Introduces Bill 69 – An Act to ensure the responsible governance of energy resources and to amend various legislative provisions

Québec’s Economy, Innovation and Energy Minister, Mr. Pierre Fitzgibbon, tabled on June 6, 2024 the much-anticipated new bill aimed at providing the province with the tools and means needed to achieve its energy transition. Titled “An Act to ensure the responsible governance of energy resources and to amend various legislative provisions” (“Bill 69”), the bill is essentially aimed at speeding up green energy production in the province, with the ambition of making Québec the first carbon-neutral jurisdiction in North America. Although electricity appears to be at the centre of Bill 69, some changes are also aimed at natural gas and other sectors of the energy supply chain of Québec.

According to current strategies and plans, Quebec needs to double its energy production to support initiatives that will allow it to reach its climate targets. Among some of the key changes proposed to be introduced^[1], Bill 69 contemplates (i) an important reform of Quebec’s energy governance model; (ii) new electricity distribution rules; (iii) additional flexibility for Hydro-Québec to instigate energy projects; and (iv) modifications to the structure of the Québec energy regulator, the Régie de l’énergie (the “Régie”), and to its rate-setting powers.

1) Energy Governance and Planning

Bill 69 aims to change the energy governance framework in Québec by increasing governmental oversight in order to develop a long-term vision for the production of energy that meets the increasing demand.

Bill 69 gives the Québec Economy, Innovation and Energy Ministry (the “Energy Minister”) a central role in the energy industry, broadening its mission by including the responsibility for integrated management of energy resources in the Province, in accordance with principles of energy transition and sustainable development.

Bill 69 also integrates and refines the provisions of Bill 2^[2], enacted in 2023, which granted to the Energy Minister the power to authorize all electricity supply contracts for loads of 5 MW and above. In keeping with Bill 2, Hydro-Québec must request ministerial authorization for supplies of electricity above 5 MW. However, Bill 69 contemplates additional elements, namely:

1. Technical Requirements: Hydro-Québec would be required to provide a notice regarding its technical capabilities for connection, and the Energy Minister would be required by law to reject a request if it is of the opinion that Hydro-Québec does not have the technical capabilities to achieve such connection.
2. Economic, social and environmental criteria: The Energy Minister’s decision would continue to be based on an assessment of the economic benefits and the social and environmental impacts of the use of the electric power, but going forward, the Minister would have the power to make the authorization conditional upon certain additional requirements chosen by the Minister relating to these criteria.

The Energy minister would now be obligated to establish, every six years over a 25-year period, an integrated energy resource management plan in compliance with government orientations on economic development and with the principles and objectives stated in the “climate change framework policy^[3]” provided by the Environmental Quality Act (Québec). The plan would also serve as a baseline for developing guidelines and benchmarks to assess the province’s energy situation and needs for all forms of energy sources. Minister Fitzgibbon aims to present the first version of the plan in 2026, following public consultations.^[4]

The Energy Minister would be tasked with the plan’s implementation. Current responsibilities of the Québec Environment and Natural Resources Ministries relating to energy, would be formally reallocated to the Energy Minister.

Other changes in Bill 69 aim to update Hydro-Québec’s structure and activities. It would notably amend the public utility’s mission to include the specific goals of ensuring and securing sufficient, safe, reliable, and cost-effective electricity supply to meet both Québec’s market needs generally and the targets set by the integrated resource management plan specifically. It would further be required to pursue its statutory mission with a view of maximizing economic, social and environmental benefits. The Deputy Energy Minister would also be provided with a seat on Hydro-Québec’s board of directors.

2) Electricity Distribution Rules

Under existing regulation, only Hydro-Québec, and some limited municipal and private actors with grandfathered rights, are authorized to sell and distribute electricity to consumers. As it had previously been reported in the media, Bill 69 would create a blanket exception to Hydro-Québec’s monopoly over electricity distribution by authorizing renewable energy producers to sell and distribute electricity to a single private customer, for the needs of their installations, subject to obtaining government authorization. Following the structure of existing rules on sales of biomass power, electricity sales would only be authorized to clients located adjacent to the production site. The existing rule regarding the sale of biomass power , which authorizes sales of energy to immediately adjacent customers, would be replaced by this new exception, covering a broader set of cases.

As currently drafted, Bill 69 does not provide a clear definition of many aspects of this exception, such as the scope of what is understood to be “renewable energy” or an “adjacent site”. The exact scope of this new exception is expected to be clarified during parliamentary debates and sessions of the commission.

Bill 69 also removes all references to private electricity systems from the Act respecting the Régie de l’Énergie and other legislation. As there is no explicit transitory language provided in Bill 69 in respect of existing private producers’ rights, there is uncertainty as to whether the legislator’s intention is for private systems to qualify, going forward, under one of the exceptions for self-production or distribution to a single consumer discussed previously.

3) A More Flexible Approach to Renewables Project Development and Procurement

A number of amendments included in Bill 69 are aimed at providing Hydro-Québec with additional flexibility to instigate energy projects and to procure energy.

1. First, the existing public procurement tendering process in respect of renewable energy, managed by Hydro-Québec, would no longer require that the Régie approve its terms and conditions. The government would nevertheless continue to have the power to compel the public utility to procure energy pursuant to tender processes.
2. Second, the situations where the Régie’s approval is required for the entering into by Hydro-Québec of power purchase agreements would be narrowed. Regulations would continue to set out situations for which the Régie authorization is required, but Bill 69 would introduce new exemptions:
   1. following a renewable energy RFP;
   2. in response to an emergency;
   3. for short-term agreements (of up to 3 months); or
   4. as approved by the Québec government.

