Rethinking Lifestyle

Manitoba Hydro is important to Manitobans. It has allowed us to harness the vast energy potential of our rivers, so is a so it is not surprising that the routing of the BiPole III and talk of privatizing Hydro are already significant election issues. The PCs speak to inefficiencies at Manitoba Hydro. Jon Girrard blogs that Manitoba Hydro should not be treated as a “milk cow”.

Unfortunately, what is missing is any discussion as to what role energy, or more precisely cheap energy should have in the development of Manitoba. Because of its many rivers, and because of the infrastructure developed by Manitoba Hydro, Manitobans have access to an incredible amount of electric energy. The question is what how should that energy be used.

Unfortunately, we have all come to believe that we are entitled to cheap energy – yes-cheap gasoline, but also cheap electricity. Note the size of the homes and public edifices we are building, the exorbitant lighting we all take for granted, and our passion for perfect temperature control, both summer and winter. We have come to believe we are entitled to all of this, and that it will be there for us – always.

So we have a cheap energy policy. That is, because the production of hydro electricity is cheap in Manitoba, we believe we should also have low electricity rates. I believe this is unfortunate because it results in an unnecessary, potentially harmful dependency on cheap electricity. Cheap energy encourages the consumption of energy, and then, inadvertently, the wastage of energy.

Manitoba Hydro advocates for more efficient light bulbs, better insulation, and promotes energy efficient appliances, but the economic incentive to follow these recommendations is weak – because of our cheap energy policy.

If we believe that using more efficient light bulbs and more insulation is good, Manitoba needs to change its policy with respect to energy pricing.

Consider that most of us have become quite comfortable with a consumption tax on alcohol and tobacco. We have accepted that income taxes and property taxes are necessary. However, we resist a tax on energy. This makes no sense.

Consider a hypothetical firm paying $1,000 tax on profit and $1,000 for electricity. Now, because of a policy change, the tax on profits becomes $1,500 and the cost of electricity becomes $500. Such a policy change would create an incentive to do what? Hire another accountant to look for ways of reducing the tax. This is hardly desirable behaviour from a social point of view.

Now what if the policy change results in a tax on profits of $500 and the cost of electricity becoming $1,500. The incentive now is to reduce electric consumption. This is desirable behaviour.

Manitoba has an amazing resource in its hydroelectric potential. Manitobans are entitled to benefit from that resource, but that benefit should not be in the form of cheap energy. The benefit should be in the form of lower income and property taxes.