The Grand Council of the Crees

Submission Concerning Hydro-Qu?bec's Proposal

Submission Concerning Hydro-Qu?bec's Proposal

Posted: 1998-05-05

CANADA - RÉGIE DE L'ÉNERGIE

PROVINCE OF QUÉBEC
DISTRICT OF MONTRÉAL - In re: Hydro-Québec's proposal relating to the determination and the implementation of rates for the supply of electric power pursuant to the first paragraph of section 167 of the Act respecting the Régie de l'Énergie

No: R-3398-98

GRAND COUNCIL OF THE CREES (EEYOU ISTCHEE) / CREE REGIONAL AUTHORITY

Intervenor

SUBMISSION OF THE GRAND COUNCIL OF THE CREES
(EEYOU ISTCHEE) / CREE REGIONAL AUTHORITY

SUBMISSION OF THE GRAND COUNCIL
OF THE CREES (EEYOU ISTCHEE) /
CREE REGIONAL AUTHORITY

ADDRESSED TO THE Régie DE l'Énergie

Concerning Hydro-Québec's proposal relating
to the determination and the implementation
of rates for the supply of electric power
pursuant to the first paragraph of section 167
of the Act respecting the Régie de l'Énergie
File no. R-3398-98

MAY 5, 1998

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1. PRELIMINARY REMARKS

1.01 The Grand Council of the Crees (Eeyou Istchee)/Cree Regional Authority represents the Québec James Bay Crees. The James Bay Crees include nine first nations bearing the following names: Whapmagoostui, Chisasibi, Wemindji, Eastmain, Waskaganish, Mistissini, Nemaska, Waswanipi and Oujé-Bougoumau. The Crees are the aboriginal population of a territory commonly known as the James Bay Territory. This is an area known to the Cree people as Eeyou Istchee.

1.02 We inhabit and use this territory. We depend on this land for our sustenance and harvest its resources. This is our territory and we assert full and complete jurisdiction over it, including the coast, islands, water and sea beds of Hudson Bay and James Bay.

1.03 The Crees have been uniquely affected by the energy policies and practices of the Québec Government. It is our traditional lands which have been used to service the electricity needs of Quebec. The Complexe La Grande, which provides approximately half of the electrical energy generated in Québec, has caused and continues to cause drastic impacts to our environment and to our way of life. It floods prime wildlife habitat, and has caused massive mercury contamination of the fish, as well as other major impacts.

1.04 Now, Hydro-Québec has recently declared its intention to proceed with the diversion for energy export purposes of a portion of Great Whale and Rupert rivers, both located on our territory.

1.05 We believe that the Hydro-Québec tariff policy has an impact on the hydroelectric development in our territory. We believe that a rate-setting procedure which would reflect the real costs of Hydro-Quebec's operations would favour a better use of the electrical energy and ensure a better balance between electricity and competing energy sources including demand side management. Consequently, we believe an appropriate cost based review of electricity tariffs would likely reduce electricity consumption in Québec and thus reduce the risk of the destruction of our rivers.

1.06 We therefore participate in this hearing so as to provide the Régie de l'Énergie (hereinafter called the Régie) with our comments on Hydro-Québec's proposal relating to the determination of rates for the supply of electricity. However our participation in this hearing as well as our submission must not be interpreted as a recognition of the jurisdiction of the Régie de l'Énergie concerning projects situated or proposed in the territory covered by the James Bay and Northern Québec Agreement. Our participation in this hearing is made without prejudice to the rights of the Cree Nation.

2. INTRODUCTION

2.01 From 1989 to 1993, Hydro-Québec forcefully defended the Great Whale project pretending that it was the most economic energy alternative in Québec and was essential to meet the internal demand. When we attacked the project on the basis that Hydro-Québec's forecasts were grossly exaggerated, the Québec government and Hydro-Québec accused us of disinformation.

2.02 In 1994, the Quebec government suspended the Great Whale project and a few years later, Hydro-Québec admitted that the proposed project was not profitable, the costs of production being too high and was not needed, the energy demand having not grown as Hydro-Québec projected1 .

2.03 Hydro-Québec is again requesting that the Québec population should have faith in a proposal which, by Hydro-Québec's own admission, is not supported by any studies and is based on an arbitrary price adopted without public review. When, on the question of the Régie de l'Énergie, Hydro-Québec replies that the tariff L, on which the proposal is based, is just and reasonable merely because it has been adopted by decree of the Québec government2 , Hydro-Québec again demonstrates that its proposal is aimed at addressing political considerations rather than being focussed on serious economic factors.

3. OBSERVATION

3.01 The Régie de l'Énergie is being asked to approve the principle of the "price cap" for determining the rates charged to consumers of electricity furnished by Hydro-Québec. As we understand this concept proposed by Hydro-Québec, for the next five years (1998-2002) Hydro-Québec would be authorized to use a fixed rate of 2.87 cents/KWh for the supply of electricity (exclusive of the costs of transport and distribution, which would also be set at fixed rates for the same time period).

3.02 The fixed rate would correspond to the rate (designated "L") which Hydro-Québec charges to its large-volume customers. Hydro-Québec is, in effect, arguing that this standard price, rather than the cost of producing electricity, is an acceptable basis for determining the global (production + transport +distribution) price charged to the Québec consumer.

3.03 The purpose of this text is to explain why we consider this approach problematic, both for the Crees as an interested party in the construction and management of hydro-electric systems, and for Québec society as a whole.

3.04 The analysis we are able to perform has been greatly handicapped by several factors, which should be clearly understood by the reviewers of this submission.

