Western Standard - Hands off Alberta's electricity

00:00:00.000 Good evening, Western Standard viewers, and welcome to Hannaford, a weekly politics show.

00:00:20.820 It is Thursday, the 16th of July. A couple of months ago, the Federal Government quietly

00:00:26.480 issued a policy statement that, if followed, would completely upset how electricity is

00:00:32.960 produced, marketed, and distributed in Canada. It's centered on the idea that Canada should

00:00:38.940 have a national, centrally organized grid so that we can move more energy east-west

00:00:44.900 instead of north-south. You could see that as an elbows-up thing, and you probably wouldn't

00:00:51.520 be wrong. However, there's more to it than that. With me today is utilities economist

00:00:59.000 Edgardo Sepulveda, who has just this week published his own analysis, and he thinks

00:01:07.000 what Ottawa is talking about would be the worst thing we could do. Welcome, Dr. Sepulveda.

00:01:14.160 Thank you, Nigel. Very happy to be on your show.

00:01:16.380 And it's good to have you here

00:01:20.020 You know, we were talking just before the introduction there

00:01:24.120 About a very cold day three years ago in Alberta

00:01:27.200 When we nearly had blackouts

00:01:28.840 And that woke everybody up to the fact

00:01:32.240 That we weren't building enough of the right kind of energy production

00:01:37.520 Here in Alberta

00:01:38.500 We'd been under a very strong compulsion to build windmills

00:01:43.400 and solar panels and cover the farms with mirrors.

00:01:50.040 You know, it was all supposed to be a terribly, terribly good thing for the environment.

00:01:55.400 But when it actually came to January 2023, it all went crashingly wrong.

00:02:02.000 And I think, if I remember rightly, it was only the fact that we could get a bit of power in from British Columbia

00:02:08.460 that saved a lot of people from having a cold dinner.

00:02:11.560 Now, here's the thing. Mr. Carney, the Prime Minister, obviously has a very centralist view of things, and he thinks that if we had a better east-west distribution system, that would save a lot of problems, and perhaps if the same thing happened in Alberta in a few years' time, there'd be a ready-made solution to it, and we wouldn't all be frightened to death that we were going to freeze.

00:02:39.480 So you've just put out this paper in which you have poured cold water on the federal proposal.

00:02:45.980 You say that having a national grid wouldn't be an improvement.

00:02:51.840 In fact, we already do a lot of east-west product moving.

00:02:57.020 So tell us about it.

00:02:58.500 What's wrong with Canada having a national grid with better east-west connections?

00:03:03.420 We'll all help each other when needed, and it'll probably be cheaper power, right?

00:03:08.900 That's the narrative.

00:03:11.220 That's the narrative.

00:03:12.420 That's the narrative.

00:03:13.580 And certainly one of the rationales for, there were two rationales for me preparing this piece, Nigel, with the McDonnell-Laurier Institute.

00:03:23.060 The first was to submit it as an input into the consultation process that was opened up by the strategy that you referred to in your opening remarks.

00:03:37.520 So this national electricity strategy put out by the federal government has two components.

00:03:45.380 One is the strategy or the proposed strategy, and the other ones are the calls for action.

00:03:51.300 And the calls for action are subject to consultation.

00:03:55.500 And so obviously, I encourage anyone who's interested in this topic, which is very important,

00:04:03.040 not just for us nerdy utility economists, but for modern life of electricity.

00:04:12.440 And I think, Nigel, you put it very succinctly in terms of that potential blackout that Albertans almost suffered

00:04:21.520 in that very cold January just brings home the importance of electricity to our daily lives.

00:04:28.860 So I encourage everyone who's interested to submit their views to the consultation, and we can certainly put that into the video notes.

00:04:41.660 So that was one thing. It was a specific input that we've been preparing for four or five months to be able to submit it and in a cooperative and scholarly way, engage with this proposed strategy and the calls for action, rather than just sort of from the peanut gallery throwing stuff at the feds.

00:05:03.420 The other one is that this idea of an East-West grid is something that's been on and off in the policy circles for many years, 15 years. There's always somebody saying, we don't trade enough East-West, whether it's with liquor, whether it's other services, etc.

