Electricity Pricing
An Introduction to Canadian Electricity Rates
Canadian Electricity Pricing - Introduction
•
Canada benefits from amongst the lowest rates of electricity worldwide. Global
statistics show that Canadians pay average electricity prices that are lower
(and in many cases substantially lower) than most other industrialized
countries of the world. These lower prices pay for a system that is as reliable
as any in the world, and that is much cleaner than most – with more than 75
per cent of our electricity supply coming from sources, like hydro and nuclear,
that emit virtually no greenhouse gases associated with climate change.
•
Canadian current electricity prices are influenced by a variety of driving factors
including; fuel sources, customer service, electricity supply, operation and
maintenance, finance, the electricity system’s upheaval and improvements,
regulatory requirements and energy efficiency.
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Glossary of Terms
Base Load
The minimum continuous load over a given period of time. Base load generating stations operate essentially at full output whenever possible.
Cogeneration
The simultaneous production of power and thermal energy. Such systems have great potential in industry, where a significant requirement for
electricity is coupled with a large demand for process steam.
Consumption:
Use of electrical energy, typically measured in kilowatt hours.
Conventional
Generation
Electricity that is produced at a generating station where the prime movers are driven by gases or steam produced by burning fossil fuels.
Consumer Price
Index
Measure of change in the price level of consumer goods and services purchased by households. The CPI is
a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Demand Charge
The component of a two-part price for electricity that is based on a customer's highest power demand reached in a specified period, usually a
month, regardless of the quantity of energy used (e.g., $2.00 per kilowatt per month). The other component of the two-part price is the energy
charge.
Dispatchable
Generation
Sources of electricity such as natural gas that can be dispatched at the request of power grid operators; that is, output can be increased or
decreased as demand or availability of other supply sources changes.
Distribution
A distribution system carries electricity from the transmission system and delivers it to consumers. Typically, the network would include
medium-voltage power lines, substations and pole-mounted transformers, low-voltage distribution wiring and electricity meters
Energy Charge
The component of a two-part price for electricity which is based on the amount of energy taken (e.g., 20 mills per kWh). The other component
of the price is the demand charge.
Feed – in – Tariff
(FIT)
A guaranteed rate program that provides stable prices through long-term contracts for energy generated using renewable resources
Generation
The process of converting thermal, mechanical, chemical or nuclear energy into electric energy.
Greenhouse Gas
(GHG)
Gases that contribute to the capture of heat in the Earth’s atmosphere. Carbon dioxide is the most prominent GHG, in addition to natural
sources it is released into the Earth’s atmosphere as a result of the burning of fossil fuels such as coal, oil or natural gas. Widely acknowledged
as contributing to climate change.
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Glossary of Terms
Grid
A network of electric power lines and connections.
Installed Capacity
The capacity measured at the output terminals of all the gene-rating units in a station, without deducting station service requirements.
Joule:
The international unit of energy. The energy produced by a power of one watt flowing for one second. The joule is a very small unit: there are
3.6 million joules in a kilowatt hour.
Load:
The total amount of electricity required to meet customer demand at any moment. The load equation fluctuates depending on electricity use
throughout any given day.
Peaking Capacity:
Generating capacity typically used only to meet the peak demand (highest demand) for electricity during the day; typically provided by hydro,
coal or natural gas generators.
Peak Demand:
The maximum power demand registered by a customer or a group of customers or a system in a stated period of time. The value may be the
maximum instantaneous load or more, usually the average load over a designated interval of time, such as one hour, and is normally stated in
kilowatt or megawatts.
Power Demand:
The maximum power demand registered by a customer or a group of customers or a system in a stated period of time. The value may be the
maximum instantaneous load or more, usually the average load over a designated interval of time, such as one hour, and is normally stated in
kilowatts or megawatts.
Power:
The rate of doing work. Electric power is measured in watts.
Power System:
The interconnected facilities of an electrical utility. A power system includes the generation, transmission, distribution, transformation, and
protective components necessary to provide service.
