Quebec is incentivized to keep its hydroelectricity rates artificially low in order to keep receiving the largest share of Canada’s equalization payments, according to a new study from the Fraser Institute.
Even a small hike in Quebec electricity prices would lead to billions more in provincial revenue, according to the report, released May 7. However, much of the gain would be offset by a sharp reduction in equalization payments.
“The data presented here show that Quebec faces strong incentives to retain low hydroelectricity rates because the financial cost of maintaining these inefficient rates is largely borne by federal taxpayers,” says the report….