11 October 2012

Equalization Changes and Hydro-Electricity #nlpoli

The federal government is considering changes to the Equalization program and the way it assess revenue from hydro-electricity, according to documents obtained by PostMedia News under the federal access to information system.

The changes would apparently take into account revenue from hydro-electric corporations in provinces like Manitoba, Quebec and Newfoundland and Labrador where a portion of the revenues from provincially-owned hydro corporations are sometimes passed directly to consumers in the former of lower electricity rates.

“Potentially, it’s a huge issue,” said Al O’Brien, chairman of the federal government’s 2006 expert panel on equalization, which examined hydroelectricity revenues as part of its analysis of the broader national program. “It will be controversial.”

He believes governments in Quebec and Manitoba recognize their fiscal capacity, or revenue-generating ability, is underrepresented in the current system.

However, any changes to how hydroelectricity is calculated in equalization could have a “huge impact” on how much — if any — a province receives from Ottawa in equalization, he explained. For example, some studies have suggested Quebec could lose billions of dollars in equalization payments if the true value of hydroelectricity were calculated in the program.