One of the first mistakes the current government of Nova Scotia made after coming into power was to eliminate the tax on all home electricity. This misguided effort at universality and relief for “hard-pressed” Nova Scotians was flawed public policy for any number of reasons.
It had a negative impact on the province’s already fragile bottom line. It gave people with more than sufficient ability to pay a subsidy they did not need. It encouraged continued consumption at unsustainable levels and it helped the poor not by treating the problem (inefficient homes and too much consumption), but by treating the symptom (high electricity bills).
Nova Scotia Power is now backfilling the gaping hole left by this bad provincial decision. If taxes are insufficient to support the needed programs to help low- and modest-income Nova Scotians invest in making their homes more energy efficient, then NSP will raise rates to cover those costs. If the tax reduction has made unsustainable electricity consumption more instead of less attractive, NSP will use higher core prices to send the message that it really is cheaper to conserve not consume. Good on NSP.
Bad, bad on the provincial government. This is one more in a disturbing trend of clever political decisions by this government. Clever political decisions based on poor public policy that leaves other entities and other orders of government either holding the bag or taking on the role of heavy. The province gets to look progressive and supportive of just about everyone and everything, while leaving the job of saying no, or telling people the true costs, to others.
With the Sydney Harbour dredging, the province has lobbed the grenade into the lap of the federal government; with the Halifax convention centre, they have punted it to Halifax regional council; and with the cut in provincial taxes on electricity, they placed it firmly in the lap of NSP.
The difference in the case of electricity is that the policy choice is clear, defensible, reasonable and, to a great extent, inevitable. The harsh reality is that it is indeed cheaper to reduce electricity consumption than to produce and/or move more electricity. At its most basic, not using electricity costs nothing; producing it will always cost something. Even if we doubled, tripled, quadrupled our generation of green renewable energy, that math would still hold true.
Now that is too simplistic a construct. We live in a climate where it is often dark and routinely cold. Electricity helps us address both those concerns. So, some electricity consumption is necessary (notwithstanding my neighbour outside Windsor, who has lived over a decade using no electricity in his home). But the need for some electricity does not undermine the basic math that it is still cheaper and more efficient and, long term, more sustainable to reduce consumption.
For the rich, that means pricing electricity at its true cost of production and delivery, so that we send the correct market message and don’t distort the incentive for them to use their own money to insulate, purchase more efficient appliances and seek more energy-efficient home designs (and the premium prices they tend to have attached).
The rich, in this instance, also include the industrial consumers who have built their business case on the availability of cheap coal-fired electricity in Nova Scotia. There is a reason folks like those at Minas Basin and NewPage are interested in biomass and other energy alternatives; they see true-cost electricity over the next hill, and it will kill them if they don’t change now. Continuing to subsidize our other heavy industrial users with low-cost electricity simply risks turning them into the next Sydney Steel, and I know neither they nor we want that.
But we can’t continue to subsidize the poor or those of more modest means either. The price of electricity must reflect its cost; otherwise, demand will reflect the subsidy, not the need. But it also means that if we really want to help — forever, not just for now — those who need help, then that help must come in the form of the capital they do not have themselves. Capital they can use to insulate, to be more efficient and to help them lower their electricity bills by using less power, not by paying less for it.
If the government wants to forgo some or all of its tax take on electricity, I say bully for them — I hate middlemen, as a general rule, in any case. But, tax or no tax, we need to raise the price of electricity to reflect its true cost. That would be good for all of us in the long run.
Charles Cirtwill is the president and CEO of the Atlantic Institute for Market Studies ( www.aims.ca), an independent, non-partisan public policy think tank based in Halifax.