Also, multiple amendments are aimed at facilitating and expanding development opportunities for small hydroelectric dams. Fewer governmental approvals would be required to obtain rights to use water power and leases, while limits on power capacity of hydroelectric dams not operated by Hydro-Québec, currently set at 50 MW, would be increased to 100 MW.

As we reported in a recent blog post, Hydro-Québec has announced plans to enter into large-scale wind power developments in Québec. Its strategy would revolve around a partnership model with local communities and First Nations from the outset of a project, with potential for third party private developers to join at a later stage. Bill 69 would narrow and clarify existing restrictions on Hydro-Québec’s ability to own shares and units in third-party entities.

4) Changes to the Electricity Board and Rate Setting

Another important segment of Bill 69 relates to updating the Régie’s structure, rate supervision functions and its procedures, while requiring it to consider and comply with the integrated resource management plan described above in its decisions. On a fundamental level, the Régie’s mandate would be expanded to include (i) more frequent reassessment of electricity rates, (ii) the power to set out rate structures to incentivize the reduction of electricity consumption during peak periods, and (iii) a clear consumer protection role.

Going forward, the Régie’s rate-setting power and regulatory oversight would be expanded to include petroleum and natural gas storage licence holders, and to provide it with the ability to authorize forms of natural gas supply agreements.

Rates for the power consumed by electric vehicles would no longer be set by the Government. Instead, the Régie would be tasked with fixing tariffs that reflect market rates for comparable services, at Hydro-Québec’s request. In addition, the Régie would be given the capacity to call a public hearing on any matter under its jurisdictions (as opposed to only a few situations previously).

While Bill 69 provides for measures to protect residential customers from rate increases, including the establishment of a fund, rates set for commercial and industrial customers would be based on actual costs of production, transportation, and distribution of electricity. It is anticipated that rate increases would apply generally to all companies in Québec, starting as of 2026.

Next Steps

Bill 69 is expected to undergo public consultation in the Fall, and would be adopted by the end of 2024. This bill could be one of the most important reforms to the province’s energy regime since the nationalization of electricity in 1962.

Our team at McCarthy Tétrault is the leading energy practice in the province of Québec, and we are closely following this major development in the province. If you would like more information about this and other energy matters here in Québec, we are here to help. Please contact Louis-Nicolas Boulanger, Mathieu LeBlanc, Jacob Stone, Xin Gao, Richard O’Doherty or Julie Belley-Perron or any other member of the energy group at McCarthy Tétrault with any questions.

[1] Over 15 laws and regulations would be modified (or repealed) by Bill 69, notably the Act respecting the Régie de l’énergie, Quebec’s core energy regulation law, the Hydro-Québec Act, and the lesser-known Act respecting municipal and private electric power systems. Other acts amended include: Act respecting the Ministère du Développement durable, de l’Environnement et des Parcs (chapter M-30.001); Petroleum Products Act (chapter P-30.01); Act ending exploration for petroleum and underground reservoirs and production of petroleum and brine (chapter R-1.01); Act to reduce the debt and establish the Generations Fund (chapter R-2.2.0.1); Watercourses Act (chapter R-13); Act respecting natural gas storage and natural gas and oil pipelines (chapter S-34.1); Act respecting municipal and private electric power systems (chapter S-41); Act respecting the Coopérative régionale d’électricité de Saint-Jean-Baptiste de Rouville and repealing the Act to promote rural electrification by means of electricity cooperatives (1986, chapter 21); An Act mainly to cap the indexation rate for Hydro-Québec domestic distribution rate prices and to further regulate the obligation to distribute electricity (2023, chapter 1). Regulations amended include: Regulation respecting oil-fired heating appliances (chapter Q-2, r. 1.1); Regulation respecting the conditions and where authorization is required from the Régie de l’énergie (chapter R-6.01, r. 2); Rules of Procedure of the Régie de l’énergie (chapter R-6.01, r. 4.1); Regulation respecting the quantity of gas from renewable sources to be delivered by a distributor (chapter R-6.01, r. 4.3); Regulation respecting the annual duty payable to the Régie de l’énergie (chapter R-6.01, r. 7). The following regulation would be repealed: Regulation respecting the maximum production capacity under a program to purchase electric power from small hydroelectric plants (chapter R-6.01, r. 0.1); Regulation respecting the conditions under which and the cases in which a supply contract entered into by the electric power distributor must be approved by the Régie de l’énergie (chapter R-6.01, r. 1). A new act, the Act respecting a financial assistance program to limit the impact of Hydro-Québec electric power distribution rate increases on the domestic clientele and establishing the Fonds d’aide à la clientèle domestique d’Hydro-Québec, would be introduced.

[2] Act mainly to cap the indexation rate for Hydro-Québec domestic distribution rate prices and to further regulate the obligation to distribute electricity.

[3] The climate change framework policy (Framework Policy on Electrification and the Fight Against Climate Change), titled Plan for Green Economy 2030, is implemented by the 2024-2029 Implementation Plan, which was presented on June 18^th 2024 by Benoît Charette, Minister of the Environment, the Fight Against Climate Change, Wildlife and Parks.

[4] Pierre Fitzgibbon, Address (delivered at Press conference by Mr. Pierre Fitzgibbon, Minister of Economy, Innovation and Energy, June 6^th 2024) online: https://www.assnat.qc.ca/fr/actualites-salle-presse/conferences-points-presse/ConferencePointPresse-94921.html