Understanding How Hydro Quebec's Winter Credit Option Works
Hydro Quebec (referred to as HQ further on) is the Quebec province's main energy utility. It derives nearly all of its energy from hydroelectric dams. Other energy sources include wind, solar and fossil fuels. Quebec residents enjoy some of the lowest energy rates in the world.
Unfortunately, much of the infrastructure is aging and the demand for more energy continues to increase dramatically.
For many years now, HQ has started to educate clients on wise energy use, especially during frigid winter days where the electrical grid comes under significant strain. During such critical events, HQ needs to bring fossil fuel electrical generators on line to meet demand. This is costly compared to hydroelectricity and environmentally unfavorable.
One of the programs to entice clients to reduce energy usage during such critical events is Rate D with Winter Credit Option.
First off, Rate D is the standard electrical rate for most non-commercial (domestic) clients. It is a tiered rate, with the first tranche of 40 kWh per day charged at one rate and the remaining energy above 40 kWh charged at a higher rate. This effectively comes to a combined rate of about CAD $ 0.11/kWh.
Adding the voluntary Winter Credit Option (WCO from this point on) to the base Rate D has no downside. It doesn't change a client's billing at all if the client doesn't change their energy consumption. However, if the client reduces their energy consumption when HQ requests it, like during frigid winter days, HQ will credit the client $ 0.56786 per kWh of saved energy (HQ calls this Curtailed Energy). This credit is over 500% the base rate D, making it very attractive to the client to save energy. It is like saying for every kWh a domestic client saves, HQ will credit the client the equivalent of 5 kWh!
The WCO program starts on December 1st and ends on March 31st each winter season. There can be a maximum of 30 critical events, where HQ asks you to reduce your energy during a period of 4 hours. These critical periods are usually 6am to 10am and 4pm to 8pm. Certain holiday periods are excluded from the program completely (Christmas, New Years, Good Friday).
Ah, this is the most important question to ask. For HQ to determine how much energy the client didn't use during a Peak Demand Event, HQ needs to determine an estimate of what the client would probably use during a Peak Demand Event.
In the simplest terms, here is what HQ does to create your estimated energy consumption during a Peak Demand Event:
- establish an Anchor Period that is 2 or 3 hours long that starts 4 or 5 hours before the actual Peak Demand Event.
- This Anchor Period, preceding a Peak Demand Event, is used to determine the effect of very cold weather on energy consumption, comparing what a client normally consumes during this period versus what they consume immediately prior to a Peak Demand Event.
- determine what you normally consume during this Anchor Period by averaging consumption over a 5 day Reference Period.
- compare average usage with what you actually consumed during the Anchor Period preceding the Peak Demand Event and calculate a Temperature Adjustment.
- establish an Energy Reference (or estimate of what you would probably consume during the Peak Demand Event) by adding what you normally consume during the same period as the Peak Demand Event (averaged over a 5 day Reference Period) and the Temperature Adjustment.
- Finally, determine the Energy Curtailed as the difference between the Energy Reference and the actual energy consumed during the Peak Demand Event.
- HQ determines that a Peak Demand Event will occur tomorrow, in the AM, between 6am and 10am.
- HQ requests all clients to reduce energy during this period (email alert, smartphone app).
- For the AM Peak Demand Event, HQ determines the Anchor Period to be 1am to 4am, starting 5 hours earlier for a period of 3 hours.
- HQ determines an average usage of 3 kWh for the Anchor Period (more the actual method later on).
- HQ records actual energy consumption of 6 kWh during 1am and 4am of the critical event day.
- HQ sees that for the 3 hour Anchor Period, 3 kWh more consumption occurred, or 1 kWh per hour of the Anchor Period
- HQ now determines the average energy usage of 12 kWh during 6am to 10am event (more the actual method later on).
- HQ adds to the 12 kWh an additional 4 kWh, based on the 1 kWh per hour more energy consumed during the Anchor Period.
- HQ calls this 12 + 4 = 16 kWh as Reference Energy.
