25 May Bill 16: An Act to Cap Regulated Electricity Rates
Mr. Clark: Why, thank you very much, Madam Chair. I have many comments, many questions, so far no amendments, but that may change over time. I can’t support this bill because this is part of a continuing trend of the NDP’s haphazard dismantling of Alberta’s electricity system.
Let’s just go back in history and recall how it is that we’ve managed to get to this point, coming up on almost two years exactly, maybe two years less a month, to where this all started. This all started with the government’s very first ever bill, Bill 1. The government’s first-ever Bill 1, as those of you, I’m sure, remember and recall vividly and fondly, increased Alberta’s original carbon tax, the specified gas emitters regulation on large emitters. At the time I’m sure the government thought: well, that seems like a good idea. You know what? In general terms and broadly speaking, I actually am in favour of these sorts of things, of a properly structured carbon tax, with the money going into innovation, allowing Alberta companies to innovate and to help solve the carbon problem not just for our province, not just for our country, but for the world. This is the contribution that, done properly, Alberta can make to the world.
But as with many things this government didn’t fully think it through, didn’t fully understand market forces, didn’t especially understand the implications on power purchase arrangements. They were warned repeatedly following the passage of the bill, leading to the end of 2015, that their actions were going to trigger the “or more unprofitable” clause of power purchase arrangements. They were warned. And if they weren’t warned – well, I happen to know for absolute certainty that they were warned and that they knew. The minister knew or ought to have known. Senior administration, political staff, deputy ministers, associate deputy ministers either knew or ought to have known that that was going to trigger the “or more unprofitable” clause.
That’s part of the deal when you’re in government, is understanding the contractual obligations that government has agreed to, whether it was your government at the time or not. You inherit everything that government in Alberta has ever done over the course of time. You may like some of it. You probably don’t like most of it because that’s what happens when we change government. It doesn’t change the fact that there are contractual obligations that the government of Alberta, which you now are – although, being nerdy and technical, there are only two members on the front bench here, which is technically government. [interjections] I’m just giving everyone a civics lesson on what government is.
Mr. Westhead: Point of order.
The Deputy Chair: A point of order has been called. The hon. Member for Banff-Cochrane.
Mr. Westhead: Madam Chair, it’s against good parliamentary practice to refer to the presence or absence of members, and I would ask the member to refrain from doing so.
The Deputy Chair: Hon. member, although you are correct on the standing order, the member did not actually refer to any particular member being absent, so it’s not a point of order.
The Member for Calgary-Elbow.
Mr. Clark: Thank you, Madam Chair. My point being that when you become government of the province of Alberta, you inherit all of the obligations and contractual arrangements that have been entered into by government. That’s what you do. As a result of not understanding that, of either not doing your homework or, worse, perhaps simply ignoring the advice that you were given and feeling that somehow you could legislate your way out of it, you find yourself in a position where you’re chasing your tail. So Bill 16 is the logical next step in a who-knows-how-many-steps process this government is going to have to go through to dismantle what was a very effective deregulated electricity market.
Now, I’ve heard some of the debate and commentary this morning about some of the challenges and price spikes and ups and downs and whether Albertans need to be market traders to lock in an electricity price. While I have some sympathy for that, there is no question that the market forces that were in play in Alberta’s electricity system were working. How do we know that? Well, here we are with historically low electricity prices. The bill that Albertans actually pay is far higher than that because there are administrative fees, there are transmission fees, there are all sorts of fees on top of fees that end up on your electricity bill, but the energy portion itself is historically low. That is because market signals were sent, generation was built, and it was working. But now, as the NDP have discovered, once you start to pull the thread, the thing starts to unravel pretty quickly and in unpredictable ways.
Here we are in this strange situation, which is not the same as Ontario. It has shades of Ontario, but Ontarians are paying enormous electricity bills. As the government there faces an election, coming relatively soon, they undertake extreme measures to reduce end-user consumer electricity prices that had already spiked. They’re doing so in a cynical political move. I note with interest that the electricity bill that they passed is called the fair hydro plan. Any time government puts the word “fair” into a bill title, I get very worried. That makes me feel like perhaps they’re trying to pull the wool over our eyes. That’s what we see here as well.
The situation here is different because Albertans’ electricity prices haven’t spiked yet, which makes me wonder. My goodness, what’s going on behind the scenes here in the Energy department that’s telling this government: “Guess what, folks? At some point in the next four years, maybe in a very inconvenient time relative to the next election, electricity bills are going to go shooting through the roof, you know, just FYI.” Then the political wheels start to move, and the folks, the secret squirrels who run around behind the scenes making these sorts of political decisions will decide: “All right. You know what we’ll do? We’ll cap consumer electricity prices, that are actually paid by Albertans. Let’s not worry about how exactly we’re going to pay for that. That’s an issue to be dealt with later. But on the political side, you know, we’d better identify who our voters are going to be and make sure that they don’t feel any pain at an inconvenient time, say, fall of ’18 or spring of ’19. So let’s come forward with a bill.” And that’s what they’ve done here.
