Ontario green tax illegal, study says

Ontario energy levy faces tax debate as some label it an indirect tax under the Green Energy Act, funding conservation and renewable energy through hydro rates, Ontario Energy Board assessments, and utility surcharges.

A $53.7 million fee imposed on electricity users to support green energy programs is not just expensive, its illegal, says a study prepared for the C.D. Howe Institute.

Thats because the fee is really a tax, says the study. And taxes must be approved by the Legislature.

Almost any economist would say its an indirect tax, says Finn Poschmann of C.D. Howe, who coauthored the study with University of Toronto law professor Benjamin Alarie.

The levy was imposed ahead of the provincial budget it will cost a typical customer about $4 a year.

The money is earmarked for conservation and renewable energy programs, including home energy audits and a program that helps industrial and commercial firms switch to solar power.

The regulation creating the new fee directs the Ontario Energy Board to assess a levy on local utilities like Toronto Hydro, and on the Independent Electricity System Operator, in proportion to the amount of power they distribute.

The levy could be called a fee used to recover the costs of delivering renewable energy, the authors acknowledge.

On the other hand, as there is nothing about the fee that closely connects it to the cost of electricity that ratepayers consume, there is little to distinguish it from any other provincial taxing and spending program, they argue.

The advantage of raising money through regulation is that it is quiet, and achieved with a minimum of debate, they say.

Yet it is against the public interest for the government to impose taxation through regulation... Taxation through regulation is taxation without representation.

But taxpayers could challenge the fee in its current format, said Poschmann. There is precedent for such actions, he noted – although theres also precedent for legislatures retroactively approving the previously illegal taxes, and keeping the money they raised.

Energy minister Brad Duguid rejected the analysis, saying the Green Energy Act gives the governments authority for the province to create conservation programs and recover the costs through hydro rates.

Its an important investment, he added. Conservation programs funded by the new fee gives consumers tools to lower their overall energy bill, he argued.

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