- During the actual Peak Demand Event, between 6am and 10am, if you consume less than the Reference Energy, you are eligible for credit.
- Assuming you reduce your energy to only consume 10 kWh during the critical event, you would have saved (curtailed) 6 kWh and thus have a credit of 6 * $ 0.56786 or $ 3.40 applied to your bill.
Since it is impossible to actually know, in advance, what you normally would consume during a critical event, HQ has no choice but to create an estimate. This estimate is based on some simple mathematical rules and is detailed in the official HQ Tariff Rate Guide annually. After the WCO program was introduced in 2020, some clients determined that one could artificially inflate the calculated Reference Energy. The Reference Energy is, after all, simply what you normally consume during 6-10 am plus the temperature adjustment. Since the temperature adjustment was simply your actual consumption during 1-4 am less your average consumption, one could significantly increase the kWh that represented the temperature adjustment by increasing your actual consumption during the reference period, even by a lot.
We will reuse the previous example with one small change...
- HQ determines that a Peak Demand Event will occur tomorrow, in the AM, between 6am and 10am.
- HQ determines an average usage of 3 kWh for the Anchor Period.
CHANGE: You decide to increase your energy consumption during the Anchor Period, by a lot.
- HQ records actual energy consumption of 27 kWh (instead of 6 kWh) during 1am and 4am of the Peak Demand Event. This works out to 8 kWh per hour compared to 1 kWh in the previous example.
- HQ adds to the Peak Event Average of 12 kWh an additional 32 kWh.
- Reference Energy is now 40kWh, compared to only 16 kWh in the first example.
- Assuming the same 10 kWh during the Peak Demand Event, you curtailed 30 kWh, and your credit is $ 17.03.
Note, there was no downside to attempts to boost the Reference Energy and no risk. Every additional kWh consumed during the Anchor Period netted $0.46, regardless!
Some HQ clients took this boost to the extreme. Public news articles began to appear where clients wasted significant energy during the Anchor Period, for example, by leaving all the windows open, in order to boost the temperature adjustment and the resulting Reference Energy high enough that they did not need to bother with reducing energy at all during the critical event and still get HQ to pay them credits exceeding $1000 per winter season!
This abuse of the HQ WCO program did not go unnoticed. Not only were clients deliberately wasting energy, they weren't reducing the necessary energy during the critical event. This was the exact opposite of the goal of the HQ WCO program!
Starting with the 2025-2026 winter season, HQ decided to cap or limit the Temperature Adjustment to not more that twice the average energy usage during the Anchor Period. This limit would only be applied if, in fact, the Energy Curtailed by the client exceeded 40 kWh during any single Peak Demand Event.
The follow graph of an AM critical event shows the effect of new algorithm. The graph assumes Anchor Period average of 4 kWh. A Peak Period average of 15 kWh, and an estimated Peak Demand Event of 20 kWh.
The X axis is different scenarios of actual Anchor Period energy consumed (1-4am), while the Y axis shows the effect on credit $. If an HQ client attempts to boost the Temperature Adjustment too far, by increasing the Anchor Period actual consumption beyond 37.74 kWh, the resulting credit precipitates from $22.71 to a measly $3.22! Not only has most of the WCO credit been lost, the client still needs to pay for the 37.75 kWh of wasted energy!
Graph Explanation
The client attempted to boost the Anchor Period energy by 940% (4 kWh normally versus 37.75 kWh prior to a Peak Demand Event). This is obviously unrealistic additional heating due to cold weather, so HQ limits the Temperature Adjustment to 2 times the average energy of the Anchor Period, when the Curtailed Energy exceeds 40 kWh.
- A period of 4 consecutive hours where HQ requests that clients reduce their energy consumption.
- A morning peak demand event occurs between 6am and 10am.
- An evening peak demand event occurs between 4pm and 10pm.
- Energy saved (curtailed) by the client is rewarded with a credit of $ 0.56786 per kWh.
