Hydro-Québec’s network was unreliable. However, the latter claims that the Vermont utilities are only trying to wriggle out of their high priced power purchase contracts, in violation of NAFTA, after Vermont’s Public Service Board denied electric rate increases to pay for importing Canadian power.

Hydro-Québec, which generates almost all of its power from hydroelectricity, has long term power supply contracts with a number of US utilities in north eastern states. A majority of these contracts were signed when power prices were high, before the advent of wheeling and the deregulation of the power market.

The 335MW power supply contract in question is worth about US$122.4M a year to Hydro-Québec. It represents more than 20% of Hydro-Québec’s US$544.2M of annual power exports and accounts for 38% of Vermont’s power supply. The Vermont utilities, led by Central Vermont Public Service Corporation and Green Mountain Power Corporation, want to void the contracts under which Hydro-Québec is selling them power at prices twice those in the northeastern US wholesale market. They want to renegotiate the contracts or get new supply deals with US utilities, at current prices.

Meanwhile, US Vermont Senator Jim Jeffords, has asked the US Department of Energy to review regulations related to the import of Canadian electricity.

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