How Canadian Markets Work

The Canadian electricity system is part of an integrated North American electricity grid but, Canada's electricity markets have primarily developed along provincial or regional boundaries.

Electricity pricing varies by province or territory according to the volume and type of available generation and whether prices are market-based or regulated. Alberta has moved the furthest in restructuring its electricity market. Its electricity prices are more market-based compared to other provinces and territories. Ontario has chosen to partially restructure its electricity market. Prices in other provinces and territories are set by the electricity regulator to cover costs and allow for a reasonable rate of return to investors.

Figure 1 shows 2006, 2007 and 2008 Canadian residential electricity prices (excluding taxes) in various cities.

Figure 1 - Canadian Residential Electricity Prices

Source: Hydro-Québec: Comparison of Electricity Prices in Major North American Cities

The provinces and territories have jurisdiction over generation, transmission and distribution of electricity within their boundaries, including restructuring initiatives and electricity prices. The federal government has jurisdiction over electricity exports, international and designated inter-provincial power lines, and nuclear safety.

Figure 2 shows inter-provincial and international trade of electricity in 2008. Total exports and imports equalled 55 732 GW.h and 23 499 GW.h respectively, with Ontario, Québec and Manitoba exporting the greatest volumes of electricity. Canada is a net exporter of electricity to the U.S. mainly due to the availability of low cost hydro electric resources. Some regions, however, rely on imports to meet domestic load requirements during high demand periods (for example, during the winter months when electricity use is high in most provinces, and relatively low most American states) or when water levels are low in hydropower based provinces.

Examples of major Canadian electricity trade include the transfer of hydro power from Labrador into Québec, interchanges between Ontario, Québec and regions in the northeastern U.S. and interchanges between B.C., Alberta and the U.S. Pacific Northwest. In recent years, growth in Canadian electricity generation has lagged growth in domestic demand. As a result, the surplus available for export has been declining and some regions have relied on imports to meet domestic requirements during high demand periods. Both countries realize commercial benefits and improved electric reliability through trade, mainly due to complementary (off-set) demand peaking seasons.

Figure 2 - Canada Electricity Trade in 2008 (GW.h)

Source: NEB