- There can be up to 30 such events between December 1st and March 31st, excluding certain holiday dates.
- NOTE: In the hydro-qc add-on for Home Assistant, this Peak Demand Event is also known as Critical Peak Period.
- An estimation, made by HQ, of what your energy consumption would be during a Peak Demand Event.
- This is based on the average normal energy consumption during the same period as the peak demand event.
- The average is increased with a temperature adjustment to account for the cold weather.
- The sum of average peak energy usage and the temperature adjustment is the Reference Energy.
- In order to establish an estimate for the Reference Energy and Temperature Adjustment, an Anchor Period prior to the peak demand event is used.
- For peak demand events occurring in the AM, the Anchor Period is 1-4am.
- For peak demand events occurring in the PM, the Anchor Period is 12-2pm.
- Note: HQ does not specifically name this period, it is only described as such above.
- To distinguish between anchor periods used to calculate average anchor consumption and the anchor period immediately prior to a peak demand event, the latter is called Critical Anchor Period in the hydro-qc add-on for Home Assistant.
- This period is used to calculate average energy usage across the reference period.
- For non-peak demand events occurring in the AM, the Anchor Period is 1-4am.
- For non- demand events occurring in the PM, the Anchor Period is 12-2pm.
- Note: HQ does not specifically name this period, it is only described as such above.
- To distinguish between peak periods used to calculate average peak consumption and the peak period during a peak demand event, the latter is called Critical Peak Period in the hydro-qc add-on for Home Assistant.
- In order to calculate the Temperature Adjustment and the Reference Energy, a reference period of 5 previous similar days are used to calculate and average.
- Previous days do not include days where a peak demand event occurred.
- Previous days do not include specific holiday days.
- If the current Peak Demand Event occurs on a weekday, then only the last 5 weekdays are used.
- If the current Peak Demand Event occurs on a weekend day, then only the last 5 weekend days are used.
- The Average Anchor Consumption is the average of the sums of each hour of the Anchor Period across the Reference Period, removing the minimum and maximum value from each hour.
- An AM Peak Demand Event occurring on a weekday/weekend would have an Average Anchor Consumption calculated by a Reference Period of the 5 previous matching weekday/weekend days, summing the average hourly consumption for each hour, excluding the minimum and maximum values, between 1am and 4am.
- A PM Peak Demand Event occurring on a weekday/weekend would have an Average Anchor Consumption calculated by a Reference Period of the 5 previous matching weekday/weekend days, summing the average hourly consumption for each hour, excluding the minimum and maximum values, between 1am and 4am.
- The Average Peak Consumption is the average of the sums of each hour of the Peak Period across the Reference Period, removing the minimum and maximum value from each hour.
- An AM Peak Demand Event occurring on a weekday/weekend would have an Average Peak Consumption calculated by a Reference Period of the 5 previous matching weekday/weekend days, summing the average hourly consumption for each hour, excluding the minimum and maximum values, between 1am and 4am.
- A PM Peak Demand Event occurring on a weekday/weekend would have an Average Peak Consumption calculated by a Reference Period of the 5 previous matching weekday/weekend days, summing the average hourly consumption for each hour, excluding the minimum and maximum values, between 1am and 4am.
- In kWh, this represents the difference between the actual energy consumption of the Anchor Period immediately preceding the Peak Demand Event and the Average Anchor Consumption.
- If the Curtailed Energy exceeds 40 kWh, then the temperature adjustment is limited to a maximum of 2 times the Average Anchor Consumption.
- The temperature adjustment is always prorated to the number of hours in the Peak Demand Event.
- AM Temperature Adjustments are prorated by 4/3 ( 3 hour Anchor Period, 4 hour Peak Demand Event)
- PM Temperature Adjustments are prorated by 2 ( 2 hour Anchor Period, 4 hour Peak Demand Event)
- The difference between the Energy Reference and the actual energy consumption during the Peak Demand Event.
- This is the basis for the credit $.
- Each kWh of Energy Curtailed receives a credit of CAD $ 0.56786