What is cross-subsidization?
Cross-subsidization occurs when the rates paid by one class of customers, such as business customers, are higher than the energy distribution costs, producing an advantage for another class of customers, such as residential consumers.
For a very long time, CFIB has been speaking out against cross-subsidization between various classes of customers as practiced by Hydro-Québec or Gaz Métro – to the detriment of small businesses.
A problem that hits SMEs especially hard
Hydro-Québec acknowledges the situation and is applying a cross-subsidization index to measure this inequity between its various customer classes:
- An index of 100 represents an equitable rate, and indicates that the client is paying its fair share based on the cost of delivering energy to that client.
- In 2016, most small businesses pay at Rate G or Rate M, which sit at 119 and 128 in the index respectively. In other words, these customers are paying, respectively, 19% and 28% more than if billing were equitable.
Unsurprisingly, a majority of our members have spoken out in favour of adjusting electricity rates. What they want is to pay a fair price for the services they receive. Below are the results of a member survey on the issue of cross-subsidization: