High electricity rates handicap Canadian businesses: report

Canadian businesses pay almost a third more for electricity compared to their counterparts in the U.S., according to a new study by the Fraser Institute.

The study, Paying More for Power, examines residential, commercial and industrial electricity rates in 119 Canadian and American cities and finds that electricity rates for Canadian commercial customers are 19 per cent higher than those in the U.S. (excluding Hawaii), with small industrial customers facing rates 30 per cent higher. Of the 119 cities examined, 12 were Canadian.

“These higher electricity rates put Canadian businesses at a competitive disadvantage and deter future economic development,” said Kenneth Green, study co-author and Fraser Institute senior director of energy and natural resources. “This is particularly troubling for a province such as Ontario, which has a significant manufacturing sector, and Alberta, which relies on resource extraction.”

The price disparity is due in part to the shift in many provinces away from coal-fired electric generation capacity and a failure to fully embrace natural gas-fired capacity, especially in gas-rich provinces such as Alberta and Saskatchewan. The Canadian cities with the lowest electricity rates are found in provinces with extensive hydro-electric generation capacity: Quebec, Manitoba and British Columbia.

The study calculates an average rate for commercial customers of 11.55 cents per kilowatt hour (kWh). Of the 12 Canadian cities included in the study, only four – Winnipeg, Montreal, Vancouver and Regina – offer rates below the average. The average rate for small industrial customers is 8.92 cents per kWh. Again, only Winnipeg, Vancouver and Montreal offer rates below the average.

In comparison, Edmonton, Calgary, Charlottetown and Halifax have the highest rates for both commercial and small industrial customers, ranging between 13.25 cents and 16.93 cents per kWh for commercial customers, and 12.44 cents and 17.92 cents per kWh for small industrial customers.

“The shift away from inexpensive coal-fired generation capacity in Ontario, and the failure of resource-rich provinces Alberta and Saskatchewan and gas-poor provinces such as Ontario to fully embrace natural gas-fired capacity, is penalizing commercial and industrial electricity consumers,” Green said.

The study suggests further development of hydro-electric facilities, investment in natural gas generation capacity, more clarity in regulations around air pollution and greenhouse gas emissions, and taking another look at subsidies for renewable energy projects to combat the higher prices in Canada.

“Although the environment should be a key consideration in investment decisions about generation capacity, policy makers should not place unnecessary burdens on taxpayers and electricity consumers by propping up expensive electric-generation alternatives,” Green said.