Pallister refuses to give up on PST rollback

Hey there, time traveller!
This article was published 07/05/2018 (2871 days ago), so information in it may no longer be current.

It’s an idea that makes perfect, common sense.

Tucked deep within a remarkable decision issued last week by the Public Utilities Board (PUB) on Manitoba Hydro’s general rate application was a recommendation to use a portion of the revenue from the soon-to-be-levied carbon tax to help offset rising electricity costs. The PUB’s rationale was a triumph in practical economics.

Ostensibly, a tax on carbon is supposed to make the consumption of fossil fuels more expensive. Using carbon tax revenue to offset higher Hydro electricity rates makes perfect sense because, over the long term, the province should want to do everything within its power to encourage Manitobans to ditch their gasoline-powered cars and natural gas-powered furnaces and water heaters in favour of electric options.

“As the provincial government will receive revenue from the planned carbon tax, the board further recommends that the provincial government transfer a portion of the carbon tax revenues to Manitoba Hydro to strengthen Manitoba Hydro’s financial health, which may allow for lower consumer rate increases,” the PUB order noted.

It’s a pretty solid argument that is, unfortunately, proving to be completely unconvincing for Premier Brian Pallister and his Tory government.

Within a couple of hours of the release of the PUB’s order last week — in which it limited Hydro to a 3.6 per cent electricity rate increase for 2018-19 — Crown Services Minister Cliff Cullen said his government had already decided to reject any use of the carbon tax to lower hydro rates. Furthermore, he pointed out that while Hydro has to accept all PUB orders, the regulatory agency can only make recommendations to government.

Cullen did not explain why the Tory government is so opposed to the idea, only that it is. For a government that rarely explains its actions or policies, that’s par for the course.

And yet, when exactly did this government exclude the carbon tax as a possible source of relief from rising electricity rates?

In early musings on the carbon tax, Pallister and his ministers mentioned that an offset for Hydro rate hikes was among the possible uses for the tax. Now, it’s a dead issue. One can only speculate about why the carbon tax policy has shifted course.

One possible explanation is that Pallister would prefer, for the time being, to have Hydro rates go up on an annual basis because it reminds voters about the risky policies of the former NDP government. There is no doubt that current rate increases are directly attributable to NDP decisions to proceed with expensive new generating station construction despite ample evidence that North American electricity rates were headed on a steep downward trajectory thanks to the current love affair with gas-generated electricity, made possible by a cheap, continental over-supply of shale gas.

The NDP will also have to continue to carry responsibility for the decision to route Bipole III down the west side of Lake Manitoba instead of the more direct route down the east side of Lake Winnipeg. The PUB, in fact, suggested the current government pay Hydro $900 million over 13 years to compensate the utility for the additional costs of what was essentially a political decision.

Pallister is more than happy to allow this self-inflicted policy wound to continue festering. In fact, in the wake of the PUB rate order, Pallister suggested he might launch some sort of inquiry into the management of Hydro capital projects. Given the number of times Keeyask and Bipole III have been scrutinized to date — by the PUB, intervener experts and by multiple consultants hired by Hydro itself — there is little practical need for another inquiry. We know the government was foolish to launch both projects in a tight continental energy market, and that Keeyask in particular was poorly managed by the general contractor. The combination of all this incompetence has been a precipitous rise in the total capital cost of the two projects.

Why would Pallister want to dig deeper? An inquiry would keep the issue on the front burner and undermine the NDP’s already miniscule chances at some sort of rebound in the 2020 election. An added benefit is that it will stop people from asking the current government why it isn’t using money from it carbon tax to lower hydro rates, particularly for those of lower incomes.

The other, perhaps more obvious explanation, is that the money is already spent. Following the spring budget, the Tory government let it slip that the carbon tax revenue would be used to help pay for the one-point cut in the provincial sales tax, a key Pallister promise from the 2016 election.

The PST cut has become an all-encompassing issue for the premier, the one thing he simply won’t reconsider as he tries to find a solution for an under-performing economy and a stubborn budget deficit. Pallister has made it clear he will cut the PST even if the budget is still in deficit, a scenario that would require the province to borrow money to deliver a tax cut.

For Pallister, the PST-cut promise is a moral issue. Having criticized the NDP for increasing the PST after promising not to, Pallister is as serious as a heart attack about rolling back the tax. However, his pledge isn’t really an economic issue; the one-point reduction in the PST is unlikely to cause any major boost to economic growth or deliver any great relief to lower-income Manitobans.

To help the economy, and provide relief to lower-income brackets, you’d have to do something bold and creative. Like using the carbon tax money to ensure that electricity is affordable for those who are being most affected by the annual rate increases.

The PUB is showing more creativity and balance in proposing practical ideas that could serve a number of policy goals. In addition to its carbon tax recommendation, the PUB ordered Hydro to create a new class for remote First Nations households, which pay thousands more in annual hydro costs than homes in the south. Given that hydro-electricity is generated in these remote regions, charging the highest rates to the people who live closest to the dams seems tragically ironic.

It’s true, the PUB can only make recommendations to government. But if there’s any common sense to be had in the Manitoba legislature, someone should start listening to those recommendations.

dan.lett@freepress.mb.ca