The following article written by Christopher Goodfellow was published in the Lachute Watchman - a regional paper covering the Laurentians - on Monday May 13 1991.

This article was intended to promote a public debate in 1991 - when it was revealed by Robert Libman that Hydro had entered into below cost contracts with certain firms - as to whether Hydro's exclusive monopoly ought not to be re-examined. In light of this month's disaster, the points raised in this article written in 1991 are very timely.

The need to know...the right to know...and hydro.

by Christopher C. Goodfellow B.A., M.B.A.

One of the hallmarks by which we measure democracy is by the openness and free flow of information by the government and about the government in power. It can be said that we have a general right to know about the activities of government so that they can be held accountable at the ballot box. There are certain very limited instances where the electorate's right to know is overridden by the need for secrecy.

Historically in Canada these instances have been limited to matters of national security, (and even then, eventual disclosure takes place as cabinet minutes are released after a certain period) and a certain amount of political oversight by opposition parliamentarians protects the public interest and trust. Secret matters of state should be few in number and far between, otherwise we risk losing the open nature of our democracy. Which brings me to the Hydro Quebec affair.

The real issue that bothers me here is not the below cost pricing (which is economically short sighted and I will deal with that later) but the government's reaction to the disclosure of the contractual terms and their attempt to suppress dissemination of the information using injunctions of the courts.

I would be the first to jump to the defense of the principle of privacy of contracts between private parties. The big difference in this case is that Hydro Quebec is a public utility owned by the people of Quebec. There is a longstanding tradition of open and public bidding for public contracts. The reasons for this are to prevent favoritism and patronage to political supporters and to eliminate as much as possible the possibility of graft, corruption, and kickbacks. Clearly, for Hydro to validate the integrity of its business dealings, it is essential for the utility to disclose the terms of all of its contractual relationships. Purchases are put to public tender. There is a published tariff of charges.

Integrity is what is at stake here. Not national security. Minister Bacon's original defense of secrecy and privacy of the contracts in order to protect the competitiveness of the parties involved is just obfuscation of the issue. It is precisely because the utility is a public company that no special contracts should be made with anyone without full disclosure of all terms. The opportunity for massive graft is obvious. If customers know that electricity can be bought at secret negotiated rates, there is nothing to prevent the purchaser from attempting to buy the politician or the utility's management in order to get a good deal. Swiss bank accounts are full of money from governments, corporations and individuals from all over the world who engage in this practice.

Furthermore, once the word gets around that Hydro makes special deals, reputable companies run by management with high regard for integrity of business dealings may just steer clear of investing here as they will never be able to know if they are on an equal footing cost wise with other companies purchasing electricity here. Honest people tend to associate with other honest people and dishonest people tend to attract dishonest people.

As I have said, what is at stake here is integrity. Not only has the integrity of Hydro Quebec been severely diminished but the integrity of the government is also called into question. The government's reaction to the international disclosure of the contracts and their attempt to use the courts to prevent the domestic disclosure of the terms was absurd. The fact that it took Mr. Libman using the principle of parliamentary immunity to finally bring the government to heel is something that we should all thank him for. To hear that the companies have threatened to sue him says much about the type of business people we are dealing with here.

I am not sure whether Hydro Quebec has a formal corporate mandate or statement of purpose, but I would assume that if one does exist, it would be fair to say that it's prime mission should be to provide for the people of Quebec, since it is a public monopoly, electricity at the lowest cost possible and plan for the future hydro needs of Quebeckers, and make reasonably sure that those needs can be met. It has assumed a much broader mandate over the years to become an exporter of electricity and as such has focussed on the potential development for hydro use large areas of the province. It has, as far as I am aware, no mandate to create jobs in the industrial sector.

As a result of being controlled by the government and its inevitable close ties, it is not only a monopoly generator of electricity, it has become an instrument of state policy in an attempt to attract industry and create jobs. In view of the contract fiasco and the obvious public discomfort over the environmental implications of James Bay II, it is time we had a full and public debate of exactly what exactly Hydro Quebec's mandate is. Mr. Libman pierced the sacred cow and it was about time.

Attracting energy inefficient and polluting industries with contractual subsidies is a matter for vigorous public discussion. Mr. Bourassa, in assuming that all Quebeckers favour and need these types of investors to create a few jobs, is displaying a level of arrogance that we can hold him accountable for. If indeed, hydro is to be an instrument of job creation, should not Quebeckers and those that have been paying for the electricity be first and foremost in line for discounts? It has been written elsewhere that greenhouse growers are upset now that the secret pricing arrangements are out in the open. They should be. I am. I and a lot of others-native Quebecois-would make capital investments if Hydro offered electricity openly at 1.5 or 2 cents a KWH. As it is a few foreign companies have received sweetheart deals. Selling electricity below cost just does not make any sense at all. There is no economic justification. The political justification, ostensibly, is to create jobs. Creating temporary competitive advantages to attract industry does not keep them here long term. Just look at General Motors in Ste. Therese. Long term growth can only be sustained on a firm foundation. Cheap electricity, not below cost, but at marginal costs of production, could give native Quebec industry a competitive advantage.

As a public monopoly, would it not be more fair, if Hydro has a surplus, to openly offer it on the market for competitive bidding? In other words, open it up so that all of us can have a chance at getting the best rate possible. In this way, it would definitely eliminate any possibility of backroom dealing.

Another point to raise in public debate is the necessity of having Hydro remain as a public monopoly. A case can be made for breaking up the hydro monopoly. The corporate mentality of Hydro has been oriented towards big project development and sales to export markets. Perhaps it would be better to have it broken up. Private companies would be eager to develop much of the smaller hydro site potential across the province and thus create more jobs and diversify the power grid at the same time. Hundreds of profitable and well run small producers have developed sites throughout New England. This type of development usually has to pass stringent environmental impact requirements. It creates lots of local jobs and encourages trying out new technology. The cumulative potential for hydro development in southern Quebec is enormous and exceeds James Bay II. Private developers have now begun to open the door with some projects but Hydro remains their only potential customer. Hydro maintain their monopoly rights over distribution thus effectively stifling price competition.

The concentrated power grid that we now have is open to international and domestic sabotage, and disruption by natural causes, and could be potentially catastrophic in the middle of winter. No sane business ever relies on one or two suppliers. It is an accident waiting to happen and we all know it.

Hydro Quebec and the government have no recourse to the defense of privacy in public contracts. The public has a right to know and it has a need to know. There is no case for national security here. Hydro Quebec's management should be on notice that Quebeckers expect integrity first and foremost. We expect the truth. We expect clear and unequivocal pricing arrangements open to all.

Hydro Quebec and the government have embarrassed all Quebeckers with their maneuvering in this affair and they should be held accountable for it.We should also remember that we, the people of Quebec, reserve the ultimate right to de-monopolize Hydro and create other producers through the power of the ballot box which after all in a democracy is our own private megawatt.

Christopher Goodfellow
Arundel Quebec

May 6 1991