Electricity Transfer Tax Exemptions
The government is extending the exemption from the electricity transfer tax which will provide publicly-owned electricity utilities with relief from paying the tax when they sell electricity assets to other publicly owned electricity utilities in Ontario. The electricity transfer tax exemption will be extended by one year, until October 16, 2009.
The transfer tax exemption is designed to encourage consolidations among municipal electrical utilities (MEUs).
Transfer tax payable is equal to 33 per cent of the value of the municipality's/MEU's interest in property transferred to any other entity.
The transfer tax helps pay down the stranded debt from the old Ontario Hydro. As part of the restructuring of the electricity sector, municipalities were given ownership of their MEUs, which has provided them with a source of income and the potential to realize significant proceeds if they sell their MEUs. The transfer tax captures some of that gain to help pay down the stranded debt.
Since the first exemption period, which began in 1998, approximately 230 consolidations have occurred, resulting in efficiencies in operations, maintenance and administration costs.