Between January, 2020, and the end of last year, residential power costs rose more than 40 per cent in Alberta. Power transmission lines are seen with the Rocky Mountains near Pincher Creek, Alta., on June 6, 2024.Jeff McIntosh/The Canadian Press
Albertans experienced far and away the most rapid increases in their electricity bills so far this decade, according to an analysis by The Globe and Mail.
Between January, 2020, and the end of last year, residential power costs rose more than 40 per cent in Alberta. That’s approaching double the increase in New Brunswick, which suffered the second-highest increase, and compares with a national average of 14.2 per cent.
The Globe’s analysis is based on Statistics Canada’s Consumer Price Index, which measures changes in consumer prices for common household items. It includes provincial indexes for electricity, which are measured monthly. (The index does not measure absolute prices.)
Typically, Canadians’ power bills have three components. The first is the cost of generating electricity, charged on a per-kilowatt-hour basis. (In some provinces, rates increase above certain use thresholds.) These rates vary widely by province and get the most attention.
The second component is the cost of moving power from generating plants to customers’ homes. Transmission charges may or may not include adjustments accounting for inevitable losses as electricity moves along power lines.
Finally, there’s also a fixed cost, or minimum customer charge, intended to gradually recover large capital costs such as those associated with major expansions of transmission infrastructure or new power plants.
In most provinces, monolithic utilities such as Hydro-Québec dominate electricity transmission and sometimes generation as well. As a check on this monopoly power, they must plead their case for rate increases before a provincial regulator. Typically, that regulator will also hear from parties charged with representing consumer’s interests, along with major commercial and industrial customers. The result is often a series of steady rate increases, like the ones experienced in Manitoba over many decades.
Alberta chose a different path.
Roughly a quarter of a century ago, it sought to establish a competitive marketplace by deregulating its electricity sector. The rationale: Instead of tasking bureaucrats with keeping prices in check, competition would compel power producers to become more efficient. Eliminating regulatory costs would push prices down; meanwhile, the newly unencumbered power sector could freely adopt new technologies, such as wind turbines. Consumers, able to choose among electricity retailers, would enjoy improved customer service.
“Rates have gone down in virtually every jurisdiction that has introduced retail competition in electricity markets,” claimed a government brochure from 2000 promoting deregulation.
With the benefit of hindsight, it’s clear this didn’t happen. The province’s CPI electricity index has increased more than any other province since 2002. What’s more, Alberta’s power bills have been far more volatile.
The reasons for Alberta’s surging electricity prices over the last five years are complex and manifold.
Some analysts say an important factor was the expiry in 2020 of 20-year power purchase agreements, or PPAs, which are contracts specifying the supply of electricity at fixed, agreed prices.
Joel MacDonald, an economist at Energyrates.ca who specializes in electricity rates, explained that those agreements were managed by the Alberta Electricity System Operator. “They were bidding in the power at essentially a much lower price with that, because they had control of those assets,” he said.
Those power purchase agreements were managed by the Balancing Pool, a non-profit corporation established to manage the deregulation process.
”They were bidding in the power at essentially a much lower price with that, because they had control of those assets,” said Joel MacDonald, an economist at Energyrates.ca who specializes in electricity rates.
“Once those PPAs expired, control of those assets went back to the generators, and they could offer their electricity at whichever price they wanted.”
Moreover, deregulation did not blow electricity generation open to competition: ownership of power plants remained concentrated in the hands of a small number of companies.
Deregulation isn’t the only culprit. Alberta’s electricity sector is powered mainly by natural gas (and previously, coal); market prices for such commodities can often swing considerably, contributing to volatility. Provinces endowed with abundant hydroelectric resources don’t face this challenge.
The transition from coal to natural gas was also a factor. In 2023, Mr. MacDonald said, several coal plants were offline while being converted to natural gas, creating a temporary shortfall in generation capacity. (With the transition complete, he added, this is no longer a factor.) Meanwhile, Alberta has also experienced rising demand owing to a changing climate: extremely hot summers led to increased adoption of air conditioning.
“This last decade, Alberta has reached record-high electricity demand in both the summer and winter periods, which is a new phenomenon.”
Wildly gyrating power bills can produce political headaches. Ontario pursued deregulation around the same time Alberta did but reversed course in 2002 in efforts to shield consumers from the resulting price swings. During the last decade, successive Ontario governments have heavily subsidized electricity bills.
Alberta also balked during its recent period of soaring rates, tacking on $500 in rebates to power bills to cushion the blow. This year, the government of Premier Danielle Smith went further, offering a new fixed rate to Albertans shaken by the recent volatility.
Albertans can still purchase their power from unregulated energy retailers – and many do. But if they don’t or can’t, they’re automatically enrolled in the “rate of last resort.” This year, the Alberta government fixed that rate for two years, effective Jan. 1, and set a maximum increase of 10 per cent for the next two-year period. Under a settlement agreement recently accepted by the Alberta Utilities Commission, the current rate of last resort is more than 12 cents a kilowatt-hour.
Alberta’s deregulated market has another feature you won’t see often elsewhere in Canada: electricity prices can decrease sharply.
“The seven-day average on electricity [for] the last week is 1.1 cents a kilowatt-hour,” Mr. MacDonald said on Thursday. “So if you used this week as your benchmark, you would probably see an 80-per-cent reduction from last year.”
Regulated provinces, meanwhile, are not immune to significant price hikes.
Recently, New Brunswick Power sought back-to-back rate increases averaging more than 9 per cent a year for its 2024/25 and 2025/26 fiscal years. The utility said rates had been “artificially low” for more than a decade, adding that it carries a substantial debt burden on its balance sheet. Moreover, expenses from its unreliable Point Lepreau nuclear power plant continue to pile up.
Late last year, the New Brunswick Energy and Utilities Board granted most of the increases NB Power had sought. NB Power currently charges urban customers nearly $27 a month in service charges, plus 13.84 cents a kilowatt-hour.
Among the provinces with the lowest rate increases since 2020, the top performer was British Columbia, followed by Manitoba and Quebec. They have something noteworthy in common: All of them generate the majority of their electricity using hydro dams, the majority of which were built and paid for decades ago. Residents of these provinces also enjoy the lowest rates in absolute terms.
Editor’s note: Alberta’s Balancing Pool controlled the power purchase agreements that expired in 2020. Incorrect information appeared in a previous version of this story.