00:05:24.520 And so electricity gets the same treatment. And every 15 years, every 10 years, somebody puts out a piece saying we should do more.

00:05:33.820 And certainly this iteration of that narrative is now in the context of two things.

00:05:44.840 The threats to our sovereignty from the South and this talk of the 51st state has provided people with new energy to push forward with that narrative.

00:05:57.180 we have got very used to well in british columbia they they get supplies from south of the border

00:06:03.500 all the time when they run short um maybe the maybe the americans charge us top dollar and

00:06:10.620 but i guess it goes both ways and the point is that the lights don't go off we can take care of

00:06:17.180 things and it's a lot closer to washington state than where do you want to bring your power from

00:06:24.500 if not from british columbia itself right it's going to be in manitoba or further east so you

00:06:32.820 know then you get into things like line loss and does all the power you send from a distant

00:06:38.180 destination actually get to where it can be used the answer i believe according to the engineers

00:06:43.140 is no you you lose stuff you lose power along the line so why is this idea of having a national grid

00:06:52.420 this way for thousands of miles so attractive

00:06:56.320 when we actually have a fairly well-functioning grid

00:06:59.400 going this way in a relatively short distance.

00:07:02.760 Well, that's right.

00:07:03.840 And so, I mean, the other thing to do is to think about the idea that,

00:07:07.980 you know, if it ain't broke, there's no reason to fix it.

00:07:12.220 And we have already, whether we trade with the U.S.

00:07:17.080 or trade amongst our own provinces,

00:07:22.460 we already have one of the sort of cheapest, most reliable,

00:07:27.900 most expansive grids in the world.

00:07:32.640 And that's based on the idea that, you know,

00:07:39.040 both constitutionally and historically, you know,

00:07:42.700 the generation of electricity has been a provincial responsibility and jurisdiction.

00:07:48.940 And so we developed this and we have 100 plus years of doing this quite well and having enviable results.

00:08:00.000 I mean, most people around the world would say, why would you ever mess with this particular system that has worked so well for most Canadians?

00:08:09.460 So that's very important because I think in the attraction of the new shiny thing, we miss what we already have, which is a very strong system.

00:08:21.460 We already trade.

00:08:23.080 One of the things that I do is I do 70 years of compiled data that shows that most of the time we trade more east-west than we do north-south.

00:08:35.560 That's one of those kind of narrative things that everyone says, oh, we don't trade enough East-West.

00:08:40.060 I had an interview yesterday with another journalist who says, oh, how did that narrative ever come up?

00:08:45.980 And it's because people who want to do the restructuring would be, you know, would want to further or at least not contest the idea that we don't trade East-West enough.

00:09:00.220 My own data shows that we've, over the last 70 years, we've traded more east-west than we have north-south in about 68, so most of the time.

00:09:09.160 So the idea that we don't trade, we trade more north-south to east-west, it's just not true.

00:09:15.920 Let me just jump in here, Edgardo.

00:09:18.240 I mean, the whole premise of the federal paper is that we need to do more east-west, and we've got to get hold of this energy thing and run with it.

00:09:27.960 but they know what you know they're just not at least i i am assuming that i mean you have people

00:09:36.620 in the federal government who are employed to actually understand their subject field and what

00:09:41.960 the politicians do with it later that's another matter but uh there are people in the federal

00:09:46.940 government who understand this and they they know that we already have a good east-west linkage

00:09:55.360 Right.

00:09:55.500 So what do you think is really the, like, who stands to gain out of messing around with something that, as you say, is working quite well?

00:10:02.960 Yeah.

00:10:03.500 So, I mean, look, the other thing.

00:10:05.020 He's filling him up the guy.

00:10:06.360 Yeah, yeah, yeah.

00:10:07.420 Well, look, I mean, I think, so let me put forward to you what I think is good in the strategy and what is bad in the strategy.

00:10:19.520 And maybe we can kind of work that out as to, like, who would be gaining from this.

00:10:24.560 What's good in the strategy is that, in the end, their actual calls for action are relatively

00:10:34.020 modest.

00:10:35.020 That's good news.

00:10:36.320 The bad news is that their context and analysis of the current situation is wrongheaded.

