Canadian electricity prices increasing faster than inflation, trends vary by province

inflation

Alberta electricity inflation Source: Alberta government photo.

Alberta electricity costs initially higher than rate of inflation but then fell; by 2016 costs were well below 2007 levels

Over the last decade, the electricity component of Canada’s consumer price index (CPI) increased faster than the price index for all consumer items, according to a government press release.

In other words, on average, electricity costs have increased faster than the rate of inflation. When broken down by province, Quebec’s electricity cost increases were below the rate of inflation throughout the entire decade.

Alberta’s costs initially rose above the overall rate of inflation but then fell so that by 2016 costs were well below what they were in 2007.

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By indexing the electricity component of the CPI to Jan. 2007, this analysis explores how rates have changed over time.

Absolute electricity rates vary widely across provinces. Factors such as the generation mix in each province, infrastructure and distribution costs, provincial government policies and programs, and taxes all affect the total electricity bills paid by consumers.

Alberta’s deregulated power market experienced the most volatility over the past decade.

Alberta’s wholesale prices, and its electricity component of the CPI, increased steeply from mid-2010 to early 2012 in response to demand increases and limited growth in supply.

In the subsequent five years, new supply was installed and natural gas prices declined, which led to wholesale prices decreasing and the electricity component of Alberta’s CPI falling considerably.

In Ontario, the electricity component of the CPI increased the most of all provinces, rising 66 per cent from Jan. 2007 to Dec. 2016.

Wholesale electricity prices generally declined, but other costs increased, namely the global adjustment established to cover the cost of providing adequate generating capacity and conservation programs in Ontario.

The average global adjustment charge on consumers’ bills increased more than 140 per cent from 2011 to 2016.

Starting in Jan. 2017, the electricity component of the CPI began decreasing as Ontario passed legislation to rebate the provincial portion of the harmonized sales tax on electricity bills.

Posted in: Canada

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