Hydro-Quebec may have waltzed through last year’s ice storm with high public-approval ratings, but a dozen American utilities have set out to prove once and for all that the $3-billion disaster was Hydro’s fault, not merely an act of God.
In a highly sensitive case quietly filed south of the border, 14 Vermont electric companies have squared off against Hydro’s lawyers to get to the bottom of the ice storm.
The Vermont utilities say Hydro’s power grid collapsed not because of ice, but because Hydro left its power grid vulnerable through years of neglect. The stakes are high. The utilities have asked a three-person arbitration tribunal to cancel their $4-billion, 20-year contract to buy power from Hydro-Quebec, which came into effect in 1992.
Even before the ice storm, Hydro-Quebec was already facing big headaches in Vermont. The state’s politicians and utilities are complaining that, under the contract with H-Q, Vermont utilities pay almost two times the going market rate for electricity, which is undermining the state’s competitiveness.
Vermont utilities will be paying Hydro 6.8 cents per kilowatt-hour next year, while the market rate is expected to be 3.5 cents, said Steve Terry, senior vice-president at Green Mountain Power, one of Vermont’s two biggest utilities. H-Q supplies 38 per cent of Vermont’s energy, more than any other source, he said.
Terry said power to Vermont was cut off from the first days of the storm in early Jan. 1998 until the first week of February, when power was partially restored. Full power was restored in mid-March, he said.
The Vermont utilities are especially peeved because their contract obliged them to keep paying Hydro during the ice storm, even while power was off. Terry said Hydro was paid $18 million during this time.
The Vermont utilities first requested arbitration in the summer of 1998, accusing Hydro of holding back information on why its lines failed in the ice storm. This past winter, the utilities revised their motion to get the contract cancelled outright. The hearings, to start Aug. 31 in Burlington, Vt., will go on behind closed doors.
Already, Hydro has had to hand over “many boxes” of internal documents related to its grid’s performance before, during and after the ice storm, said Avram Patt, general manager of Washington Electric Co-op, one of the Vermont utilities. Patt described the disclosures as “voluminous.”
The utilities’ case got a boost last April, when the Quebec government’s Nicolet commission reported that Hydro’s lines collapsed before they should have. Many lines collapsed when small components in Hydro’s towers broke. The Nation reported last month that Hydro knew these same components were defective as far back as 1980.
The Vermont contract is highly lucrative to Hydro-Quebec, bringing in $100 million in revenues last year out of the utility’s total export sales of $812 million, according to Gilles Tousignant, director of industrial development in Hydro’s energy service.
Tousignant dismissed the allegation that Hydro neglected its power grid: “(The ice storm disaster) was an act of God.” He said the Vermont utilities are just looking for a way to get out of their contract.
He acknowledged that the utilities had to keep making payments even though they weren’t getting any electricity, but said the payments were a service fee just for being hooked up to Hydro’s grid.
The state’s two biggest utilities have hinted they may go bankrupt if state regulators don’t allow them to pass Hydro’s high electricity costs on to ratepayers – an idea that has run into strong political opposition.
Terry said the contract has left Green Mountain Power, which supplies power to 165,000 Vermonters, “in a very precarious financial situation.” It had to sell its corporate headquarters and cut back its workforce from 470 to 200. “If the contract remains in force and some utilities go bankrupt, it will have a very damaging impact on the economy of Vermont and send a very bad message to electric companies around the Northeast United States that we have a very difficult business partner that we are dealing with.”
“What was once a fair deal for both sides is now not a fair deal for the 600,000 people of Vermont. It’s going to be a major issue between the people of Vermont and Hydro-Quebec,” Terry said.
Paul Cillo, a former Democrat member of the state Legislature, said the contract has undermined Vermont’s competitiveness. He said Vermont utilities saw regulators oppose their request for a rate increase because they “acted imprudently” in signing the contract in the first place.
