Canada Energy Market Report – June 2018

Electricity Discussion: The election of a Progressive Conservative government could mean significant changes on the electricity file. Power prices remained a top issue during the campaign and the new government is eager to put their stamp on the file –a special session of parliament will be convened in the summer to enact several campaign promises. The outgoing Liberal government subsidized rates by extending the amortization period of certain generation contracts, but interest on the deferred amount is pilling up and will make for a potential landmine in a few years time on the new government.

Other programs at risk include the Save on energy program –an incentive scheme that pays a portion of energy efficiency upgrades. Funding for the program is recaptured through the Global Adjustment, which means that cancelling this program could result in quick savings for ratepayers. Alternatively, the government could move this program to the general tax base. Whatever the case, the challenges on the electricity file will be considerable for the incoming government, with no easy solutions in sight.

Natural Gas Discussion: At the AECO market hub, where most of Canadian marketable gas production is sold, gas is piling up with few opportunities to send it anywhere due to export constraints and uneconomical shipping options to move it east. This has dragged the price curve down across the board -despite a cold winter and extremely hot summer temperatures, near term and longer term deals are much cheaper than they were a year ago. At some point, producers will have to accept that production cuts will be necessary to bring the market back from being mired in the $1 handle.