00:10:45.400 That's one of the things that I get into the report, which is that they basically use

00:10:51.800 a rationale that we are very inefficient, that we are, that we have islands, and that

00:11:03.040 the lack of additional trade is costing us billions.

00:11:08.360 And so that kind of scare mongering, and I'm going to call it that, is the typical strategy

00:11:18.200 that one uses, the narrative one uses to be able to push for something. Now, in terms of why people

00:11:27.540 would want to do this, I don't know exactly. I mean, the money is important and I focus on the

00:11:34.560 money a lot. Being an economist, I'm not an engineer, so I'm not going to tell you about

00:11:38.760 line laws and what technology should be used versus another. What I'm going to tell you and

00:11:44.720 what I did do in the report, Nigel, was to track 70 years of actual prices that Alberta would trade

00:11:53.540 with BC, BC would trade with California, Quebec would trade with Newfoundland, and New Brunswick

00:12:01.980 could trade with PEI. And so one of the things that I developed in the report is that certain

00:12:11.080 provinces that have been blessed with natural resources especially hydro resources and i think

00:12:17.800 from an albertan perspective this will be very understandable in terms of being you know having

00:12:22.600 access to oil and gas for example we're not all geographically equal and so there are certain

00:12:29.080 provinces that have access to hydro and they have exploited those resources and as a result of which

00:12:36.760 they have lower prices both for their own residents and that allows them to

00:12:44.020 trade at a premium with other provinces now what would happen if you had a true

00:12:51.880 national grid whereby all those all the pub provincial utilities were required

00:12:59.620 to join a transmission system which would you know buy and sell across a

00:13:05.360 a national grid subject to kind of regional differences, is that that premium, the price

00:13:12.560 between the export and import would converge. So it would mean that the premium that an Alberta,

00:13:22.720 sorry, a BC or a Manitoba or a Quebec currently has selling their low cost power would be

00:13:33.440 reduced. We all know, and this is not a secret, that BC, Manitoba, and Quebec use those export

00:13:43.660 earnings that result both from the arbitrage of the difference between their import prices and

00:13:51.220 their export prices, and the premium between their export prices and their cost of production.

00:13:58.100 They use that, and it's hundreds of millions of dollars a year to reduce their own power prices.

00:14:05.180 So politically, a Manitoba, a Quebec, or a BC would never join a situation where they lost the provincial authority to trade when they wish and at what prices they wish.

00:14:19.620 that authority would be lost under a national grid.

00:14:23.740 And that's why those provinces would be opposed to joining such a grid.

00:14:29.600 So they would be worried that their domestic power prices would go up in a flash

00:14:34.160 if they joined something like that.

00:14:37.080 Okay, well, what about Alberta and Saskatchewan?

00:14:40.640 Well, Alberta and Saskatchewan are interesting because Alberta already,

00:14:43.760 First of all, Alberta is a relatively, by design, and this is a by design issue, Alberta

00:14:52.660 has always had very limited interties with the rest of Canada and the U.S. Alberta made

00:15:03.580 this as a policy decision in the same way that, for example, Texas did in the United

00:15:11.000 States, whereby they did not want to be subject to federal jurisdiction, and so they had very

00:15:16.580 limited interties. So put it this way, Nigel, that Alberta does not have a lot of interties and does

00:15:24.300 not trade much is not because there's lack of opportunities, it's because they have chosen

00:15:30.600 historically not to do so. They have chosen to be more or less an isolated grid. And there are

00:15:37.060 reasons for that, both historical and market reasons, because what happens now is Alberta

00:15:42.700 is one of the two provinces in Canada that has an operating wholesale market.

00:15:50.260 You already equalize prices across the province.

00:15:54.560 For example, in Quebec or in Saskatchewan, you're probably going to have different prices

00:16:03.260 depending on the city.

00:16:05.520 Alberta doesn't have that.

00:16:07.060 Alberta, in a sense, and this is the ironic part, in a sense, because Alberta right now in 2023, based on the most recent data, has the highest system cost in Canada, I don't think anyone in Alberta would be surprised to hear that, given how high the prices spiked in 2022 and 2023.

