In mid February, the CEO of Hydro Quebec which is Canada’s largest electrical utility was interviewed by Nicolas Van Praet of the Globe and Mail Report on Business. In the article Eric Martel he talked about the future of the company including trying to double revenue to $27 billion by 2030. That was the good news, the bad news is he needs to avoid the solar death spiral. The solar death spiral is individual and businesses producing more and more of their own electricity and consuming less and less from the grid. Hydro Quebec has all the fixed costs of the transmission lines, the hydro plant and can not lower its existing very low rates but those fixed costs will need higher rates. As rates go up, more individuals turn towards going off gird.

Hydro Quebec thus has to continue to find new customers or sell more to existing customers. One of its projects is to sell greater amounts to the Massachusetts but the transmission line needs to go through New Hampshire who really does not want it. The proposal is called Northern Pass. Supplying New York State and New York City is easier.

Linking to dividend paying stocks, utilities are a wonderful core holding because people  need electrical power and those bills come every month. (most utilities now charge every month). As long as people pay their monthly bill, all is good until they think the bill is too high. Generally the regulators at the state level tend to agree with the utility company to raise rates and keep a semi-monopoly in place. The issue is when people think they can save money or feel the price is too high and look for alternatives. If you were to drive around and see vast numbers of homes with solar panels, you would need to check are they selling to the grid? or are they off grid? If they are the off grid, then the spiral would be happening; if they were selling to the grid then fewer gas, coal and oil electrical generating plants would be needed. Pricing is always delicate issue.

There are more questions than answers, till the next time – to raising questions.