Lowering Electricity Prices Through Market Integration

SESSION 2 - Energy Costs - How to Address Higher Power CostsPolicy & Solutions Forum

Windsor-Essex Regional Chamber of CommerceMay 15th, 2014 – Windsor

Pierre-Olivier PineauProfessor, HEC Montréal

Chair in Energy Sector Management

2

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

ON QC (real) QC (paid)

$ pe

r kW

h

Debt Retirement Charge

Rural Rate ProtectionChargeWholesale MarketService ChargeEnergy (weightedaverage)Distribution Rate

Connection Service

Network Service

Residential Price Ontario & Québec

14.9¢/kWh 8.9¢/kWh 7.2¢/kWh

1.27¢/kWh

6¢

3

0

5,000

10,000

15,000

20,000

25,000

4 5 6 7 8 9 10 11

2012

per

cap

ita c

onsu

mpti

on (k

Wh)

Cents per kilowatt-hour (average price)

NL

NB

QC

MB

BCNS

PEI

AB

ON

SK

Electricity Consumption per Capita by Average Industrial Price (2012)

Statistics Canada (2014)

Hydro provinces

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Why does Québec have such a low energy price?

• Average cost of a kilowatthour = 2.09¢ (2012)→ Cheap hydropower

• “Native load commitment”:obligation to sell electricity

at a regulated price to local consumers

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National Energy Program (1980-1984)Main elements of the program:• a blended “made-in-Canada” price of oil

consumed in Canada: $18.50 versus $35 (Sept. 1980 world price)

• a petroleum and gas revenue tax of 8% on all production of oil and gas in Canada

• a federal share of petroleum production income rising from 10 to 24%

Scarfe (1981) and Bregha (2013)

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Nordpool

Statnett (24-04-2014 22:10)

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How can reason prevail over history?

• Think of a Canadian energy framework– Electricity– Greenhouse gases– Oil & gas (i.e. pipelines)

• Assess the benefits of such a framework• Explain – Educate – Engage