Alberta’s Leaky Bucket
Alberta’s Carbon Tax was introduced in 2017 and in 2018 it was increased. There has been a lot of push back from Albertans on this topic. If the Carbon Tax was used for what it was intended – to help improve our environment – then I doubt that we would have seen so much opposition. This hasn’t happened. Hundreds of millions of carbon tax dollars are being used to pander to voters and subsidize ill-thought out programs. This is a complex problem and the province is getting it wrong.
We all know that the government wants to reduce carbon emissions and create a greener society with the target of 30% renewables by 2030. Billions of dollars are being collected with the carbon tax to achieve this goal. Yet, we have been able to offer consumers the option of greening 30% of the energy they consume for only $3.50 per month, no subsidies needed. That is just 11 cents per day.
Alberta’s electricity market is changing and Carbon Tax dollars are now being used to subsidize the big regulated utilities in order to cap the Regulated Rate Option (RRO) retail price for electricity at 6.8 cents per kWh. This is just a smoke and mirror game. Consumers must realize that they are subsidizing the capped rate with their own money paid out of the carbon tax. Most importantly, do consumers REALLY know who the subsidy is going to? Only 50% of the consumers in Alberta are on the RRO – what about the rest of us? The other half of the province is being ignored with this poorly designed regulation.
The RRO subsidy does nothing to reduce Alberta’s carbon footprint, yet this fiscal year alone over $70 million will be gifted to the old incumbent utilities, some of whom at the same time are exporting Alberta jobs and selling off assets to companies out of the country. Subsidizing the regulated rate providers may help the government in pandering to some voters but it does absolutely nothing to help stimulate a healthy greener economy. There are lots of examples like this, but today let’s focus on what is going on with a few of the big utilities in Alberta. Exporting jobs has been going on for some time and the move to companies shipping jobs out of the country is increasing.
ENMAX & Tata
It started when ENMAX outsourced back-end technology-support jobs associated with its business operations software to the Tata Group in India. All of this started in 2003, the utility signed a 10-year deal that saw customer-service functions outsourced to Accenture, an international technology and business consultancy company. Then in 2006, Accenture transferred billing and administrative jobs to the Philippines. In 2014, a Calgary councillor was quoted saying: “City-owned utility ENMAX needs to be able to compete on the same playing field as other corporations, even if that means outsourcing dozens of local jobs”. Without question the Tata Group and ENMAX are both great companies; but it is fundamentally wrong to ship jobs out of the province when skilled workers live here.
ATCO & Wipro
ATCO followed with outsourcing billing and customer care jobs to Wipro and began operating their call center out of Manila in the Philippines. ATCO sold off their information technology business to Wipro for $210 million. As part of the deal it included a 10-year total outsourcing contract from ATCO Ltd, whose businesses spans across energy, utilities and technology. The deal, one of the largest for the Bangalore-based IT firm, is projected to result in over $120 million a year flowing to this company in India, up to December 2024. $1.2 Billion lost to the Alberta economy. Undoubtedly, ATCO and Wipro should be admired for what both corporations have achieved in growing their respective businesses – but the bottom line is hard to explain to the person in Alberta who was laid off.
Direct Energy & HCL
Direct Energy picked HCL as their champion and jobs were shipped to Guatemala, Texas, the Philippines, and India. Billing, customer care, information technology jobs gone. In their latest move, earlier this year Direct Energy sold off all of their Alberta gas holdings to a consortium from China. As Alberta’s major regulated rate gas supplier in the province; how could this have been allowed to happen? The question that should be asked is, should the largest government regulated natural gas utility been allowed to sell off all their gas holdings? The new owners: a joint partnership including Mercuria (HQ Geneva), Can-China Global Resource Fund (in part, funded by China Exim Bank), MIE Holdings Corporation (HQ Hong Kong) acquired Direct Energy’s foothold in the province for $722 million.
Of course, we should welcome investment in Canada by offshore money. The Chinese backed corporations have a long game strategy of investing into Alberta’s natural resources industry for superior risk-adjusted returns. At some point in time, it is hoped that the government will ask the hard questions. Jobs lost + selling off our natural resources = is it worth it?
At the same time, consumers should ask a pointed question …. Why is a chunk of the carbon tax going to subsidize many of the same companies that shipped jobs off shore or sold off prized Alberta assets? If you sell off provincial assets and export technology jobs, we will eventually end up servants of new masters.
Possibly, the government doesn’t care. Why do I say this? Our own government went out of the province to find companies to help them design and manage the great giveaway of carbon tax dollars under the banner of Energy Efficiency Alberta.
Back to the issue at hand: The regulated cap allows the regulated utilities to overpay for energy because the government will make up the profit margin with subsides while capping the regulated consumer rate at 6.8 cents/kWh. The 6.8 cent number is fictitious, as the consumer is paying the carbon tax to subsidize this Ponzi scheme. At the end of the day it is wise investors like Tata, Wipro, HCL, Mercuria, Can-China Global Resources, and MIE Holdings that will own our resources and as well intellectual property. Our kids will be paying for this mistake for decades.
Concerned About the Future
We have a simple message to our government; please stop for a second and try to understand the damage that is being caused to the private sector by artificially subsidizing the big regulated electricity and natural gas utilities. You are creating an unlevel playing field. This message is targeted to all political parties: support the private sector. The message to consumers – switch off of the regulated rate and over to your local independent retailer of electricity and natural gas. You will save some money and send the message that buying local matters.
Changes Need to Be Made
Today, the private sector and other businesses like ours have never been more at risk. Current government policies, subsidies, and outsourcing has had a major negative impact on the current health of our industry and will negatively impact the future. A business built on subsidies is not sustainable and eventually consumers will say enough! We are wrong to leave our children with a growing debt that they will have a hard time paying down or leave them a dwindling workforce ravaged by outsourcing.
$100’s of Millions lost to the Alberta economy
Have you ever heard of the Local Multiplier 3 (LM3)? It was developed by the New Economic Foundation as a simple and understandable way of measuring local economic impact. The multiplier effect measures the number of times a dollar circulates within an economy. It was developed on the idea of the ‘leaky bucket’. Think of one of the examples we explained above: ATCO outsourced over a billion dollars when they signed a 10-year deal with Wipro, a company out of India. $120 million a year. How many dollars using the multiplier will be lost to our economy? Add it up.
If you imagine the local economy as a bucket full of water, every time you spend money that goes outside the local area, it leaks out of the bucket. Generally, our energy is focused on trying to pour more money into an area so as to keep filling up the bucket. However, a better starting point for strengthening the local economy should be to try to prevent the money leaking out in the first place. Remember – the money leaking out is your tax dollars.
Want to show your support for the private sector and local Alberta companies? First question to ask yourself is “Who do you buy your electricity from?” If you are on the government regulated rate it is time to switch and get off of it. If you are paying 6.8 Cents/kWh on the RRO, maybe its time to support a local option at better price.
Source: Green Alberta Energy