Rethinking the society-energy relationship

May 28, 2007 - Speeches

Sophie Brochu, President and Chief Executive Officer, Gaz Métro
Address given to the Board of Trade of Metropolitan Montreal.
Friday, May 25, 2007

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Madame President of the Board of Trade,
Distinguished guests at the head table,
Ladies and gentlemen,
Hello!

It’s a real privilege for me to be here with you today. The Board of Trade of Metropolitan Montreal is recognized across Canada for the dynamism and vitality of its membership. In my view, it’s a unique forum that brings together people from all backgrounds, with varied interests, who do not always have the occasion to be in contact. Well beyond the strict commercial positioning of our respective companies, the Board of Trade encourages sharing ideas and perspectives, bringing us to reflect together on the development of our metropolis and of Québec. Madame Hudon, I am grateful for, and I salute the remarkable job you and your team are doing.

Today, of course, I’m going to talk to you about natural gas and Gaz Métro. And because I believe we need to have an all-encompassing vision of energy, I’m also going to talk to you about electricity. More fundamentally, what I want to talk to you about is our development as a society, about which I am optimistic, and about the social projects Québec wants to carry out. For me, they are all closely interconnected.

So I’m standing here before you today after my first quarter at the helm of Gaz Métro. I believe it’s a great time to be taking charge of a company in Québec. That’s particularly true in the case of a public utility energy company, listed on the stock exchange, with a mandate to create wealth for its shareholders, which is very important. And also for the society it has a mission to serve, which is just as important. For me, the challenge is even more stimulating at a time when our society is rethinking its relationship with energy.

The reflection currently under way in Québec is supported by our growing awareness of environmental considerations.

This is good – and it’s time! Thanks to the tenacity of scientists from around the world and a few other committed supporters who were treated as ‘hippy pot smokers’ not so long ago, Québec has joined the group of nations concerned about the impact of human activities on the sustainability of our planet and the ranks of societies who have decided to do something about it.

What is even more significant, in my opinion, is that we are in the process of assimilating in our collective subconscious the fact that what we do here has repercussions elsewhere, and vice-versa. Fair trade coffee, for example, costs more than commercially produced coffee; yet, despite the price, we know that it’s a good thing because we are making a difference for a producer in a developing country. Similarly, when we have a better understanding of the issues related to greenhouse gases (GHGs), the fact that Québec is not an island and that we truly are part of a planetary community hits us squarely in the face.

What is fascinating is that when we look closer, we realize that this environmental awareness has given rise, in turn, to a sentiment that has not been felt for a long time in Québec, and that’s the desire to transcend our simple status as consumer to become that of citizen. Is that the normal course of history? Is it a generational question? Perhaps …

Whatever it is, I note that Quebecers gradually seem to be finding a desire for the public good, which is now increasingly defined by more than what happens within our borders.

In my opinion, an important step toward our duty as citizens today requires us to free ourselves from the individualistic state into which we have been plunged by the complex, even troubled relationship we have maintained for two decades with electricity.

Ideas put forward successively by Adélard Godbout, René Lévesque and Robert Bourassa spoke to us as a community.

They led us to acquire electrical grids, then to construct the hydroelectric facilities destined to become astounding economic levers. Yet, curiously, the subsidized electricity rates that were introduced over the years plunged us into a profoundly individualistic state. To that, add a cynical view of the State. As a result, in their heart of hearts, everyone preferred to have the money in their own pockets rather than leave responsibility for redistribution to the State, where it could be most beneficial. And even if that turned out to be less in the end …

Without fully realizing the perverse effects that would follow, we left it up to electricity rates to distribute an exceptional patrimonial resource.

In the name of universality, we decided to shower subsidies even on those who had absolutely no need. Consequently, our rates favor the wealthiest, who use much more energy and who have the wherewithal to pay the real cost of their consumption choices. That grave error has made us profligate consumers of electricity.

In order to understand that we have gone too far, it is perhaps enough to observe, as have astronomers at the Université de Montréal, that the light pollution from our metropolis, which has 3 million inhabitants, is the same as that of New York City, which has six times as many people.

Québec’s second historic rendezvous with energy

That said, the evolution of the energy market, the growing environmental awareness and the gradual transfer of ‘consumer’ reflexes into ‘citizen’ reflexes create a combination of circumstances that we have not seen for a long time. It makes me optimistic as the head of Gaz Métro and, more fundamentally, as both a citizen and a taxpayer.

At a time when:

  • electricity consumption in Québec is exceeding our heritage pool limit;
  • we import electricity from the United States, which, more often than not, comes from coal or oil;
  • we are putting huge hydroelectric projects back on the drawing board; and
  • we are developing wind power at the speed of light, so to speak,

we need to be aware that these new sources of production will be quite a bit more expensive than those that have met our needs up to now. All of which brings Québec to its second major rendezvous with energy. 

The first made us maîtres chez nous. The second is forcing us to review our choices on the basis of a social and economic environment that is nothing like what prevailed 20 years ago. We need to reflect on the best way of developing our extraordinary energy resources.

We need to find the collective pride that enabled us to take those major steps forward. While reflecting is good, we need to act.

So then comes the 64-thousand-dollar question: What will push us to act?

