Updated: Sep 9, 2018
By Ashley Smith, Fundamental Inc.
It’s been in the news, and people are talking about it—the topic of rising energy prices.
How will you and your business be affected by carbon pricing and the projected increases in electricity rates? Why is now a prudent and appropriate time to be evaluating your business and home energy consumption?
A price will be put on carbon emissions. Canada signed on to the Paris Accord, and out of that commitment developed the Pan-Canadian Framework on Clean Growth and Climate Change. This Framework requires each province to develop a climate-change strategy. It is expected that Newfoundland and Labrador will adopt a “pay at the pump” tax on all fossil fuels (gasoline, diesel, propane, heating oil, etc.). Starting no later than 2019, the federal pricing minimums will be as follows: (1)
The provincial plan has to be in place by September 2018. Though there has been reference to a two-tier costing plan (for large and small emitters) and the current four cents we pay per litre of the 2016 gas tax, there has been, as of yet, no official provincial response or policy release.(2)
A business or individual can calculate the financial risk or impact of the federal minimums by summing up all fuel that is purchased (burned) directly, and adding the additional cost listed in the table below to the cost per litre of fuel consumed.
Projected doubling of electricity rates
Electricity prices have already increased and are projected to almost double. Nalcor’s projected rate for 2022 is 23¢/kWh (Stan Marshall, CEO of Nalcor3). We currently pay approximately 12¢/kWh. Other projections range from 17¢/kWh (Premier Ball(4)) to 37¢/kWh (critics such as Uncle Gnarly(5)). Our rates went up on July 1, 2018; a further application is in for another rate increase effective March 2019, and businesses with commercial accounts will probably be facing higher increases.()6 Analysis done by the Canadian Federation of Independent Business (CFIB) indicates that a doubling of electricity rates for Newfoundland and Labrador will mean at least $179 million annually in increased costs for SMEs.(7)
There has been talk of rate subsidization, but that means the provincial government would simply be shifting money around and taking it from somewhere else, which many economists are saying simply is not possible. Stan Marshall continues to state they are looking for ways to reduce costs. But the cold reality is the money has to come from somewhere, and the Muskrat Falls project will cost at least $6 billion more than was originally estimated.
A business or individual can calculate the approximate electricity price increase by totalling up the kWh (kilowatt hours) used in a year, multiplying that value by 11.4¢/kWh (A), then multiplying the total kWh by 23.3¢/kWh (B) and subtracting the two values (B-A). The resulting number will be the approximate additional projected costs for electricity. The kWh can be found on the electrical bill you receive each month. If you are a commercial rate client and have a demand charge, that charge is not at present expected to increase.
All is not lost . . .
There is evidence that aggressive climate policy can push commerce and industry into an innovative and profitable place when energy strategies are undertaken in a proactive manner (see the Haga Initiative(8)). Other options involve cost-effective renewable energy (solar and wind) and energy efficiency planning. Saving energy saves cost, which is a useful exercise in any climate. More information on renewable energy options and strategic planning will appear in future issues of The Advisor.
Ashley Smith, Fundamental Inc.
Fundamental Inc. provides consulting and design services related to energy efficiency, carbon emissions, and renewable energy. We are based in Newfoundland and Labrador and work with all sectors, including commercial, municipal, institutional, and residential. We help our clients understand and effectively exploit cost savings from energy efficiency measures and renewable energy options. Owner and director Ashley Smith, BSc, MEng, LEED AP, has 16 years’ experience in strategic planning, construction management, green building, and sustainability consulting.
(1) www.canada.ca/en/services/environment/weather/climatechange/technical-paper-federal-carbon-pricing-backstop.html. Accessed June 6, 2018.
(2) www.thetelegram.com/business/newfoundland-and-labrador-businesses-want-details-on-carbon-pricing-230086/. Accessed August 6, 2018.
(4) www.pressreader.com/canada/the-telegram-st-johns/20180724/281479277206375. Accessed August 6, 2018.
(5) unclegnarley.blogspot.com/2016/02/stable-rates-eleven-myth-of-muskrat.html. Accessed June 1, 2018.
(6) http://www.thetelegram.com/news/newfoundland-power-rates-are-going-up-july-1-220742/. Accessed August 6, 2018
(7) In A Shocking State. CFIB. https://www.cfib-fcei.ca/sites/default/files/2017-12/nl1148.pdf. Accessed August 6, 2018.
(8) https://www.hagainitiativet.se/en. Accessed August 6, 2018.