Carbon Tax on Natural Gas is Premature
The Problem with Poor Planning
The Alberta NDP passed the Climate Leadership Implementation Act into law last June. But the related Regulations upon which the legislation is to be based for Natural Gas have not yet been approved by the Premier’s inner circle. Most likely, the Act with Rules established by the Utility Commission (that define the implementation procedures) will not be circulated until near the end of October or into November. Some of the details of the new carbon tax program still are not clearly understood by all the players in the game. This is a problem.
Window of Hope
Given that the New Carbon Tax Regulations on Natural Gas have not yet been signed-off by the Premier, it's the perfect time to put the implementation of the new tax on hold for a few months, possibly the summer of 2017. This will give our Government and the regulators time to make sure the tax plan and implementation protocols make good sense. We need the details documented, methods determined for collection, and exceptions related to the tax on gas well designed, billing systems tested, and all the details and costs explained to Albertans.
As in any business, “processes, controls and attention to details” are mandatory in good governance of a solid business. Running a government should be no different. As one of Alberta’s Energy Retailers, we are living with the rush to implement this new tax. When we watch the process the Government is following, it is a classic example of the attempt to micro manage the process by politicians. We understand your objectives, but this approach lacks the defined details for industry participants to interpret requirements for how to collect and remit the money to the Government. This is a serious problem which needs to be understood by our MLAs. But are they listening? (More on this in Part Four of this Blog.)
The New Tax on Natural Gas
Once the Premier signs off on “The Govt Regs”, they need to be converted to “Processing Rules” by the AUC and provided to the Gas Distributors plus Energy Retailers (Competitive and Regulated) in Alberta to implement the necessary systems, processes and controls. Effectively, the retailers become the “tax collector” on behalf of the Government. The Carbon Tax will be an extra charge to the consumers monthly invoice.
The devil always is in the detail and we know that the Treasury Board Administration (TBA) still is trying to figure out some of the details. For example:
- who pays the tax if the consumer defaults on their monthly utility invoice?
- how will the rebate program work?
- will the TBA compensate the retailer for services rendered, as the "tax collector"?
With this said, we ask the Government to recognize that given the state of the economy, NSF rates for retailers like our company are now running 250% increase year over year. Many consumers don't need higher taxes on Natural Gas which will kick into gear in the midst of winter. We can expect that more and more customers will default on their utility invoice payments. These are issues that cannot be simply ignored.
Minister Ceci, I am sure, recognizes that default in payments is a situation that will arise. And, yes, we know that the Treasury Board has indicated that a recovery program will be established - albeit not until early in 2017. The collection and exception reporting process should be implemented at the same time. There is a rush to collect the new tax without all the terms and conditions defined. This is a problem. You are running out of time.
As well, our First Nations people are exempt from the tax, but how do you expect the energy retailers in Alberta to know who has exempt status? Here we are a couple of months away from implantation of the tax and the Government still hasn’t published a definitive list of the consumers who are exempt. This has not been thought through. Joe, if you don't first address the details of things like this, then the implementation of the new tax will turn into a disaster.
Suggestion: Work out all the details prior to implementing the new tax scheme.
This is what the convoluted idea looks like: the distributor (aka ATCO or Alta Gas) will bill the retailer for the tax based on the natural gas delivered to the residential and small business consumer based on the meter read. This, in turn, will be invoiced to the customer – collected and paid by the retailer to the distributor and then remitted to the Government. Yet, Regulations have yet to be published...Rules have yet to be defined...and retailers still need to code their billing engines. Time is running out, as there are only 100 days left to do all the work. As a small independent retailer we can make this work within the time frame, but others will be pulling out their hair.
Surprise! The country with one of the worst records for carbon emissions will profit from Alberta's new Carbon Tax
While this is not our concern, it should be of concern to our Government. Please try to remember, once the taxation business processing rules are finalized by Treasury, the AUC needs to implement them. Enmax, ATCO and Direct Energy (three of the major retailers and Big Utilities in Alberta) need to coordinate the needed changes to their systems with their IT partners over in India which will add another kink in the process. (Madam Premier: are you aware that three of the provinces largest utilities exported critical key operations out of the province? )
Implementation of any major program, like your new tax plan on Natural Gas, needs time to define rules, document, develop, test and implement. It's especially true when it involves working with 3rd party outsourced services located offshore.
Implementation of the tax plan to a large part will fall on the shoulders of TATA (on behalf of Enmax), WIPRO (on behalf of ATCO) and HCL (on behalf of ATCO). It's ironical that the country with one of the worst records for carbon emissions is going to profit by helping our 3 Big Utilities process the software billing code behind Alberta's new Carbon Tax plan.
Regulated Rates Cost Albertans Even More
Ok. Let's add a little insult to this whole process. We can expect the Regulated Providers will apply to the AUC for a rider to be added to the customer’s monthly bill to recover the cost of administration, systems design, testing and implementation. This could be in the millions. For 60% of consumers still stuck on the government’s Regulated Rate (RRO), their monthly utility bill will get a little more expensive.
These are just a few more reasons why the Premier, Deputy Premier, Minister of Energy and Minister of Finance should seriously consider delaying the implementation of the new tax plan. Use the time wisely: work out the details and ensure consumers are aware of all the costs prior to implementation.
With so many economic indicators in the red, Albertans who already are suffering don't need additional fees and taxes on their shoulders in the middle of the winter months. Not this winter.
As your correspondent wrote in this space on Friday, it is incumbent on all of us to work together, put our best foot forward, and work together to help solve the problems. We need to be smart in what we do because we're all in this together.
What Can Albertans Do? Contact Your MLA. Ask Them To Do the Right Thing.
- take a moderate approach to the Climate Change issue
- stop fighting with the generators
- focus on cutting Government spending and creating jobs
- support the forward thinking initiatives that municipalities like Calgary and Edmonton are proposing