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Electricity in Quebec before Nationalization, 1919 to 1939

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Abstract

History books tend to depict the early days of the electrical industry as one of monopoly where consumers were being gouged. The province of Quebec in Canada was no exception. With the use of wide-ranging data over time, we observe a different portrait: electrical firms in Quebec increased production faster than elsewhere while prices fell consistently. The main reason for this divergence between facts and history books is most likely the choice of comparing Quebec’s private industry with Ontario’s nationalized industry, which priced electricity at the average cost.

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Notes

  1. Troesken (2006) explains this franchise in the case of electricity for the United States.

  2. Emmons (1993) indicated that private monopolies, private firms in competition, public monopolies and public firms in competition all had different price levels in spite of sharing a common downward trend.

  3. It is also worth pointing out that electrical appliances, which were complements to electricity services (Fouquet 2008), were expensive, and the relatively poorer Quebeckers tended to acquire the less expensive wood- and coal-burning home appliances (Marchand 1988), which created pressures on electricity companies to reduce prices in order to increase adoption rates (Gelly 2010).

  4. Firewood represented 15.6% and 44.6% of fuel and light expenditures for French households in Montreal and Quebec City (“British” households in Montreal reported expenditures equal to 5.6% of all expenditures on fuel and light). Overall, “British” families in Canada expended 10.5% of their fuel and light budget on firewood as opposed to 23.9% for “French” families (Dominion Bureau of Statistics 1941).

  5. This was largely a result of the fact that Quebec had greater population density in cities. The largest two cities of the province of Quebec (Montreal and Quebec City) accounted for 31.0% and 33.0% of the province’s population in 1921 and 1931 as opposed to 21.7% and 22.9% for Ontario’s two largest cities, Toronto and Hamilton (Dominion Bureau of Statistics, 1932).

  6. MLHP represented a minor share of total electricity output (4%) in Quebec, and 30% of the electricity it distributed was bought from SWP. Its power sites were in the Upper Saint-Lawrence region. SWP was located in central Quebec (the Maurice region) and was the largest single producer with numerous distribution subsidiaries, which notably served Quebec City and Trois-Rivières. GP was an imported producer, but it sold most of its output to local distributors, the pulp and paper industry that was prominent in the region and the neighboring province of Ontario. As for SP, originally known as the Duke-Price Power Co., its output was largely oriented toward the aluminum and pulp and paper industries. However, it did consolidate with other regional companies, which allowed it to become the main distributor for many localities of the Saguenay and Lac Saint-Jean region. SCP was the smallest of them and operated largely in the eastern townships in south-central Quebec (Dales 1957; Dupré et al. 1996; Hogue et al. 1979).

  7. The Directory reported the population of the different municipalities (with the exception of one, Shipton in the eastern townships, which was linked to the municipality of Danville for distribution), which allowed us to arrive at this figure. The Directory reports one cooperative, operating in Rimouski, which served 0.1% of Quebec’s population.

  8. Dupré et al. (1996) have analyzed the regulations of the Quebec Electricity Commission (1935–1937) and the Provincial Electricity Board (after 1937) and found that, as Stigler and Friedland (1962) and Peltzman (1976) did, the regulatory boards were largely ineffective.

  9. The exception was self-generators for large industries.

  10. It is worth pointing out that in an earlier version of his work, Emmons (1991) found a much larger price differential (28%), half of which could be explained by capital cost advantage. The refinements in Emmons’ work from his 1991 version to the 1997 version led to a reduction in the price advantage estimate to this much lower figure.

  11. While it is beyond the scope of this paper to determine this, there is the possibility that lower rates for larger power consumers increased their productivity, which allowed them to offer higher wages. Thus, workers would have benefitted though this channel instead of through lower prices.

  12. Historian Keith Fleming, who studied HEPC extensively, summarized the fixation of rates as follows:

    Rates charged by the municipalities had to be sufficient to cover the cost per horsepower incurred by the HEPC (…). Also to be considered in the final price were the municipality’s proportionate share of transmission costs, operation and maintenance costs, interest charges on any money borrowed for installation, depreciation reserves, a reserve fund for obsolescence and contingencies and sinking fund reserves for the amortization of local commission’s debts. Ultimately, a higher power cost resulting from longer transmission distances, smaller population density and lighter power load had to be borne solely by the contracting municipality (Fleming 1983, p. 486).

  13. The Murray and Flood report came from an association of electricity manufacturers. However, the statistics from the Dominion Bureau of Statistics’ Central Electric Stations series point in the same direction. In 1923, the generation of 1000 kWh cost $4.74 as opposed to $7.15 in Ontario. In fact, this is probably a conservative estimate. Until 1932, the Dominion Bureau of Statistics did not publish data regarding interprovincial trade of electricity, so we have to divide expenses over electricity generated rather than electricity generated and distributed. This is a problem because Ontario tended to buy substantial quantities of electricity from Quebec, which it then distributed at a cost (Quebec imported a few hundred thousand kWh from the United States). After 1933, this is not a problem, as we can divide over electricity distributed and generated (pages have been lost in the 1932 edition, meaning we have to jump to 1933). In 1933, the cost per 1000 kWh serviced in the province of Quebec stood at $1.43 as opposed to $6.13 in Ontario.

  14. Moreover, the quality of transmission inferior in Ontario than in Quebec, which probably worsened the shortfall. Indeed, Dominion Bureau of Statistics (1940) data suggest that losses of energy in Quebec in 1939 represented 6.95% of total consumption compared with 16.63% in Ontario.

  15. The rest of Canada is defined here as Canada minus Ontario and Quebec.

  16. Especially if the price schedule were fixed in the franchise contract.

  17. The franchise acquired by the new firm, the Public Service Corporation of Quebec, only extended to electricity. QRLHP had managed to retain only its franchise for gas and tramways.

  18. City dwellers were well-connected to electricity by 1931. In Montreal, it was estimated that between 89% and 99% of households were connected (Gelly 2010).

  19. Quebec had some of the lowest rates in Canada. For example, the Dominion Bureau of Statistics for 1939 places Quebec in second position (slightly behind Manitoba) for the lowest rates (as proxied by revenues per 1000 kWh) for large power customers. This result is more or less in line with the points made by Peltzman (1971) and Kitchens and Jaworski (2017), who argue that public and private ownership influence rate setting across different consumer classes since private firms tend to be better able to price discriminate.

  20. Large power only accounted for 63.8% of revenues in Quebec (Dominion Bureau of Statistics 1939), so that, at $30,177 of revenue per large power customer, Quebec was more three times above the Canadian average.

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Acknowledgements

Acknowledgements go to Alexandra Foucher, Mike Guetta, Robert Rogers and Art Carden, Jean-Thomas Bernard, Herbert Emery, Edward Stringham, Pierre Desrochers, Michael Giberson, Gérard Bélanger and the participants of the research seminar at Texas Tech University.

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  1. Texas Tech University, Lubbock, USA

    Vincent Geloso

  2. HEC Montréal, Montréal, Canada

    Germain Belzile

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Geloso, V., Belzile, G. Electricity in Quebec before Nationalization, 1919 to 1939. Atl Econ J 46, 101–119 (2018). https://doi.org/10.1007/s11293-018-9568-8

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