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Impact of Increases in Electricity Rates on Low and Non Low Income Households in Manitoba

Authors: Drs. Harvey Stevens and Wayne Simpson (for CAC Manitoba).

This paper addresses the impact of proposed electricity rate increases (4% per year over a 17 year period from 2015 to 2032 according to the Need For and Alternatives to Report (NFAT ch.11, pp.7-11) on the low and non low income households in Manitoba. Using 10 years of annual data from Statistics Canada‚Äôs Survey of Household Spending (SHS) and supplementary data provided by Manitoba Hydro on electricity rates and consumption patterns, the paper addresses the following key questions:

  1. How do the spending patterns of low income households compare to those of the near and non low income household?
  2. How have real, inflation-adjusted electricity rates varied between 2000 and 2013 in Manitoba?
  3. What impact have these variations in electricity rates had on the consumption patterns of Manitoba households?
  4. In light of these impacts, what can we expect to be the effect of the proposed increases in electricity rates on low and near low income households in Manitoba?

This paper reveals that,

  1. Low income households spend more of their budget on basic necessities like electricity, food, shelter, household operations and health care than non low income households. Also, on average, they run a deficit which is 13 per cent of their total consumption. By comparison, near low income households run a slight surplus of 3 per cent of total consumption while the non low income household has a surplus of 26 per cent of their total consumption budget.
  2. In the period covered by the analysis (2009 to 2013), the real, inflation-adjusted (2009$) cost of electricity first fell from $6.80 per 100 kWh in 2000 to $6.42 in 2003, fluctuated up and down between 2003 and 2007 and then rose to $6.81 in 2009. The change from high to low to high rates ranged from -5.1 to +5.9 per cent. By 2013, it stood at $7.08 per 100 kWh.
  3. This variation in the real price of electricity resulted in shifts in how low and non low income households allocated their spending and in their overall household balance. Higher electricity rates resulted in low income households spending more on electricity but less on food, shelter, clothing, transportation, reading and education and a decline in the overall household balance. By comparison, the near low income households overall balance declined even more while that of the non low income household improved.
  4. Manitoba Hydro projects a 2% (real) increase in electricity prices (NFAT, Appendix D, p. 55) over the period of 2015 to 2032. This will lead to small but statistically significant annual changes in the consumption patterns of low and near low income households. Moreover, a sustained 17 year annual real 2 per cent increase in electricity rates will lead to a worsening of the deficit already experienced by low income households and the movement of many near low income households into a deficit position.

 

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