A tax on electricity production of one cent per kilowatt hour, payable by consumers not generators, would bring between $390 million and $440 million in new revenue for the provincial government.
Only about $70 million of that would come from the people of Newfoundland and Labrador. The rest would come from consumers in the United States, Quebec, and Nova Scotia.
This new tax would be the single most efficient source of new revenue for the provincial government and could be used to pay for Muskrat Falls. It would also fairly distribute the burden of Muskrat Falls across all people using electricity generated in Newfoundland and Labrador, not just the handful living in the province.
The reason for this is simple to understand.
Newfoundland and Labrador currently produces about 39 terawatt hours (TWh) of electricity annually, according to the National Energy Board. All but about seven TWh is exported to customers in Quebec and the United States. On completion of the Muskrat Falls project, the province will generate potentially as much as 44 TWh. More than half of Muskrat Falls’ annual production will be exported to Nova Scotia free of charge or for less than the cost of generating it. The small portion left is available for export at costs far below the cost of production.
The provincial government’s plan for Muskrat Falls is for the people of Newfoundland and Labrador alone to pay for Muskrat Falls.
The original government plan was for the full cost to be recovered from domestic electricity rates. The current provincial government plan, copied by the Progressive Conservatives, is for the cash to come from other provincial revenues with less than $50 million expected to come from export customers. This is unfair and jeopardizes the future of essential services such as health care.
The current government plan is merely the old government plan in new clothes. Its impact is still unfair. The threat to basic services still lurks.
The crushing burden of Muskrat Falls on taxpayers/ratepayers and on the economy is not any lighter. The pain of the new plan will just be felt in a different way.
The new tax would not cover all the costs of Muskrat Falls, but it would cover more than any other option. The new tax would be fairer than the government’s scheme and, most importantly, it would not weigh down the province physically and mentally with the burden of a disaster. Together with other initiatives that I proposed recently, a new tax on electricity would be part of a plan to mitigate the impacts of Muskrat Falls fully.
A better plan than any currently discussed would allow the people of Newfoundland and Labrador to move confidently into the future.
A comprehensive plan to address Muskrat Fall’s entire burden would also remove the spectre of impossible costs that is currently depressing the people and the economy. Muskrat Falls also threatens Quebec, Nova Scotia, and the other provinces should Newfoundland and Labrador default or, more likely, have difficulty providing basic services out of its own funds. It is in their interest, in other words, to be part of the solution that avoids a bigger problem tomorrow.
It is not too late to take this path even though, as Premier Dwight Ball recently acknowledged, provincial government officials have not looked at the tax option at all. The premier and Opposition Leader Ches Crosbie are simply wrong when they claim that a new tax would inevitably lead to costly court battles. It may go that route but only if the province’s political leaders continue to fail in their obligation to seek effective, political solutions to the political problem that is Muskrat Falls.