Privatizing Hydro-Québec to get full value for our "blue gold"



    MONTREAL, Aug. 29 /CNW Telbec/ - In a conference today in Montreal,
Marcel Boyer, vice president of the Montreal Economic Institute, and Claude
Garcia, former president of Standard Life, stated that partial or full
privatization of Hydro-Québec would produce greater value for our water
resources.
    Such a move would also enhance Quebec's energy efficiency and improve the
health of its public finances. The two speakers said that deregulation of the
North American energy market and a wider opening of the electricity sector on
a continental scale have broadened the debate on new options for reform that
could benefit all Quebecers.

    FULL PRIVATIZATION FOR A DEBT-FREE QUEBEC
    (Claude Garcia's point of view)

    Selling Hydro-Québec would enable Quebec to eliminate its public debt,
evaluated at $122.6 billion. A debt-free Quebec would save a total of
$5.5 billion in annual interest charges, allowing for a 33% cut in income tax.
It would also create a highly competitive tax environment, stimulating
economic growth.
    In the last few years, electricity rates have risen far more slowly than
prices for oil products, and Quebecers are paying well below market value for
their electric energy. Electricity rates in Toronto are 75% higher, and in New
York electricity costs three times as much as in Quebec. Raising rates to
market prices would result in energy savings. The kilowatt-hours left unused
in Quebec following a rate hike would easily find buyers in export markets.

    ... OR PARTIAL PRIVATIZATION TO APPLY MARKET PRICES FOR ENERGY
    (Marcel Boyer's point of view)

    Another beneficial option would be to consider a partial privatization of
Hydro-Québec. Selling 25% of the company, for example, would suffice to get
greater value for our energy resources. This could be done by issuing shares
and amassing a large quantity of new funds to finance future investments. Some
of this could also be used to reduce taxes or repay part of the debt.
    With the new shareholders represented on the board of directors,
maximizing the value of shareholders' equity and selling electricity at market
prices would lie at the core of Hydro-Québec's mission. This change in mandate
would deny governments the right to reach into Quebecers' collective
inheritance and squander their energy resources. Hydro-Québec would have
incentives to invest in any money-making project and to guarantee sound
management of operations.
    This rate increase could be spread over several years. If the government
wishes to protect or subsidize certain groups of citizens or businesses, such
as low-income households or aluminum producers, it would have to do so through
direct subsidies rather than by manipulating electricity prices.
    The background paper titled Privatizing Hydro-Québec: an idea worth
exploring was prepared by Marcel Boyer, vice president and chief economist of
the Montreal Economic Institute and holder of the Bell Canada Chair in
industrial economics at the University of Montreal, and by Claude Garcia, who
sits on the board of several companies and is the former president of Standard
Life.
    The background paper is available at www.iedm.org

    The Montreal Economic Institute is an independent, non-partisan,
non-profit body that takes part in public policy debate in Quebec and across
Canada, offering wealth creation solutions on matters of taxation, regulation,
and reform of health and education systems. Its publications since 2000 have
included the Report Card on Quebec's Secondary Schools. In 2004 it won a
Templeton Freedom Award for Institute Excellence for the quality of its
management and public relations.




For further information:

For further information: and interview requests: André Valiquette,
Director of Communications, Montreal Economic Institute, (514) 273-0969 ext.
2225, Cell: (514) 574-0969, avaliquette@iedm.org


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