Alberta: A crude natural gas fix

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Thursday 1 February 2001

A crude natural gas fix

The Edmonton Journal

No one should minimize the severe difficulties that high energy prices pose for certain Alberta businesses and individual consumers. Those difficulties are adequate justification for the enormous giveaway program the government has undertaken to cushion high gas and electricity prices.

However, no one should forget how expensive and how fundamentally crude the emergency cushioning program is. This is not a good way to deal with high energy prices on a long-term basis, and nor is it a prudent way of spending the provincial government's resource royalty wealth.

The government has bought us, and itself, some time with these programs. Now it needs to come up with a longer-term strategy that is much more targeted and less wasteful.

The announcement this week that the monthly rebate on each natural gas bill will triple, to $150, is an example of the flaws in the short-term fix. That $150 may save some families from financial disaster. However, for those with a high income it's merely gravy -- nice to have but hardly essential. Some people living in small houses may actually find themselves paying less for natural gas than they did last winter, after the rebate.

Is $150 a month too much, or too little? Depends on the individual circumstance.

That's what's wrong with universal programs of this kind: they fail to distinguish between those who actually need the help and those who don't. It's administratively easier to send the money to everyone, but it's not great policy.

The two $150 Energy Tax Refund cheques being sent to tax filers are problematic in the same way. A couple with two teenagers old enough to file a tax return could end up with a tidy $1,200 in provincial giveaway money; a couple with four little children would get half that. Nor do the cheques distinguish between wealthy professional couples and deep-in-debt working-class couples.

We are at the moment a very rich province, with natural gas royalties piling billions of dollars into the government's bank account. But that doesn't mean the province of Alberta should be wasteful with its non-renewable resource wealth.

Nor should the current energy boom ever, ever lull us into the false idea that such revenues will flow forever. We only get to sell our natural gas once; once it's gone, it's gone.

Given the shock that has hit this province with both a crisis in electricity rates and skyrocketing gas rates, the current throw-money-at-the-problem approach is excusable. Given the imminent election call, it is also to be expected.

But long term, it is not acceptable. Long term, we need to ask ourselves to what degree citizens and businesses should be shielded from the real price of gas or electricity.

Artificially low prices distort the market and discourage consumers from altering their habits to conserve energy. Government intervention in the pricing of gas and electricity should be done with great caution.

Clearly we don't want Albertans on low or fixed incomes to be driven from their homes by crushing energy prices, particularly when the government can afford to shield them. But for the bulk of Albertans, the most efficient long-term way to deliver the benefits of our current wealth is through good government -- lower taxes, government services and heritage savings -- not by rebates or cheques in the mail.

http://www.edmontonjournal.com/opinion1/stories/010201/5101023.html

-- Martin Thompson (mthom1927@aol.com), February 01, 2001


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