Hydro-Québec faces $40M court fight with Massachusetts utilities over winter power cuts

Hydro-Québec’s first winter supplying Massachusetts under a major 20-year power deal has led to a court fight over nearly US$40 million.

The dispute dates back to January, just days after Hydro began delivering power under agreements with three Massachusetts utilities. As extreme cold drove up demand in Quebec, Hydro reduced some exports; the utilities say that breached the promise of “firm” power, while Hydro says emergency measures on the grid excused the shortfall.

“Hydro-Québec’s position is straightforward: The electricity was delivered and received and therefore must be paid for,” the utility said in a statement to The Gazette.

Hydro-Québec and the three Massachusetts utilities — Eversource, National Grid and Unitil — filed competing lawsuits in U.S. federal court on Sept. 8.

Deliveries under the agreements began Jan. 16. Eight days later, as bitter cold pushed up electricity use in Quebec, Hydro began reducing shipments south of the border. The utilities say the reductions affected parts of 12 days between Jan. 24 and Feb. 9.

The contracts call for 9.45 terawatt-hours of hydroelectricity a year, according to court filings. The utilities say that is equivalent to roughly one-fifth of Massachusetts’s annual electricity demand.

At the heart of their case is what they say Hydro had promised to deliver.

The utilities say the power was sold as “firm” and argue their service was supposed to have the same transmission priority as electricity serving customers in Quebec.

In their complaint, they allege Hydro reduced deliveries “to preserve the province’s supply for local demand during a period of extreme cold in the region.” They argue that was a discretionary decision, rather than an unavoidable emergency covered by the contracts.

“We entered into this agreement to bring reliable, affordable power to customers, and our legal action seeks to uphold the commitments made under that agreement and help ensure customers receive the benefits they are owed,” National Grid spokesperson Bob Kievra said to The Gazette.

Unitil referred The Gazette to the utilities’ court filing, saying it supports “reliable and affordable energy from a range of resources, including hydro power.”

The Gazette also contacted Eversource for comment, but did not receive a response in time for publication.

Hydro’s defence rests on what was happening in Quebec at the time.

Its lawsuit describes an “extreme, prolonged and life-threatening” cold spell that pushed electricity demand close to historic highs. Hydro says its TransÉnergie unit, which oversees the province’s grid, imposed reliability measures to stabilize the system and avoid wider power cuts.

Hydro argues those measures amounted to “force majeure” under the agreements, temporarily excusing it from delivering the full amount of electricity.

It also says it took steps to free up power elsewhere, increasing imports from neighbouring markets, stopping spot exports and reducing interruptible supply to commercial and industrial customers.

The Massachusetts utilities reject that explanation. They argue Hydro has not shown that the circumstances met the contracts’ requirements for a force-majeure event or that a qualifying reliability order required their deliveries to be cut.

That disagreement is also behind the US$40-million fight.

The utilities say the missed deliveries forced them to buy replacement electricity and incur other costs, and they assessed Hydro about US$39.7 million in damages. Instead of paying Hydro that money and pursuing the claim separately, they deducted it from bills for electricity Hydro had delivered.

Hydro says the contracts did not allow them to do that while the damages were still disputed.

Its lawsuit says more than one million megawatt-hours of electricity were delivered and accepted in January and February. Hydro is seeking US$39.69 million in unpaid bills, plus interest.

The dispute is not only about last winter’s money. The utilities want the court to enforce what they say are Hydro’s firm supply obligations in the years ahead, while Hydro wants a ruling that disputed damages cannot simply be withheld from future payments.

The contracts run for 20 years, meaning the same question could arise again when severe cold pushes up demand in Quebec at the same time Hydro is committed to sending power south.

For now, Hydro says “electricity deliveries to New England continue as normal.”