Canada's home energy costs soared by an average of 100 percent this winter: analysts

Most Canadians who pay for natural gas or electricity can expect their bills to rise by an average of between 50 and 100 percent this winter, according to an energy analyst.

Some consumers could see their bills rise as much as 300 percent while others could see minimal increases, but the overall trend is clear, said founder Joel MacDonald. "In general, Canadians join the global community in seeing very high electricity and natural gas bills," MacDonald told in a telephone interview on Friday. the market, but in general the answer is very high energy bills."

A large part of what will drive up home energy costs this winter will be rising prices for natural gas, which produces 8.5 percent of Canada's electricity. According to Statistics Canada, the vast majority of Canadians - 61 percent - use traditional gas-powered systems, such as stoves and boilers, to heat their homes. A smaller proportion – 29 percent – ​​used electric baseboards and radiant heating systems. The rest use heat pumps, stoves, and other heating systems.

Currently, says MacDonald, natural gas prices are being pushed up by a combination of geopolitical disputes in Europe, the global transition to renewable energy, seasonal demand, federal carbon taxes and cyclical fluctuations in gas prices over a period of about 20 years as supply and demand try to converge and correct. Some of these factors are predictable. Some, like the war in Ukraine, don't. War reduces the global supply of natural gas, generally pushing prices up. It has also reduced European access to resources. As a result, the US has increased its natural gas exports to Europe, and Canada has increased its exports to the US, further reducing Canadian supply. Natural gas is currently five times more expensive in Europe than it is in Canada, says MacDonald, but when our supply drops, that will change.

"We are shipping more and we will start to see the Canadian market and natural gas prices in Canada tend to be closer to global prices than they have historically," he said. Further driving European demand for natural gas is the gap in energy supply generated by the continent's transition to renewable energy. It's in a phase, says MacDonald, where neither the slowing fossil fuel sector nor the growing renewable sector can meet its energy needs.

So the international demand for natural gas is increasing. As the days get shorter and colder into the winter months, domestic demand also increases. Higher energy bills are something Canadians look forward to every winter, but some years are more expensive than others. This winter will be an expensive one, explains Michelle Leslie, senior manager of infrastructure and capital projects at Deloitte Canada. "Forecasts suggest it will be cold and snowy, especially for the central part of the country and in the maritime provinces," Leslie told in a telephone interview on Friday. "If the forecast works... it will drive demand for heating systems. When you look at supply and demand, when demand goes up, depending on what your supply is like, you can see price increases."

Then there is the federal carbon tax, which applies to natural gas and electricity produced using combustible fuels. Placing a price on carbon pollution is widely recognized as the most efficient method for reducing greenhouse gas emissions and encouraging innovation, but it can translate into higher home heating and electricity bills.

Finally, MacDonald explains, natural gas prices tend to rise and fall over a multi-year cycle as the market corrects the gap between supply and demand. For example, the cost of natural gas in Alberta this July was $5.44 per gigajoule (GJ). In mid-2008, it peaked at $9.84 before falling again. In late 2005 and early 2001 it temporarily surpassed $11. "Natural gas from 2000 to 2010 regularly traded at around $6 per GJ," MacDonald said. "Then we had a period of extreme lows from 2015 to 2020, and we've seen over the last year return to the $6 per gigajoule figure."

All of these factors – domestic, international, predictable and unpredictable – increase energy costs. How much and how quickly people's home energy bills reflect this increase will depend on the province or region they live in. This is because market mechanisms in some provinces and regions act to reduce or delay increases. The provincial energy retail market is regulated or unregulated. Unregulated markets tend to be more volatile, while price changes in regulated retail markets tend to be more controlled.

"Everyone's price will go up over time," said MacDonald. "I think one of the biggest regional differences right now is the speed at which it's rising, and regulated markets are a bit slower than unregulated ones."

The Ontario market is technically deregulated, but most consumers buy from entities whose rates are regulated by the province, such as Enbridge Gas and the EPCOR Natural Gas Limited Partnership. The Ontario Energy Council announced in June that it would allow Enbridge to increase natural gas prices by 20 percent, but MacDonald said that the increase actually reflected the debt Enbridge was asking to absorb when natural gas market prices rose during the pandemic, to avoid skipping the deadline. increased to become consumers at a time when many people were unable to work.

"Ontario asked Enbridge to take on $527 million in debt to cover the increase, so to date, the bill has not increased," he explained. "But now they have to start recapturing (that) debt." Regional nuance aside, MacDonald and Leslie both agree that Canada won't see home energy prices drop again any time soon.

"As of now, there isn't much reason to think that prices will fall in the next two to three years," MacDonald said. Leslie explained, adding that all signs suggest domestic and global demand for natural gas will continue to increase in the future, driving up prices if supply can't keep up.

"With the forecasts that are in Canada and North America this winter, with everything going on with Russia and Ukraine and Europe's energy woes, I don't expect natural gas demand to decline," he said. "Even I hope it improves."

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