The billions of dollars of losses. What I can’t fully grasp, and perhaps this is a failing on my part in opposition, is how it is that $2.2 billion has gone into the Balancing Pool, backstopped by Alberta taxpayers, and it isn’t the single greatest scandal that Albertans have seen. It is a scandal. It is absolutely a scandal. The amount of money is stunning to me. That it went from a $600 million or $700 million surplus now to $2.2 billion backstopped by Alberta taxpayers is unbelievable to me.
Now we have a bill that seeks to use Alberta’s carbon tax revenue, this slush fund . . .
Mr. Gill: Levy.
Mr. Clark: I don’t mean levy, hon. member. I mean tax. It is a tax.
Mr. Gill: Okay. I just wanted clarification.
Mr. Clark: Yeah. Absolutely. There’s no question there.
The carbon tax revenue is now going to be used. First, that money comes from the carbon tax, which the government likes to just go back to this well. It seems like it’s this unlimited mythical source of funding that they can just dip into for everything from light bulbs to multibillion-dollar backstops to our electricity market. But guess what? At some point that money is gone. And given what is likely to happen in our electricity sector with this bill, that money is going to go pretty darn quickly, and when that money is gone, well, it’s more backstop from general revenues. And guess what? Our general revenues, topline revenues this year, I have a feeling are not going to meet the government’s projections this year.
Already the price of oil has trended downward below what the government’s estimates were. Just today the price of oil, WTI, is off another 4 per cent. Now, I’ll never cheer against Alberta. That’s not a good thing. I want that price of oil to go up. There’s nothing I want more: $60, $70, $80 oil. That’s good for Albertans; it’s good for our province. Unfortunately, this government has relied on crossing their fingers, just like every government before them, on the price of oil going up. Well, guess what? It hasn’t. And if it doesn’t, our deficit goes higher. That means that we need to borrow even more money.
Now we have a bill before us that’s going to see perhaps another raid on the treasury just to support electricity prices at the consumer level just because of all of the changes this government has brought in without thinking them through. So I’m asking: what problem are we trying to solve? We’re trying to solve a problem created by the government. Either you’re simply cutting a blind cheque here because you have a sense of what this is actually going to cost or, worst yet, you have no idea what this is actually going to cost, and you refuse to share that information with us. Right now today, well, prices are low. Where are prices going to be in six months or a year or a year and a half or three years or by the end of this? The only reason that you would bring this bill forward is that you have pretty good information that consumer electricity prices are going to be a heck of a lot higher than 6.8 cents a kilowatt hour. That’s going to hit Albertans in the pocketbook. Well, guess what? It’s going to hit Albertans in the pocketbook no matter what. The money has got to come from somewhere. All these changes mean that the money has got to come from somewhere.
Now, don’t think for a moment that any of this means that I don’t think we should phase out coal-fired power, because I do. The Alberta Party ran on a platform of phasing out coal-fired electricity. I’m in favour of doing that. I’m in favour of taking action on climate change. I think climate change is real. I think climate change is human caused. I think it’s a problem. I think it’s something we ought to deal with. But I also think that, done properly, Alberta’s response to climate change could be the single greatest market opportunity of our lifetimes. If we put Albertan entrepreneurs to work, if we create a true frame for innovation, if we use carbon tax revenues for appropriate things like cutting personal and corporate income taxes so that people can keep more of their hard-earned money, that we create an attractive investment climate, that we make real and substantial investments in Alberta innovation, in our postsecondary institutions, in our research institutions: these are the kinds of things we should be doing with carbon tax money, not light bulb programs, not backstopping your changes to electricity, that you didn’t think through.
[Mr. Sucha in the chair]
By the way, did it have to be this bad? Did we have to find ourselves in a position where we already have backstopped a $2.2 billion loan to the Balancing Pool, which probably gets worse over time? Well, the answer is no, actually. It didn’t need to be this bad, no less than the economist Trevor Tombe and a fellow by the name of Dr. Andrew Leach – now, you might have heard his name. He’s someone that this government ought to be familiar with. He did the climate plan, didn’t he? He worked with Trevor Tombe, and they discovered that had the government simply accepted back the PPAs, for which their policy change triggered the “or more unprofitable” clause, that, at most, the losses would have been $600 million. At most. How did it get to $2.2 billion? I support phasing out coal. My point is that there’s a much better way of doing it.
