Power pricing

Photo shot from space over North America at night, showing lights
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T he average Canadian household spends about $3.60 a day on electricity. That’s not much when you consider we use electricity to preserve our food and heat and cool our homes. In fact it’s impressive what the cost of a Venti coffee can do. But behind the simple flicking of a switch is a complex system of generation, production, distribution and, of course, pricing. Underscoring the complexity of the system is the simple fact that we haven’t found an efficient way to store electricity on the scale needed to supply cities. Combine that inability to stockpile electricity with population density, the age of infrastructure, geography and the type of power used to generate the electricity, and things become complicated. Here, Energy Exchange takes on three key questions to help explain the cost of electricity.

Why are electricity prices different across the country?

To answer this, we need to start with the source of electricity. The geography of Quebec, British Columbia and Manitoba is such, for example, that those provinces have an abundance of cheap and reliable hydroelectricity close to major cities, while provinces such as Ontario, Alberta and Nova Scotia don’t. If you consider Quebec’s hydropower, and Ontario’s mix of nuclear, hydro and gas, and Nova Scotia’s reliance on coal, one reason for the variation in electricity prices across Canada emerges: each source has its trade-offs, including cost of resources, infrastructure upkeep and (for some) market ­fluctuations.

Related to geography is population density. The more concentrated the users of the electricity are, the cheaper it is for a provider to service them. A large part of the cost of electricity comes from how far it has to be distributed. First, electricity has to travel hundreds of kilometres over high-voltage transmission lines from power plants. Then, closer to where it will actually be used, electricity runs through step-down transformers and then low-voltage distribution lines before finally reaching the outlets in your house. So, the “wire cost” of electricity, which is the cost of maintaining the power plant and its transmission and distribution lines as well as the cost of electricity that’s lost to resistance in the wires, is much cheaper in downtown Toronto, for example, than the Yukon, where fewer people are spread over hundreds of kilometres and maintaining the lines is more difficult. Another factor is that because each province and territory is largely responsible for its own resources, including electricity production, electricity is rarely shared across provincial or territorial borders. Speaking of territories, with a population around 100,000 spread over 3.5 million square kilometres, powering Canada’s North is a particular challenge. Though hydro is the biggest source of electricity in the North, many communities (and all of Nunavut) rely on diesel generators, making the cost of electricity much higher than in the rest of Canada.

There are other small costs too, such as regulatory administration fees and the price that electricity distributors pay to electricity wholesalers, which varies across Canada and affects your bill.

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