How electricity is priced in Canada
The cost of electricity in Canada can significantly vary between provinces, but overall, there are several factors that affect the cost of electricity across the country. Some factors, such as how your electricity is generated and the weather are out of our control.
Other factors, however, such as choosing which energy retailer provides electricity to your home, can be controlled by consumers in some provinces. To help you learn what factors affect your electricity costs in Canada and how they do so, we’ve compiled a list of some of the most important things impacting your energy costs.
After you’ve learned about the factors impacting the cost of electricity, you’ll have a better idea of what you can do about increasing electricity costs
1. Climate, seasons and weather events
When it’s summer and the weather is hot, the demand for electricity often peaks: All the extra fans and air conditioning units in use increase the demand for electricity and costs subsequently increase. The same often goes for winter — when temperatures remain consistently cold, people often use more energy to heat their homes. As such, the demand for electricity also increases and so does the cost.
2. Power plants
Your electricity has to come from somewhere, right? Power plants generate electricity via several different sources, such as coal, hydroelectricity, solar power, wind energy, nuclear energy and many other sources. The cost of building, operating and maintaining these plants is reflected in the price you pay for electricity.
3. Transmission and distribution costs
In order to get to your home, electricity must be carried from generators or power plants and distributed to your home. The systems needed for distribution and transmission of electricity have maintenance costs associated with them. These costs show up on your electricity bill as transmission and distribution costs.
4. The cost of electricity and the demand
Depending on which province you’re in, there are different sources used to produce electricity. For example, in Alberta, there is an abundance of coal. Using coal or other abundant sources would cost less than more difficult sources, such as wind power.
However, when there’s a high demand for electricity, it is sometimes necessary to use more expensive, or less abundant, electricity sources in order to fulfill demand. As a result, the cost of your electricity may increase during periods of high demand.
5. Location and natural resources
It may surprise you to know that your location also influences the cost of electricity — things like power plant availability, natural resources, as well as distribution costs vary with location and affect electricity costs. For example, people living in rural parts of a province often have to pay more in distribution costs than people living in urban areas because of lower population density and increased distances between residential sites.
6. Regulation and legislation
While they obviously vary from province to province, local and provincial regulations often affect the cost of electricity. For example, the Ontario Energy Board has time-of-use pricing in place that affects electricity costs based on the time of day that electricity is used, as well as if it is used on a weekend or weekday.
Another example is the former electricity price cap in Alberta; the max price Albertans could pay for electricity was 6.8 cents per kilowatt-hour (kWh) while the price cap program was still in place.
7. Type of energy market
According to Natural Resources Canada (NRCan), one of the most significant factors affecting electricity prices is the market structure. If you take Alberta as an example, the province has a deregulated electricity market, which allows for competition between energy retailers.
In other provinces, including Saskatchewan, electricity prices are set by electricity regulators and prices are generally higher due to lack of competition. However, there are exceptions to this: British Columbia, Québec and Manitoba don’t have deregulated electricity markets, but do have fairly low electricity prices due to being large-scale producers of hydroelectricity. As such, they don’t need to import electricity.
8. Consumption size
Generally speaking, industrial consumers of electricity pay less per kWh than residential or commercial consumers. This is due to the fact that industrial consumers use more electricity and are able to receive electricity at high voltages. This makes it less expensive and more convenient for power plants to supply electricity to these large customers.
Compare electricity and natural gas rates in Canada
A lot of these factors affecting electricity prices may seem out of your control. However, choosing which energy retailer provides you with electricity and/or natural gas is something that you can control.
EnergyRates.ca can be of great help if you want to learn more about electricity or gas rates in Canada. The website is a free, unbiased tool that allows you to compare electricity and natural gas rates in your province. Using EnergyRates.ca is easy — all you have to do is fill in your postal code in the form above and select the type of service.