The other challenge with this particular bill and the entire approach the government has taken to electricity goes far beyond the electricity market. It goes to confidence in Alberta as a place to invest. Why would someone invest money, why would a company invest money, why would an individual buy or start a business in Alberta when they don’t know what the rules are going to be a year or two or three or four or five down the road, when things are constantly changing, when they don’t know what their electricity prices are going to be? That instability and unpredictability in the market make Alberta an unattractive place to invest.
It’s unnecessary. It’s hurtful to the people of Alberta. If you truly do want to make life better for Albertans – TM, trademark, copyright, quote, whatever – you will not pursue policies that drive capital out of the province of Alberta, that drive companies to invest somewhere else. That hurts our province. It breaks my heart to see it happen because you are hurting the province of Alberta. You are hurting Albertans. You are not incenting and rewarding people for taking an entrepreneurial risk, which, by the way, doesn’t guarantee success. Investing in a company, investing in a business, starting a business: there’s no guarantee that it’s going to work. In fact, the numbers will tell you that it fails far more often than it succeeds. But Albertans are diligent, responsible, hard-working people, and they’re going to take those risks if you give them the chance to do that, if you give them the chance for a reasonable return on investment should that investment work out for them.
When you have unpredictable government and unpredictable legislation, you never quite know what’s going to happen. With a government that relies far too heavily on the price of oil, there’s a chance that our deficit could be $11 billion or $12 billion or $13 billion this year. I don’t want to see that happen – I genuinely don’t – but there’s a huge risk that it does. When it is that high, now what? Do we see more tax increases? What do we see? How are you going to find your way out of that particular problem that you’ve put yourself in?
Instead of using the carbon tax money to backstop electricity like you’re doing, you could use it for substantial, real innovation. We could invest in Alberta research. We could invest in Alberta companies. We could invest in targeted tax credits, not the $30-million-a-year innovation tax credit you’ve already done. A good idea – I like it – but it’s far too complicated. It’s too small. It’s too narrow. That innovation tax credit is the right vehicle. You’ve just got an 80 CC Honda motorcycle when what you really need is a big Ford F-150 truck.
I looked at this bill, and I asked my team: what do you see when you see Bill 16? One of my staff said that this bill seems designed to waste the most amount of money possible.
Mr. Hanson: Sorry. I missed that.
Mr. Clark: I said that this bill seems designed to waste the most amount of money possible. Now, that’s interesting. I’m not sure this is the only bill that seems designed to waste the most amount of money possible, but it’s right up there. It really is. You have an unlimited backstop on the price of electricity. Once that carbon tax money is gone, we’ll dip into general revenues, and with general revenues already in the red, it means we borrow more money in this province.
Our credit rating is under threat. Interest rates are going up, not just globally but in Canada. If you saw it, Canada’s central bankers yesterday indicated that it looks like our interest rates are likely headed higher. That means the money Alberta has already borrowed is going to cost more, that the money we’re going to borrow in the future is going to cost more, and we create this debt spiral. It’s a huge challenge.
I also want to make an important point, also, actually, borrowed from an insightful tweet from Andrew Leach. This bill doesn’t prevent price spikes. Prices will still spike. Consumers won’t see the impact of that. Money has got to come from somewhere. Wholesale prices have still spiked. This does not prevent price spikes. It prevents people seeing the impact of that on their electricity bill, but it doesn’t mean that Albertans don’t pay for it. The money has got to come from somewhere. It’s not magic. The money has got to come from somewhere.
Dr. Starke: It’s a transparency thing.
Mr. Clark: It is a transparency thing. That’s exactly right.
The government is using the complexity of the electricity system. Trust me, having done a little bit of work in trying to unravel some of this stuff, it is complex. There’s no way of truly simplifying it. But when you have a bill that just simply seeks to backstop it, it shows that this government hasn’t done their homework. They haven’t actually sought to truly understand the implications, so we see this piecemeal, step-by-step, put out one foot and then see where you end up. There’s no road map here beyond, really, an ideological route in saying: we don’t like the idea of deregulation. Okay. But why don’t you put together a fully baked, thoughtful plan that thinks about all of the different implications? You haven’t done that.
No matter what, one way or the other Albertans are going to have to pay for this. This isn’t magical. Money has to come from somewhere. My greatest concern is that you’re doing this at a time when electricity prices are at historic lows. Back in the depths of the Energy department and back in the depths of government I am truly worried about what those forecasts look like. I’ve asked my team to look into some of that. It’s obviously a little more difficult when we don’t have the resources of government, but I’m very concerned that the numbers are going to get very big very quickly and that they will start to get out of control, certainly over the course of the four years that this bill is in force.
For all of those reasons and many, many, many more, I certainly cannot support this bill and would seriously and sincerely hope that the government would rethink their approach to electricity reregulation. This bill is troubling, to say the least.
Thank you, Mr. Chair.