Market Snapshot: Canadian electricity prices generally increasing faster than inflation, but trends vary among provinces

Release date: 2017-05-17

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

By indexing the electricity component of the CPI to January 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.

Source and Description

Source: Statistics Canada

Description: This line graph shows the electricity component of the CPI for Canada, Quebec, Ontario, Alberta, and a combination of other provinces and territories from January 2007 to March 2017. The combination of other provinces and territories includes B.C., Newfoundland and Labrador, Prince Edward Island, Nova Scotia, New Brunswick, Manitoba, Saskatchewan, Yukon and Northwest Territories; data for Nunavut was not available. The graph also shows the all-item CPI for Canada. All lines are indexed to equal 100 in January 2007. From January 2007 to March 2017, the all-item index increased steadily from 100 to 119. At the same time, the Canadian electricity index increased from 100 to 132. Quebec’s electricity index increased from 100 to 113. Ontario dropped from 100 in January 2007 to 95 in May 2008, then rose steeply to 167 in May 2016 before finishing at 154 in March 2017. Alberta increased to 122 in January 2009, dropped to 81 in October 2009, increased again to a high of 162 in January 2012, and then dropped to a range between 70 and 90 in 2016 and 2017. The Alberta index experiences monthly spikes, whereas the other indices are smoother. The combined series for other provinces and territories closely followed the national electricity index, and in March 2017 was 137.

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% from January 2007 to December 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% from 2011 to 2016. Starting in January 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.

 

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