Alberta to spend up to $336 million in tax money for business power subsidy

Canadian Press - Thursday, January 18, 2001

EDMONTON -- The Alberta government will spend up to $336 million from tax revenue to shield small businesses from rising power rates.

The money comes on top of more than $3 billion in previously announced natural gas and electricity subsidies, but much of that went to homeowners.

It is the first time the government has committed tax money to cut electricity costs.

"We feel that too many small businesses are already vulnerable," said Resource Development Minister Mike Cardinal.

"These businesses should have time to explore their options."

Some businesses have received an electricity cost break by negotiating long-term deals with suppliers at lower rates.

The program applies to small businesses that have not already signed an electricity contract and must buy power at the market rate. It will subsidize the power rate on a sliding scale up to four cents a kilowatt-hour -- as long as the market rate stays above 11 cents.

The subsidy reaches four cents when the market cost hits 15 cents per kilowatt-hour.

Since Alberta's power system was deregulated Jan. 1, electricity has averaged 12 cents a kilowatt-hour.

Some critics have blamed the government's deregulation plan as the cause for soaring electricity rates.

The new subsidy comes on top of a previously announced one of 3.6 cents a kilowatt-hour. That means Alberta small businesses will pay an average of 7.4 cents, about the same as residential customers are expected to pay this year.

The program will be reviewed at the end of six months, Cardinal said.

The short time frame concerns Dan Kelly of the Canadian Federation of Independent Business.

"High prices are likely to be with us for a few years," he said. "The cynical side of me says this has been time-limited to July to get us past the election window."

A provincial election is widely anticipated this spring. The government also announced Thursday it will recall the legislature for a spring session on Feb. 12. It could then drop an election writ.

While Kelly welcomed the rate subsidy, he said it still does nothing for businesses too large to qualify as small and too small to have any bargaining clout to negotiate their own deal with power suppliers.

Thursday's announcement is the latest in the natural gas and electricity subsidies the provincial Tories have announced since the fall.

In September the province announced a natural gas tax refund of $300 for every Albertan over 16 who filed a tax return.

That was followed by a $20 rebate on each household's electricity bills which was later doubled to $40. The province also announced Albertans will receive four $50-per-month rebates to offset high natural gas prices for January through April.

Although the gas rebates are funded out of general revenues, the electricity subsidies will be paid with the $2.1 billion the government earned auctioning off the rights to sell power produced by the province's generators.

Because the electricity subsidies will use up all that money, Thursday's announcement will be funded with tax dollars.

Lance White, energy critic for the Opposition Liberals, called the program "another patch on the leaky inner tube of government re-regulation.

"There doesn't seem to be any stopping this government throwing money at the problem, especially before an election."

He said the Liberals will release their own plan for power generation before the election.