3.05 First, we denounce the refusal of Hydro-Québec to provide us a copy of its proposal in a language that we can understand. In its Strategic Plan Hydro-Québec claims that it wants to establish a new partnership with the aboriginal communities. We question the seriousness of this statement. The Cree Nation is the population most affected by Hydro-Québec developments. Moreover, after having been involved in discussions with the Crees for more than twenty years, Hydro-Québec is fully aware that the Crees first language is Cree and, for historical reasons, its second language is English. We seriously doubt that Hydro-Québec sent its important document, or business proposal only in the French language to its non-French speaking partners including its United-States bondholders.

3.06 Secondly, Hydro-Québec has declined to provide basic information needed to justify and support the application of the "price cap" principle. A number of intervenors, including ourselves, have taken the time and effort needed to seek this information, but have received minimal cooperation from Hydro-Quebec. The Régie has not used its authority to require that Hydro-Quebec provide sufficient documentation and data to justify the holding of a hearing on this application. Also, the Régie has left the intervenors with excessively narrow time delays that seriously limit the scope of any analysis. The problem is aggravated by the fact that intervenors simply do not have the time to seek information elsewhere and base their analysis on data furnished by other utilities. The impression has thus been created not only of a public corporation which is more secretive about its financial picture than the great majority of other energy-producing utilities in North America, but also of the emergence of a regulatory authority (the Régie) which is essentially being subordinated to Hydro-Québec's position concerning the disclosure of costs.

3.07 The absence of the information we have requested considerably limits our arguments, prevent us from producing the submission that we had intended to file, as well as undermines our ability to prepare adequately our evidence, our cross-examination and our final argument. It goes without saying that the control of the process by Hydro-Québec, the refusal of the Régie to require Hydro-Québec to provide the information before the filling of our submission, as well as its decision to accept the 6 month delay to the detriment of the rule of fairness, cause us prejudice and, consequently, we reserve our rights with respect to these matters.

3.08 We therefore have to point out that the operations of the Régie are being seriously compromised even before its constitutive legislation is fully in place, and before it has had an opportunity to determine its role and responsibilities vis-à-vis Québec society.

3.09 We fully understand that the present hearing is not a hearing on the rate determination (section 48), on the rate of return of Hydro-Québec investment (section 32(1er)), on general principles for the determination and application of rates (section 32(3)), on standards concerning rate-related methods and practices (art. 114 (3e)) or on standards concerning accounting methods and practices and administrative and financial practices of Hydro-Québec (art. 114(4e)). However, the apparent purpose and the effect of Hydro-Québec's proposal is primarily to remove from the Régie the powers conferred on it by these provisions of its constitutive Act.

3.10 Hydro-Québec's proposal has two major defects:

i. The method used to determine the tariff is not based on costs as provided in the Act respecting the Régie de l'Énergie, L.Q. 1996, c. 61;

ii. The establishment of the tariff proposed by Hydro-Québec does not take into account all the real costs of the supply of electricity as generally determined in Canada and in United-States.

3.11 Thus, Hydro-Québec proposal does not allow the population to make the appropriate energy choices, including demand side management, as it does not allow a full review of the real economic, environmental and social costs of the supply of electricity. Only the establishment of rates based on costs will give us such an opportunity.

3.12 Our analysis of Hydro-Québec's proposal is divided into two sections. One relates to economic concerns of the proposal as provided in Mr. Robert McCullough's written testimony, attached hereto as annex A. The second facet addresses the characteristics of the hydroelectric generating systems and the issue of rate determination as provided in Mr. Alan Penn's written testimony, attached hereto as annex B.

4. LEGAL CONSIDERATIONS

4.01 Hydro-Québec's proposal does not conform to a proposal pursuant to section 167 al. 1 and section 52 of the Act respecting the Régie de l'Énergie (hereinafter called the Energy Board Act), (1996) L.Q. c. 61;

4.02 The distinctions made by Hydro-Québec between various departments are artificial and have the effect of 1) depriving the Board of its jurisdiction, and 2) avoiding the application of sub-paragraph 5 of section 73 of the Energy Board Act which provides that Hydro-Québec must obtain the authorization of the Régie "to restructure their operations so as to exclude part thereof from the application of this Act".

4.03 In fact, Hydro-Québec seeks to have the Régie read down its constitutive Act so as to make any decision-making on tariffs a sterile and pro-forma exercise. The Régie de l'Énergie has a statutory duty to ensure that Hydro-Québec's proposal respects the provisions of the Act. Pursuant to the Energy Board Act, and more specifically sections 1, 2, 31, 32, 48 and ss. and 73, the establishment of the rates of electric power supply on a cost basis, which include a full analysis of Hydro-Québec's production, transmission and distribution costs, is mandatory.

4.04 Moreover, section 5 of the Energy Board Act specifically provides that, in the exercise of its function, the Régie shall promote the satisfaction of energy needs through sustainable development and must consider economic, social and environmental factors.

4.05 The Régie is bound to carry out its legislative duty in this matter. Hydro-Québec provides no Evidence in support of its proposal to enable the Régie to draw conclusions and recommendations as to the nature of the economic, social and environmental consequences associated with its proposal.

4.06 The Grand Council of the Crees (Eeyou Istchee)/Cree Regional Authority reserves its rights to raise the issue of federal jurisdiction on Hydro-Québec's activities as well as its rights to raise any other legal matters during the presentation of its oral argumentation.

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1 Caillé, André, invited guest on Jean Dusseault's radio show called Midi 15 on August 28, 1997, Radio-Canada.

2 HQ-4, Document 1. Response of Hydro-Québec to the Régie de l'Éngerie.