February 22, 2022

Weekly EconMinute—Household Electricity Prices

In this week’s EconMinute, we’re talking about Electricity Prices.

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Canada’s inflation rate hit a new 30-year high in January, reaching 5.1%. Here in Alberta, the story isn’t much different, as consumer prices are 4.8% higher than they were 12 months ago.

But one area where Albertans are certainly noticing the pinch is when their utility bills come in. Consumer prices for home electricity in Alberta are 43% higher than they were a year ago; and are nearly 60% higher than they were last June. Meanwhile, the year-over-year increase in electricity prices for Canada as a whole came in at a comparatively modest 9%.

Here are some of the reasons why Albertans are paying so much to keep the lights on:

  • December and much of January were cold. Electricity use soared as a result, driving up prices through demand-side pressures.
  • Unlike most other provinces, Alberta’s electricity is primarily generated using natural gas; and gas prices have soared since mid-2020. Higher input costs translate into more expensive electricity in Alberta’s deregulated electricity market.
  • Alberta is phasing out coal-fired electricity generation. While this policy will significantly reduce GHG emissions in the sector, coal is plentiful and cheap; the switch to gas is driving prices higher.
  • Because Alberta relies on natural gas (and, until next year, coal) to generate electricity, our power bills include payments under the federal carbon tax, which will rise over time. The good news for households is that for eligible Albertans, this cost will be rebated through personal income tax returns.

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