HYDRO-QUEBEC ENERGY SAVINGS PROGRAMS - WATT ARE THEY WORTH

Hydro-Quebec, a large government-owned electric utility serving the Pr ovince of Quebec, launched several energy savings programs as part of its 1992 development plan. It will be replacing investment in new hydr o-electric power projects with investment in energy savings and intend s to spend $1.9 billion from 1992 to 2000 and $2.0 billion from 2001 t o 2010 on the venture. This is expected to reduce electricity demand b y 9.3 TWh in 2000 (5.4% of the business as usual forecast) and by 18.0 TWh in 2010 (9.1% of the business as usual forecast). We perform a co st-benefit analysis of the programs, taking into account the financial criteria underlying electricity rates paid by consumers. We find that the programs should lead to present value benefits ranging from $2097 million to $4493 million over the 1992-2010 period, depending on the size of the electricity savings. Annual benefits range from $181.0 mil lion to $387.7 million. Consumers are the main beneficiaries and Hydro -Quebec is a marginal beneficiary. Government, however, is a net loser . The precise size of the benefits and their distribution among the th ree parties are sensitive to the extent of the electricity demand redu ction effected by the programs.