Regulated Price
Plan (RPP):
Rates (adjusted every six months) to ensure electricity pricing reflect the true cost of generating electricity. They provide stable and predictable
electricity prices for consumers.
Transmission:
The process of transporting electric energy in bulk on high
voltage lines from the generating facility to the local distribution company for delivery to retail customers.
Voltage:
The electrical force or potential that causes a current to flow in a circuit (just as pressure causes water to flow in a pipe). Voltage is measured
in volts (V) or kilovolts (kV). 1 kV = 1000 V.
Load or Demand
Management:
Measures undertaken to control the level of energy usage at a given time, by increasing or decreasing consumption or shifting consumption to
some other time period.
Watt:
The scientific unit of electric power; a rate of doing work at the rate of one joule per second. A typical light bulb is rated 25, 40, 60 or 100 watts.
A horse power is 746 watts.
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Consumer Price Index, 2005-2010
200
Consumer Price Index (CPI)
180
160
140
120
All Items
100
Electricity
Gas
80
Energy
60
40
20
0
2005.
01
2006.
01
2007.
01
2008.
01
2009.
01
2010.
01
Note: Energy - The special aggregate "energy" includes: electricity, natural gas, fuel oil, gasoline and fuel, parts and supplies
for recreational vehicles.
Statistics Canada, Consumer Price Index -Table 326-0021
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The Consumer Price Index (CPI) Comparison :
Energy’s Impact on the Economy
118
116
114
CPI all items
112
110
CPI all items
excluding
energy
108
106
104
102
Note: A consumer price index (CPI) measures changes in the price level of consumer goods and services purchased by households. The CPI is
a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.
Statistics Canada, Consumer Price Index -Table 326-0021
Page 6
7
Selected World Residential Electricity Prices, 2009
Italy
Hungary
Ireland
United Kingdom
Austria
Spain
Poland
France
Finland
Turkey
Switzerland
Canada
Mexico
United States
0
5
10
15
US cents/kWh
20
Source for Canada: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities, 2009
Source for Rest of World: International Energy Agency, Key World Energy Statistics 2009
25
Page 7
30
35
8
Selected World Industrial Electricity Prices, 2009
Italy
Ireland
Hungary
Portugal
United Kingdom
Turkey
Poland
Mexico
Finland
Switzerland
Spain
Canada
United States
France
0
5
10
15
20
25
US cents/kWh
Source for Canada: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities, 2009
Source for Rest of World: International Energy Agency, Key World Energy Statistics 2009
Page 8
30
35
Estimated Average Residential Electricity Price in Canada,
1998 – 2010 (2008 cents/kWh)
Electricity prices have increased by $1.01 /Kwh between 1998 and 2010
2008 Cents/kWh
11.0
10.5
10.0
9.77
9.85
9.67
9.40
9.5
9.58
9.66
2001
2002
9.79
10.34
10.44
2007
2008
10.82
10.78
2009
2010
9.94
9.58
9.0
8.5
1998
1999
2000
2003
2004
2005
2006
Source: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities, 1998 – 2010.
Notes: Based on 1,000 kWh monthly consumption
Average electricity price is an average of 11 major Canadian cities and may not represent an exact national average.
Prices have been adjusted from current cents/kWh to 2008 cents/kWh
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Average Residential Electricity Bill in Canada
(2006 – 2010)
$105.00
$95.06
$88.57
$90.00
$90.94
$72.17
$72.04
2009
2010
$75.00
$60.00
$45.00
$30.00
$15.00
$0.00
2006
2007
2008
Source: Hydro Quebec, Comparison of Electricity Prices in Major North American Cities, 1998 – 2009.
Notes: Based on 1,000 kWh monthly consumption
Average electricity price is an average of 11 major Canadian cities and may not represent an exact national average.
Prices have been adjusted from current cents/kWh to 2008 cents/kWh
Page 10
The Driving Factors of Electricity Pricing
Cost of
Transmission
Population
Density
Cost of
Distribution
Cost of
Production
Cost of Customer
Service
Page 11
Geography
The Cost of Electricity Across the Country
Electricity Price Regulation
• Provincial authorities regulate consumer electricity prices, generation,
transmission and distribution. In the provinces with municipal utilities
(Ontario and Alberta), the distribution portion of the rates paid by
consumers are set after receiving municipal approval.
