Public Utility Finance and Economic Waste

Abstract

This paper explores the ways in which the low-cost financing of publicly owned electric utilities in Canada has resulted in both income transfers and the creation of economic waste. Economic waste arising from the low financial cost of public funds is created through the effect that subsidized capital has on the choice of technology; through the direct and indirect export of electricity sold at prices below its cost; and through the effect that low electricity prices have by inducing Canadians to overconsume electricity. Expressions are developed that enable the estimation of the magnitudes of these various economic losses. The estimated losses are very large and amount to an annual loss of approximately one percent of Canada's GNP. (This abstract was borrowed from another version of this item.)