00:16:31.980 because of shortages that were associated with a very almost blackout that you pointed to.

00:16:41.460 Those two go hand in hand.

00:16:43.880 In a market system, when there's a very short supply, prices go up and reliability goes down.

00:16:51.320 So in a way, Alberta would be probably a beneficiary of being able to trade with B.C. at probably lower prices than B.C. would normally want to negotiate with Alberta because of this national price if the Feds get their way.

00:17:14.600 okay now that's that's interesting so the the issue would be the price because i know we already 0.80

00:17:20.560 have a an intertie with uh northern british colombia we take power from the site we damn

00:17:25.620 when we really need it but i i anecdotally i think they also charge us a lot of money for that

00:17:31.480 that it's not a deal no well why would they i mean this is a transactional i mean we become

00:17:38.280 all transactional now and that's what i'm saying i'm getting at is that there are provinces that

00:17:42.860 likely to win and provinces are likely to lose and so anything that takes away agency from

00:17:51.180 provinces to establish their own prices is going to be fought by those people who are potentially

00:17:55.660 going to lose so actually you know i mean my first reaction when reading uh about what you've

00:18:02.060 described here in your report was let's stay away from that we don't want anything to do with a

00:18:07.900 a national grid to to the extent we're already doing it well done but we want to be have you

00:18:14.540 know shorter links with uh north south but you're saying i'm pretty sure you're saying that alberta

00:18:21.820 could save money if it took this federal plan now well again a downside to getting into this

00:18:29.740 i'm sure there must be or they wouldn't be offering it well look i mean uh there would

00:18:35.500 would be a downside in as much as that you know if it is implemented the way

00:18:42.280 that is sort of implicit in section 2.4 again this is not the action plan it is

00:18:47.560 what is sort of the intellectual infrastructure that I know in section 2.3

00:18:54.940 is that Alberta would be relatively it would be relatively easy to implement

00:19:03.160 in this because there's two things that these things would require one would be to

00:19:11.880 separate what are now vertically integrated utilities so for example

00:19:19.160 bc hydro or sas power both provincial crowns um albert has never had a provincial crown

00:19:29.480 But Saskatchewan and BC have provincial crowns where the distribution system, which is sort of the people who are the wires in the cities and towns, the transmission, which is those sort of high voltage transmission, and the generation, which is the actual power plants, you know, wind, solar, gas, coal, nuclear, whatever it is, those are unbundled.

00:19:54.980 And the reason that you unbundle that is that ultimately there's a third party that controls the transmission and then, you know, all those generation assets beat into the system.

00:20:08.380 Under that scenario, Alberta's already done that.

00:20:11.360 So it wouldn't structurally, it would be relatively easy for Alberta to actually do this if they wanted to.

00:20:17.900 So structurally, it would be relatively easy.

00:20:19.620 It would be also relatively easy for Ontario, which we also have done that.

00:20:24.100 i'm talking to you from toronto and so for those two provinces that did that 25 years ago it would

00:20:30.100 be relatively easy i'm not saying it's a good thing i'm saying i'm just sort of describing it

00:20:35.540 because i'm not advocating for it but it would be a relatively easy thing to do

00:20:40.180 what you would lose though you would lose the authority to or the agency to establish your own

00:20:48.900 um uh electricity policy because that would now longer be done by the um by the the federal

00:20:58.340 government or yeah yeah yeah and then so so aso basically would be dissolved uh and so would the

00:21:06.820 iso in in ontario and you'd have a kaisal a canadian you know uh independent tremendous

00:21:16.260 I think there's a tremendous number of people in Alberta who are giving careful consideration on how they will vote

00:21:23.320 when they're asked to cast an opinion about Alberta independence in October.

00:21:31.240 I am going to make a bet that if you care a lot about Alberta independence,

00:21:36.740 what Mr. Carney is offering in this paper is not for you.

00:21:42.700 Because you would lose that agency that you have just discussed.

00:21:46.260 you wouldn't be able to control your own power.

00:21:51.560 Totally agree.

00:21:53.380 That brings me to a little bit.