The Variability of Electricity Prices across the country
• Prices are generally set by the provinces and territories so prices will
vary. The biggest factors contributing to pricing differences are
generation availability (i.e. bioenergy, fossil fuels, geothermal,
hydropower, solar and wind) and the cost to deliver electricity to
consumers.
Customer
Service
Costs
Page 12
Generation
Costs
Transmission
Costs
Distribution
Costs
The Price of
Electricity
The Components of Electricity Pricing
Electricity Supply
•
Generation: The provincial cost of electricity is primarily dependent on the volume, fuel
type and whether prices are market-based or regulated. These include water rental fees
and energy purchases
•
Distribution: Distribution costs are accumulated from the transmission of electricity
over local, low-voltage power lines to residential and other consumers. Distribution
costs are regulated by municipal, provincial or territorial regulatory boards.
•
Transmission: Costs incurred to transmit electricity on the high-voltage transmission
system, from the point of generation or purchase, to the electricity delivery point or the
low-voltage distribution system
•
O&M: The ongoing operational and maintenance costs associated with up keeping the
reliability of Canada’s electricity system. The cost of infrastructure investment and the
use of renewable energy sources to produce electricity.
Landscape
•
Geography and Population Density: Our natural resources vary by province and
influence the type of fuel source available to the Canadian population. The cost of
electricity varies between provinces and territories, due to the differences in these fuel
sources.
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The Driving Factors Behind our Electricity Pricing Structure
Taxes
• The provincial and federal taxes applicable to the provinces (i.e. GST, HST, provincial sales tax etc.)
influence the electricity customer rates.
Operating Costs
• Financial Costs
• Cost of Capital: the cost of a company's funds (both debt and equity). Firms need to acquire capital
from others to operate and grow. A company’s assets are financed by either debt or equity.
• Cost of Capital for Replacement, Supply and System Improvements: The costs associated with
upholding the electricity system. A portion of the customer electricity rate charge is attributed to the cost of
providing service and does not depend on the direct cost of energy consumption.
• Cost of Meeting Regulatory Requirements : The vast majority of electricity in Canada is generated by
public utilities whose rates are subject to government regulation. Our federal government has targets to
reduce Canada’s greenhouse gas emissions substantially in the coming years. The electricity industry has
invested in clean, renewable electricity generation, which accounts towards the current cost of electricity
prices.
• Cost of Energy Efficiency: In some cases, a portion of the customer electricity rate charge is used to
fund electricity efficiency programs. These dollars help to meet future energy needs in an environmentally
responsible way (i.e. there is a charge on the Nova Scotia Power bill for energy efficiency. Those funds are
then passed on to Efficiency Nova Scotia for the delivery of energy efficiency programs).
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The Driving Forces Behind Increasing
Electricity Rates
Canada’s electricity system is on the verge of an important transformation.
A growing population, economic recovery and growth, and evolving
expectations of how Canadians want their energy needs met will
necessitate fundamental changes to our electricity system. While significant
investment is required and will not come without a cost to the customer, the
benefits to investing in reliable, affordable and sustainable electricity far
outweigh the costs. Investing in electricity infrastructure will ensure a stable
supply of electricity to support Canada’s economic and demographic
growth. Growing our electricity supply responsibly, and investing in loweremitting electricity technologies, will mean a reduction in the sector’s
environmental footprint as well as economic and social benefits to our
communities.
