The Fraser Institute says low electricity rates in Quebec are affecting equalization payments to other recipient provinces by more than $3 billion.
Newfoundland and Labrador is considered a “have” province under the equalization formula and does not receive payments under the program – something the provincial government has been fighting to change for some time.
A court challenge launched by the provincial government in 2024 continues to wind its way through the courts.
Quebecers currently enjoy some of the lowest electricity rates in the country and because Quebec is considered a “have not” province under the federal government’s equalization program, increasing those rates would mean the province would lose out on equalization payments.
The think tank’s study found that under current equalization rules, a four cent increase in electricity prices in Quebec would increase equalization payments to other provinces by about $3.64 billion.
That’s because the formula requires equalization payments to continue growing over time, even when fiscal capacity gaps shrink. As a result says the Fraser Institute, Quebec’s revenues redistribute payments among recipient provinces instead of lowering total expenditures.
It says if the continuous-growth feature were removed, a four cent increase in Quebec electricity prices would reduce the total equalization envelope by roughly $3.9 billion – thereby lowering costs for federal taxpayers.