00:21:56.680 I was going to say, I mean, it's not just a,

00:21:58.700 I mean, what I was going to say is that constitutionally

00:22:02.000 and jurisdictionally, the federal government know this

00:22:09.620 and have in the strategy implicitly accepted it.

00:22:15.380 however uh what happened in the u.s and what happened in australia for example that did

00:22:23.160 similar things it's not that it's being pushed from top down is that what happens is um the

00:22:30.640 national governments or the federal governments uh provide incentives and inducements right so

00:22:36.680 that's what i was talking about you know if you offer a physical interconnection are there any

00:22:41.100 strings are tied right and so that's what i was getting at is that i think that i i don't think

00:22:46.460 there's an imposition problem i think there's a potential problem for inducement and facilitation

00:22:54.120 that can lead to what is ultimately a loss of provincial sovereignty over energy that applies

00:23:03.160 not just to alberta and skaterin but to every single province which is why um you know uh i

00:23:09.540 would be saddened by the idea that the grid that we've built based on provincial grids

00:23:16.660 and the primacy provincial grids would be weakened by any such moves.

00:23:25.080 Giorno, we're fast running out of time.

00:23:27.340 There's one last thing that I just want to get you to pass it.

00:23:30.380 Just give me a personal opinion on it.

00:23:31.880 It doesn't have to be an exhaustive study, but like all provinces, Alberta is supposed

00:23:36.920 to achieve a certain net zero for carbon by 2050.

00:23:43.720 The province is expanding rapidly.

00:23:47.580 I think you may have seen the headline yesterday

00:23:49.800 that 80% of all the jobs created in Canada last year

00:23:54.120 were created in Alberta.

00:23:55.620 So they're coming here, they're buying houses,

00:23:57.780 they want schools, hospitals.

00:23:59.820 And the power of demand is going up like that

00:24:02.200 just at the same time that the federal government is existing

00:24:05.780 that we must be carbon net neutral by 2050.

00:24:11.000 It really doesn't go hand in hand.

00:24:14.660 Would you suggest that Alberta just take a very strong position on this

00:24:21.200 and say, look, if we're going to be the flywheel for the Canadian economy,

00:24:26.260 we need relief from this foolish aspiration to be carbon net neutral by 2050.

00:24:33.440 It just can't be done.

00:24:34.160 Well, look, let me give you a slightly different answer and that the market system that Alberta adopted in 2025, which, among other things, have led to very high prices and low reliability, handcuffs you to both from a price perspective,

00:25:04.020 reliability perspective and a decarbonization perspective so you are moving towards both a net

00:25:11.300 zero and we can debate you know whether it's even feasible but you are trying to meet net zero

00:25:18.480 reliability and affordability three very challenging things in and of themselves

00:25:24.660 with a system that is just not built for it and so my my first recommendation again i've written

00:25:31.260 about this for the AFL. My first recommendation is to scrap this experiment that you've done for

00:25:37.360 the last 25 years of a deregulated unstructured market. It hasn't led to positive results.

00:25:46.120 And in the future, Nigel, all of those things that you talk about, whether you want net zero

00:25:51.800 or not, whether, and I think we all want affordability and certainly reliability,

00:25:55.860 All of those things are made much more difficult when you've basically given away a certain amount of control over your provincial utilities by this liberalization, privatization, restructuring that you undertook 25 years ago.

00:26:11.640 Okay. I'm sure the AFL was very, very pleased to hear your blessing on their position for that one.

00:26:19.860 Look, this has been great. I really appreciate you coming on the program.

00:26:23.960 it's one of those things where you know as long as the light comes on when you flick the switch

00:26:29.620 that's about all most people are interested in energy but boy oh boy if things are seriously

00:26:35.380 altered and the price of turning on that light switch goes up and you're not even in control

00:26:43.080 of your own utilities it's a massive it's a massive issue and i congratulate you on the

00:26:47.900 paper and getting that information out there. So, look, ladies and gentlemen, Edgardo Sepulvedia,

00:26:55.140 utilities economist, got some really important words for Alberta right now. Thank you very much

00:27:01.460 for coming on the program, Edgardo. And for the Western Standard, I'm Nigel Hannaford.

00:27:17.900 so

Western Standard - July 17, 2026

Hands off Alberta's electricity

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