Last week, New Brunswick Premier Bernard Lord announced his government's "Energy Action Plan", a list of 14 items intended to help residents of New Brunswick with their energy costs. Three of these items would be of particular interest to many Nova Scotians:
While these items would appear to be the right actions to take at a time when world energy prices are poised to rise even further; the fact is they have more to do with electioneering than sensible energy policy.
Rebating the province's share of the HST on the sale of energy used for home heating (notably electricity, home heating fuel, wood, and natural gas) will mean an eight percent reduction in residential energy costs. This is being presented as an annual savings to New Brunswickers of $55 million; on the other hand, it means a revenue shortfall in the range of $55 million for the New Brunswick government.
Capping NB Power's upcoming electricity rate increase at eight percent, when combined with the HST rebate, will effectively freeze the cost of electricity to anyone who pays HST on the electricity they purchase in New Brunswick. The New Brunswick government has the final say in any electricity rate increase because NB Power is owned by the provincial government.
Late last year, NB Power approached the New Brunswick Public Utility Board requesting an 11.4 percent increase in rates. If the PUB grants NB Power a rate increase over the eight percent rate cap, the New Brunswick government has stated it will use tax revenues to make up the difference.
Regulating the price of gasoline and home-heating oil runs the risk of having the producer selling (or threatening to sell) the fuel heating elsewhere should the regulated price fall below that which the producer expects to obtain. This happened last September in both Prince Edward Island and Newfoundland, where the regulatory agencies quickly backed down when faced with the possibility that gasoline would not be distributed in their respective provinces because the oil companies considered the regulated prices too low.
Some of these items, by themselves apparently reasonable, when taken together, may result in unintended consequences. For example, regulating the price of a fuel to keep it low, when coupled with the eight percent HST reduction, may result in shortages as some consumers purchase more fuel for less than it would normally cost. If demand increases, there can be environmental impacts, such as increased greenhouse gas emissions.
These three items in New Brunswick's Energy Action Plan may work in the short term (that is, until the next election), but attempting to manipulate the price of energy will ultimately fail. In fact, New Brunswick Finance Minister Jeannot Volpe admitted as much during his budget speech:
"Energy prices are a global issue, and significantly affect New Brunswickers. While government has no control over this situation, we have heard New Brunswickers' concerns loud and clear, and with today's budget, we will act."
The solutions proposed by New Brunswick's Energy Action Plan are not addressing the long term problems associated with rising world energy prices and climate change. Quite simply, policies are needed to reduce energy demand, targeting the heating of buildings and the movement of goods and people. As part of the bridge to a less energy intense future, it will be necessary to ensure that those on low-income are given assistance to meet their existing space heating needs.
As world energy prices continue to climb, governments must forego the temptations of short term, politically expedient expenditures and implement policies for an energy secure future. Whether Nova Scotia's government is capable of doing this has yet to be seen, as Nova Scotia's existing energy policies seem, like those in New Brunswick, to be intended for short term political gain.