Page 15
Canada’s Future Residential Electricity Needs
Reference: Graphics from BC Hydro: Lighting the Way. Estimates based on a
business as usual scenario. Stats Canada Population Projections: Table 052-0005
Page 16
Canadian Provincial Electric Utility Tribunals
Alberta
Alberta Utilities Commission
British Columbia
British Columbia Utilities Commission
Manitoba
Manitoba Public Utilities Board
New Brunswick
New Brunswick Energy and Utilities Board
Newfoundland and Labrador
Newfoundland & Labrador Board of Commissioners of Public Utilities
Northwest Territories
Northwest Territories Public Utilities Board
Nova Scotia
Nova Scotia Utility and Review Board
Ontario
Ontario Energy Board
Prince Edward Island
PEI- Island Regulatory and Appeals Commission
Quebec
Régie de l'énergie du Québec
Saskatchewan
Saskatchewan Rate Review Panel
Yukon
Yukon Utilities Board
Page 17
Canadian Provincial Electricity Structure
Alberta
The Alberta Utilities Commission (AUC) regulates the utilities sector, natural gas and electricity markets to protect social,
economic and environmental interests of Alberta where competitive market forces do not.
British Columbia
The BC Utilities Commission (BCUC) primary responsibility is the regulation of British Columbia’s natural gas and
electricity utilities.
Manitoba
Manitoba Hydro is the only entity that can retail power in Manitoba. Retail electricity rates are regulated by the Manitoba
Public Utilities Board.
New Brunswick
Almost all the residential and industrial power consumers in the province are serviced by New Brunswick (NB) Power, a
crown corporation that functions as a regulated monopoly. The New Brunswick System Operator (NBSO) ensures the
reliability of the electric system and facilitate the development and operation of a competitive market in the province
Newfoundland and
Labrador
Newfoundland and Labrador Hydro (“NL Hydro”), a Crown corporation, owns and operates most of the generation and
transmission facilities in this province. Newfoundland Power Inc., a Fortis company, owns and operates some
transmission and generation, and distributes energy to most residential and commercial customers in the province. The
Newfoundland and Labrador Board of Commissioners of Public Utilities regulates the electrical utilities.
Nova Scotia
The Nova Scotia Power System Operator (NSPSO) is responsible for the administration of the NS Market Rules and the
Nova Scotia open access transmission tariffs (OATT).
Ontario
In Ontario, electricity prices are set by the Ontario Energy Board through the regulated price plan.
Prince Edward
Island
Most of PEI’s electricity is imported from New Brunswick. Approximately 90% of PEI’s customers are serviced by the fully
integrated, regulated, and privately owned Maritime Electric (Maritime) which is a wholly owned subsidiary of Fortis. The
remainder of electricity customers are serviced by the municipally owned utility Summerside Electric. Both Maritime and
Summerside Electric are regulated by the all purpose PEI Regulatory and Appeals Commission.
Quebec
Transmission and distribution are regulated by the Regie de l’energie, the sector regulator.
Saskatchewan
SaskPower, a provincial crown corporation, is the owner of Saskatchewan’s generation, transmission and distribution
facilities. SaskPower implemented an Open Access Transmission Tariff (“OATT”) in 2001, which opened the Province’s
electricity system to wholesale access
Canada : 2011 Surveyed Household Expenditures*
3% 2%
3%
Food expenditures
14%
7%
Shelter (excluding electricity)
Electricity
6%
Household Operations & Furnishing
Clothing and accessories
25%
Transportation
Health Care & Personal Care
21%
Recreation
Education & Reading Materials
2%
6%
11%
Tobacco products and alcoholic beverages
Other
Statistics Canada, CANSIM 203-0021, Survey of household spending , retrieved April 10, 2013
*Total current consumption excluding income taxes, personal insurance payments and pension contributions,
gifts of money, alimony and contribution to charity
Page 19
Canadian Residential Electricity Demand
(1998-2008)
180.000
160.000
Terawatt hours (TWh)
140.000
120.000
100.000
80.000
60.000
40.000
20.000
0.000
1998
1999
2000
2001
2002
2003
2004
Resedential Electricity Demand (cents)
Page 20
2005
2006
2007
2008
Canadian Residential Electricity Pricing vs.
Electricity Demand (1998-2008)
Residential Electricity Demand
(petawatthours)
0.170
0.165
0.160
0.155
0.150
0.145
0.140
0.135
0.130
The chart indicates that Electricity prices have increased as demand has increased.
