Electricity Pricing in Canada
Canada’s electric utility industry began as a loosely knit group of investor-owned operations spread across the country. As mass production and massive urbanization shaped 20th century Canada, the economics of electricity supply meant the gradual centralization of portions of the industry under government auspices, whether municipally, regionally or provincially. By mid-century, the provincially owned electric utilities that became known as Hydro-Quebec and Ontario Hydro were among the largest in the world.
Movement toward competition and industry restructuring has taken place since the 1990s in Alberta and Ontario while the trend also continues throughout the United States. However, the majority of Canadian utilities are still owned and regulated by the provinces and have limited retail competition.
How Canadian markets work
The Canadian electricity system plays a key role in the North American electricity grid although its electricity markets vary by province or region. In 2006, Canada generated more than 585,000 gigawatt hours of electricity. Six provinces, British Columbia, Saskatchewan, Manitoba, Ontario, Quebec and New Brunswick, exported more than 41,300 gigawatt hours of electricity to the United States, and imported more than 24,000 gigawatt hours.
The provinces and territories have jurisdiction over the three components of energy pricing – generation, transmission and distribution of electricity – within their boundaries, including restructuring initiatives and electricity prices. The federal government has jurisdiction over electricity exports, international and designated inter-provincial power lines, and nuclear safety.
While Canada’s electrical generation industry is dominated by hydroelectricity, there are considerable regional variations. In most provinces generation is primarily hydro or fossil fuel-fired thermal with the notable exception of Ontario where there is a more diverse mix, which includes nuclear power.
Hydroelectricity production is concentrated in British Columbia, Manitoba, Ontario, Quebec and Newfoundland and Labrador. Alberta, Saskatchewan, Ontario, the Maritime Provinces and the Territories largely rely on thermal-based generation, using coal, natural gas or oil-fired generation. Nuclear generation is limited to Ontario, Quebec and New Brunswick. Natural gas-fired generation, as a stand-alone facility or part of a cogeneration process, is also becoming more common in most regions.
Alternative sources of generation capacity are being increasingly used, although they still make only about one per cent of total generation in Canada. With improving project economics and government production incentives, alternative generation technologies such as wind are becoming increasingly attractive. Some provinces have seen wind compete with higher cost generation.
The Canadian electricity industry still largely remains in public ownership. There are however a few exceptions. In Alberta, the industry is now increasingly privately owned, except for EPCOR, which is owned by the City of Edmonton. Nova Scotia Power is a wholly owned subsidiary of Emera, an investor-owned company.
In other provinces, parts of the industry are now investor-owned but with provincial crown corporations still dominating the generation and transmission services. Municipal ownership is also prominent. For example, Toronto Hydro and Hydro Ottawa are municipally owned.