Hydro ratepayers across the province could be on the hook for $9 million if the City of Winnipeg wins a silly lawsuit against Manitoba Hydro.

Although the law may technically be on the city’s side, it’s a bad law, and, moreover, City Hall should realize there is only one taxpayer and drop the matter all together.

Central to the city’s argument is provincial legislation which allows the City of Winnipeg to charge a tax on hydro bills.

According to the law, the city’s 2.5% electricity tax should have been added on top of the GST, not just on top of the electricity charges over the past 20 years.

Sound complicated? Consider this example.

Right now if someone in Winnipeg uses $100 worth of electricity, Manitoba Hydro will add the city’s 2.5% tax ($2.50), the province’s 7% PST ($7.00) and the federal government’s 5% GST ($5.00) together for a total bill of $114.50.

Clearly, each tax is applied against the $100 for the service.

However, the city discovered the law technically says the GST and the cost for electricity use should be combined together before the city’s 2.5% tax is applied.

Thus, the $100 in charges and $5 of GST would be combined for $105 and then taxed with the city’s 2.5% tax. Therefore the city’s revenue would rise to $2.63 — a whopping 13 cents higher.

The difference between how the tax has been applied and how the city says it should have been applied adds up over the years.

According to the city, Manitoba Hydro (ultimately ratepayers) owes them $9 million.

It’s a ludicrous claim, especially when one thinks back to the days of Winnipeg Hydro. Winnipeg Hydro of course was the utility that used to service a large portion of Winnipeg with electricity before the city sold it to Manitoba Hydro in 2002.

So how did the city calculate this tax when it owned Winnipeg Hydro? You guessed it — they didn’t even do it the way they say it should be charged.

Charging taxes on top of other taxes is simply poor public policy, one that the Canadian Taxpayers Federation regularly speaks out against.

In fact, for years we have spoken out against the federal government applying the GST on top of other gas excise taxes every time you fill up at the pumps.

Instead of discovering the mistake and going after Hydro for the money, someone at City Hall should have picked up the phone and advised the province to correct the legislation.

After all, it’s not like Hydro has $9 million just lying around, they’ll have to raise electricity rates on the same ratepayers city hall is supposed to be looking out for.

Rumours are flying that the province might simply change the legislation retroactively and cut the city’s lawsuit off at the knees.

A big two thumbs up if they do.

On this issue, someone in government needs to be looking out for taxpayers.