Remember a few months ago when, to great public fanfare, the Government of Newfoundland and Labrador announced in its budget that it would be giving consumers a break on their energy bills, by (somehow) eliminating the province’s portion of the HST from their electricity bills?
As Minister Tom Marshall said in the Budget speech:
“As Newfoundland and Labrador becomes an energy powerhouse, it is important that we continue to maximize the benefits Labradorians and Newfoundlanders receive from those developments. To that end, I am announcing today a rebate equivalent to the 8% provincial component of the HST for residential energy generated by home heating fuel, electricity and other energy sources for every household in the province. The rebate program will be effective October 1, 2011, in time for the winter heating season, and will assist individuals, families and seniors with the rising cost of energy, and it will be in addition to the current home heating rebate. Our energy tax rebate will put another $38 million back in the hands of taxpayers. All this, plus the electricity rate-reduction impact of a federal loan guarantee on Muskrat Falls, will reduce the cost of living for all consumers.”
Let’s leave aside the nagging little fact that the tax isn’t being eliminated (as many reported) but that an ad hoc estimation of an equivalent amount will be sent to households just “in time for the autumn voting winter heating season” in October, 2011. Those are stories for another day.
Today, let’s just talk about math. And perspective. And accountability.
The day of the budget announcement, as one prominent consumer advocate put it, “To say that we’re happy about this budget move is an understatement…”
While we’re at it, let’s deal with the understatements as well.
The public utilities board, at the behest of Our Dear Nalcor subsidiary, NL Hydro and to apparently nobody’s notice or interest just raised power rates for residential customers by 7.7%.
And nobody said a word. Not a peep. Not a whisper from the Liberals. Not a squeal from the NDP. And not a murmur from the “advocates”. There was one brief media story over at VOCM, but someone took it down.
Now let’s break this down:
In simple terms, if you used $300 worth of electricity last month, your bill would be $300 + HST of 13%, or 300+39= $339.
Theoretically, the elimination of the provincial portion of the HST would bring the HST down from 13% to 5%. So your “reduced” bill would show a total amount of $300 + HST of 5% or 300+15 = $315.
In theory, that’s a saving of $24 dollars per month. But you’ll never actually see a bill like that, because the HST cut (still unexplained) doesn’t come into effect until October. The form of the rebate is unknown, but you’ll get a cheque along with your voting card during the writ period. Timing is everything if you want to fleece consumers and the electorate in one fell swoop.
But back to the math.
Even assuming the provincial HST portion is off of your bill, the new power rates at 7.7% higher would be $300 x 1.077 = $323.10. That’s before taxes. After taxes (just the GST component of the HST under our imaginary Tom Marshall scenario), the amount would be $323.10 x 1.05 = $339.26.
Guess what?
$339.26 is grater than $339. The government isn’t giving you a discount this October at all. In fact, your monthly bill is actually going up. So much for “reduc(ing) the cost of living for all consumers”. And on a year-over-year basis, they’re sticking it to you slightly more, because the increased rates take effect this month, while the as-yet-imagined HST discount won’t start until October.
But that’s not all…
As you probably know, NL Hydro is a subsidiary of Our Dear NALCOR, which is, itself a wholly-owned Crown corporation. In layman’s terms, it’s a government entity.
The second wonderful trick about this whole bait-and-switch is that while the net impact for consumers is somewhere between nil and a meager handful of change, the impact internal to government is quite large.
Because all of those millions of dollars (see above) that are going “back” into the hands of taxpayers represent millions less on the government’s books in the form of tax revenue. But an equivalent or slightly higher amount is now flowing from rate payers into NALCOR’s coffers, where it can be safely spent with far less public scrutiny. (Like this, for example).
So endeth today’s math lesson.