What if that were the principle of sustainable development, which Quebecers will spontaneously sign on to, once they understand what it implies: establish a social ideal, find an economic lever to achieve it, and excel in terms of the environment.

We already know the social ideal of Québec. We want:

  • an accessible and efficient health-care system;
  • quality educational systems with the means to ensure school success and university excellence;
  • a cultural framework that gives our creative people and our artists the means to create and innovate.

We know that our public finances are in dire straits and that they act as a brake on the achievement of our most legitimate ambitions. The economic lever that will enable us to break the deadlock is already in place. It’s the development of energy. All we have to do is to activate that lever by carefully controlling the use of a range of measures. First we need to:

  • be rigorous in terms of energy efficiency;
  • take advantage of renewable energies and of the new electricity production capacities that will be coming on stream in the coming years;
  • gradually correct the rates for electricity used for heating water and buildings and allow natural gas to play the role it plays in all industrialized countries. 

At the risk of repeating myself, it is a gradual rate correction that is needed, not a rate shock.

What is at issue is the use of electricity for heating. The fundamentals of these measures need to be known and understood by everyone.

Because natural gas will play the role that fits it well, we will gradually free up volumes of electricity for the export markets that surround us – markets that are ready to open their deep pockets to buy our electricity. As evidence, 20% of the revenue generated by Hydro-Québec in 2006 was attributable to 4% of the volumes that were exported. It’s hard to find better a deal.

Québec will immediately excel in environmental terms because our electricity exports will displace other forms of electricity production used by our neighbors – oil and coal – that pollute more and generate GHGs. It’s a net gain for Québec and for the planet. 
To succeed in rallying our fellow citizens around these objectives, I believe we need to envisage an energy pact built on the following two pillars:

First: Agree that the additional money generated will not disappear into the black hole that is the government’s consolidated revenue fund, but will be dedicated to our social ideal, to the priorities of our citizens: improving health and education, attacking poverty, supporting culture , what else? 

Second: Ensure that those of our fellow citizens who do not have the means to pay more for their energy are not forgotten and that the government will assume the responsibility that is its by right.

If we succeed, and I firmly believe that that’s possible, we are going to give a new dimension to sustainable development and reconnect with the pride of Quebecers.

Developing our energy will enable us not only to meet current needs but also to increase the ability of future generations to face the obligations that will be theirs. We are going to lift the financial burden that weighs on them. Now that’s something that should make Godbout, Lévesque and Bourassa smile.

Of course, it’s quite a challenge and all stakeholders in society will be called on. Gaz Métro will be there at the rendezvous!

The idea here is not to rewrite history by removing electric baseboard heaters from existing homes! What we do need to do is to work on the future. Between now and 2015, more than 200,000 new homes will be built in Québec. Most will be on or near the natural gas distribution system. We need to collectively pursue the government’s energy strategy, which encourages good pricing signals and complementary forms of energy in the heating market. Over a 10-year horizon, a deeper penetration of natural gas in new residential construction could free up 4 TWh of electricity.

Now 4 TWh on export markets is worth at least $250 million. In time, that’s $250 million in additional revenues per year. So what’s $250 million, you ask, when Hydro-Québec already makes way more than a billion dollars in profit a year? Well, let me tell you, $250 million is a lot of money! It’s three times the annual Centraide campaign raises for all Québec.

And it’s not true that it would be at the cost of our good environmental record. Yes, the increased use of natural gas in the residential sector will increase the production of GHGs in Québec. But our exports of clean electricity will replace electricity our neighbors produce from coal and oil. The bottom line is a substantial improvement in the GHG global balance sheet as a result of using the right energy in the right place right here at home.

I come back to my initial proposition: Québec is not an island and Quebecers understand that. We can improve our social, economic and environmental lot by looking just a little beyond our borders …

In closing, let me share with you an additional reason for signing the energy pact that I’m proposing. 

When you run a company whose head office is in the Centre-South of town, you quickly get back to essentials.

The neighborhood where Gaz Métro lives is one of the most disadvantaged in Canada:

  • the average income per family is 38% below that seen elsewhere in Montréal;
  • 41% of young people aged 15-24 do not go to school;
  • 50% of the people are living below the poverty line.

It’s not an easy neighborhood, but we like it and we’re proud to be there.

The men and women at Gaz Métro get involved in all kinds of ways in order to contribute to the social life of our immediate surroundings.

We are not alone. We have discovered other enthusiasts – absolutely incredible people who give themselves heart and soul to improving the lot of those who do not have it easy. My goal is therefore for Gaz Métro to give the best possible support to the people and organizations who refuse to accept fate and who want to make a difference.

I want to take advantage of this occasion to salute the extraordinary efforts of some of them. I am thinking of Dr. Julien, of our friends at Projet 80, of the teachers and the sponsorship committee at Hochelaga school, a school we have literally adopted.

In conclusion, let me also tell you that I often go to work by metro. Six stations separate downtown from Frontenac. That’s 12 minutes at most. But when I leave the metro, I’m in another Montréal. And when I walk to my office, one face in two that I meet is one of poverty. The second is one of hope.

I am personally convinced that what I have shared with you today will enable me, one day, to more often meet the second and a little less the first. My ideal goes far beyond being President of Gaz Métro!

Thank you for your attention.

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