0.125
0.120
0.075
0.080
0.085
0.090
0.095
Residential Electricity Pricing (cents)
Page 21
0.100
0.105
The Percentage Change in Household Expenditures 2000-2009
(Cumulative Percentage Change)
200%
Note: The price increase for the residential electricity sector has increased 28%
between 1999 and 2009, the lowest amongst property taxes, water and
internet services for principle accommodation.
150%
100%
50%
0%
2000
2001
Property Taxes
22
2002
2003
Electricity
2004
2005
2006
Water
Source: Statistics Canada, Survey of Household Spending, 2009
2007
2008
2009
Internet Services
The Percentage Change in Household Expenditures 2002-2009
(Cumulative Percentage Change)
250%
200%
Note: The price increase for the residential
electricity sector has increased 13% between
2001 and 2009, the lowest amongst housing
(87%), natural gas (78%) and gasoline (38%).
150%
100%
50%
0%
2002
2003
2004
Average Cost of House
Average price of Natural Gas
23
2005
2006
2007
2008
Average Electricity Rate
Average price of Gasoline
Note: The change refers to a unit of electricity (kwh), a unit of natural
gas and a litre of gasoline.
2009
Cumulative Percentage Change in Household Items
Price Per Unit 1998-2010
(Cumulative Percentage Change)
80%
Notes: Ground Beef - 72% increase , Bread - 69% increase, Milk - 46% increase, Butter - 46% increase, Eggs - 41% increase,
Coffee - 26% increase, Toothpaste - 39% increase, Electricity rate - 10% increase
60%
40%
20%
0%
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
-20%
-40%
Ground Beef
Milk
Butter
Eggs
Bread
Coffee
Toothpaste
Electricity
Notes: Units as followed: Ground Beef - 1kg, Partly Skimmed Milk - 1Litre, Butter -454 grams, Eggs - 1 Dozen, Bread - 675 grams,
Roasted Coffee - 300 grams, Toothpaste - 100 millilitres, Electricity - 1 Kwh ( kilowatt-hour)
24
Source: Statistics Canada, Survey of Household Spending, 2009
Ottawa Daily Spend Snapshot – Electricity Pricing
Comparison 2011
$16.00
$14.00
$15.00
$12.00
$10.00
$8.00
$6.00
$4.00
$2.00
$3.54
$3.13
$2.00
$1.89
$0.00
Parking Rate (Downtown Ottawa)
OC Transpo Bus Fare
Newspaper - The Globe and Mail
Rogers Cable
25
$1.51
$1.20
Daily Electricity Rate (Ottawa Area)
Starbucks Medium Coffee
Tim Hortons Medium Coffee
Note: Tim Hortin’s medium coffee (including tax), OC Transpo Bus Fare (to and from work), Newspaper
(Globe and Mail from news stand- including tax), Cost of Electricity (Hydro Ottawa – OEB calculator using
tiered pricing and 760 Kwh per month)
In Ottawa,
power all this
and more for
only $3.54
per day!
Percentage Change Slides – Definitions and
Explanations
Percentage Change in Household Expenditures
(Slides 1, 2 and 3)
• The percentage change amongst the various household expenditures
were based on a 1999 baseline. The slides explain the changes in
household variables from year to year based on an average
expenditure Statistics Canada survey.
Percentage Change in Household Items per Unit
(Slide 4)
• The percentage change amongst the various household items per unit
is based on a 1997 baseline. The slide describes the change in the
average cost on a per unit basis.
27
Canadian Electricity Pricing - Summary
•
Electricity makes up about 3 per cent of the average household
expenditure in Canada. Yet our economy and our lifestyles are
increasingly dependent on the reliable provision of electricity. While
there are upward pressures on electricity prices as new infrastructure is
built, the average cost of electricity has increased at a much slower rate
than for other services such as telecom, cable, property taxes and
water bills.
•
There is upward pressure on electricity prices across Canada as
electricity companies begin to make necessary investments in new
infrastructure — to ensure our power system remains highly reliable
and becomes even cleaner.
Page 28