No, a coal phase-out will not cause your electricity bill to triple. And here’s why

Blog - April 19, 2016 - By Benjamin Thibault

Coal at the Sheerness coal-fired power plant. Photo: Pembina Institute

I feel like a broken record. I’ve already pointed outtwice — that the president of the Canadian Coal Association and recent PC cabinet minister, Robin Campbell, is lying to you when he says the coal phase-out will “double” — or, wait, a week later it became “triple” (when you’re just making stuff up, these nuances don’t matter much) — your power bill. Unfortunately, there are still unabashed commentators failing to grasp the depth of this misinformation.

The Globe & Mail ran an op-ed by the Canada West Foundation’s Trevor McLeod defending Mr. Campbell’s claims. He commented on our previous strong reactions to the coal lobby misinformation, then wrote: “A quick look at the numbers, however, makes it hard to believe that Mr. Campbell is wrong.”

No, it doesn’t. It makes it very clear he is wrong.

The pool price does not equate to your power bill

Mr. McLeod explains the pool price is historically low right now. On this account, he’s right. And he’s right to say, “it is hard to believe that electricity prices won’t triple in the next few years.” As the graph below shows, the forecasts predict they will rise considerably and most analysts agree.

Pool prices

While long-range electricity price projections for Alberta’s small, relatively isolated, energy-only markets are notoriously inaccurate, many analysts agree where electricity prices have to go. They believe prices have to be high enough to incent competitive new supply needed to meet increasing demand and replace end-of-life generation. The lowest-cost new supply is a mix of wind and high-efficiency natural gas generation, which the Alberta Electric System Operator (AESO) pegged at between $80 - $90/MWh in 2014 (though there is evidence wind can now be cheaper). Pool prices in 2015 averaged around $33/MWh — dipping south of $20/MWh so far in 2016 — so it would not be a surprise to see an eventual tripling of pool prices. Not consumer bills, like Mr. Campbell has said.

Pool prices are wholesale market prices. If the price of a bushel of wheat (wholesale price) goes up it raises the price on your loaf of bread — but not proportionally.

costs do not tripleThe bread cost also depends on the costs of other ingredients, labour, packaging and transportation. Consumer electric energy prices (the bread) also have other factors mixed in, like your retailer’s mark-up, administration charges and Balancing Pool tariff (which actually falls when the pool price rises). And your power bill (like your grocery bill) has a whole slate of other wheat-free items that are independent of energy prices, like transmission costs, the costs of just having a hook-up to the local grid (fixed distribution costs) and rate riders.

Consumer electricity costs are going to rise. But, just as your power bills haven’t gone down nearly as much as wholesale energy prices since 2013, nor will they triple by 2020 — even from this year’s aberrant lows.

So, no, misters Campbell and McLeod. Power bills will not triple.

These increases were baked in well before the coal phase-out

And then there is the truly cynical aspect to all of this. The projected increases of pool prices that Mr. McLeod exhibits to defend the coal lobby were expected more than a year before the coal phase-out announcement. The graph above shows projections used in a June 2014 AESO publication. Similarly, electricity bills were always expected to rise (though certainly not triple, as explained above) as demonstrated in the graph below. cost predictionSo, no, coal lobby and Canada West, the coal phase-out will not cause power bills to triple.

In defense of facts and accuracy, whatever the forum

Frankly, it did occur to us the errors above might explain Mr. Campbell’s comments that the coal phase-out would triple power bills. But we were a bit incredulous that an electricity observer — and former environment and finance minister — would make these blunders. Mr. McLeod has verified what we’re dealing with here.

In lamenting our pointing to the coal lobby’s false statements, Mr. McLeod derided the Twitterverse’s eruption about Mr. Campbell’s misinformation, saying it was “unhelpful” to the debate on electricity policy and incapable of “reasoned arguments.” Just because you use 750 words instead of 140 characters on social media doesn’t make you right. It makes you wrong at greater breadth.

Benjamin Thibault
Benjamin Thibault

Ben Thibault was the director of the Pembina Institute's electricity program until 2016.


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