Western Standard - HANNAFORD： Hands off Alberta's electricity

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

00:00:20.780 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

00:00:32.880 produced, marketed, and distributed in Canada. It's centered on the idea that Canada should

00:00:38.900 have a national, centrally organized grid so that we can move more energy east-west

00:00:44.960 instead of north-south. You could see that as an elbows-up thing, and you probably wouldn't

00:00:51.500 be wrong. However, there's more to it than that. With me today is utilities economist

00:00:58.980 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.

00:01:14.140 Thank you, Nigel. Very happy to be on your show.

00:01:16.360 and you it's good to have you here you know we were talking just before the before the

00:01:23.240 introduction there about a very cold day three years ago in alberta when we nearly had blackouts

00:01:28.820 and that woke everybody up to the fact that we weren't building enough of the right kind of

00:01:35.380 of energy production here in alberta we'd been under a very strong compulsion to build windmills

00:01:43.380 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.

00:02:01.980 And I think, if I remember rightly, it was only the fact that we could get a bit of power in from British Columbia

00:02:08.440 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.

00:02:39.460 So you've just put out this paper in which you have poured cold water on the federal proposal.

00:02:45.960 You say that having a national grid wouldn't be an improvement.

00:02:51.820 In fact, we already do a lot of east-west product moving.

00:02:56.600 So tell us about it.

00:02:58.560 What's wrong with Canada having a national grid with better east-west connections?

00:03:03.400 We'll all help each other when needed, and it'll probably be cheaper power, right?

00:03:08.940 That's the narrative.

00:03:11.200 That's the narrative.

00:03:12.260 That's the narrative.

00:03:13.580 And certainly one of the rationales for,

00:03:17.940 there were two rationales for me preparing this piece, Nigel,

00:03:21.020 with the McDonnell-Laurie Institute.

00:03:23.060 The first was to submit it as an input into the consultation process

00:03:31.280 that was opened up by the strategy that you referred to in your opening remarks.

00:03:37.500 So this national electricity strategy put out by the federal government has two components.

00:03:45.360 One is the strategy or the proposed strategy, and the other ones are the calls for action.

00:03:51.280 And the calls for action are subject to consultation.

00:03:55.480 And so obviously, I encourage anyone who's interested in this topic, which is very important,

00:04:03.020 not just for us nerdy utility economists, but for modern life of electricity.

00:04:12.420 And I think, Nigel, you put it very succinctly in terms of that potential blackout that Albertans almost suffered

00:04:21.500 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'd 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.

00:05:03.400 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.

00:05:15.680 There's always somebody saying we don't trade enough East-West, whether it's with liquor, whether it's other services, et cetera.

00:05:25.240 And so electricity gets the same treatment.

00:05:27.620 And every 15 years, every 10 years, you know, somebody puts out a piece saying we should do more. And certainly this iteration of that narrative is now in the context of two things.

00:05:44.340 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 get supplies from south of the border all the time when they run short.

00:06:07.260 Maybe the Americans charge us top dollar, but I guess it goes both ways.

00:06:12.740 and the point is that the lights don't go off we can take care of things and it's a lot closer

00:06:20.020 to washington state then where do you want to bring your power from if not from british

00:06:25.380 columbia itself right it's going to be in manitoba or further east so you know then you get into

00:06:33.700 things like line loss and does all the power you send from a distant destination actually get to

00:06:39.780 where it can be used the answer i believe according to the engineers is no you you lose stuff you lose

00:06:46.980 power along the line so why is this idea of having a national grid this way for thousands of miles

00:06:55.540 so attractive when we actually have a fairly well functioning grid going this way in a relatively

00:07:01.060 short distance well that's right and so i mean the other thing to do is to think about the idea that

00:07:07.940 um you know if it ain't broke there's no reason to fix it and we have already uh whether uh

00:07:15.460 whether we trade with us um or trade amongst our our own uh provinces we already have one of the

00:07:24.180 sort of cheapest most reliable uh most expensive grids uh in the world um and so and that's based

00:07:33.940 on the idea that both constitutionally and historically, the generation of electricity

00:07:44.840 has been a provincial responsibility and jurisdiction.

00:07:49.640 We developed this and we have a hundred plus years of doing this quite well and having

00:07:58.740 enviable results.

00:08:00.440 people around the world would say why would you ever you know mess with this particular system

00:08:07.240 that has worked so well for most canadians so so that's very important because i think i think in

00:08:14.040 the in the attraction of the new shiny thing we miss what we already have which is a very strong

00:08:20.360 system we already trade one of the things that i do is i do 70 years of compiled data that shows

00:08:29.640 shows that most of the time we trade more east-west than we do north-south. That's one of

00:08:36.120 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

00:08:44.820 ever come up? And it's because people who want to do the restructuring would want to further,

00:08:55.260 or at least not contest the idea that we don't trade east-west enough.

00:09:00.420 My own data shows that over the last 70 years,

00:09:03.960 we've traded more east-west than we have north-south in about 1968,

00:09:07.760 so most of the time.

00:09:09.160 So the idea that we trade more north-south to east-west is just not true.

00:09:15.900 Let me just jump in here, Edgardo.

00:09:17.960 The whole premise of the federal paper is that we need to do more east-west

00:09:24.060 and we've got to get hold of this energy thing and run with it.

00:09:29.020 But they know what you know.

00:09:31.360 They're just not, at least I am assuming that, I mean,

00:09:35.600 you have people in the federal government who are employed to actually understand their subject field

00:09:41.660 and what the politicians do with it later, that's another matter.

00:09:44.140 But there are people in the federal government who understand this

00:09:48.320 and they they know that we already have a good east-west linkage right so what do you think is

00:09:56.280 really the like who stands to gain out of messing around with something that as you say is working

00:10:01.840 quite well yeah so i mean look the other thing yeah yeah yeah well look i mean i think i i think

00:10:09.980 uh so let me let me uh put forward to you uh what i think is good in the strategy and what is bad

00:10:18.360 in the strategy and maybe we can kind of work that out as to like who would be gaining from this

00:10:23.620 um what's good in the strategy is that in the end um their actual cause for action

00:10:32.480 are relatively modest. So that's the good news. The bad news is that their context and analysis

00:10:40.440 of the current situation is wrongheaded. And so that's one of the things that I get into

00:10:46.720 the report, which is that they basically use a rationale that we are very inefficient,

00:10:57.520 that we have islands, and that the lack of additional trade is costing us billions.

00:11:08.260 And so that kind of scaremongering, and I'm going to call it that, is the typical strategy

00:11:18.140 that one uses, the narrative one uses to be able to push for something.

00:11:22.520 now um in terms of why people would want to do this uh i don't know exactly i mean the money

00:11:32.120 is important and i focus on the money a lot being an economist i'm not an engineer so i'm not going

00:11:38.240 to tell you about line laws and you know what technology should be used versus another what

00:11:43.500 i'm going to tell you and what i did do in the report nigel was to track 70 years of actual

00:11:49.880 prices that Alberta would trade with BC, BC would trade with California, Quebec would

00:11:57.940 trade with Newfoundland, and New Brunswick could trade with PEI.

00:12:04.000 And so one of the things that I developed in the report is that certain provinces that

00:12:11.920 have been blessed with natural resources, especially hydro resources, and I think from

00:12:18.080 an Albertan perspective, this will be very understandable in terms of having access to

00:12:23.240 oil and gas, for example. We're not all geographically equal. And so there are certain provinces

00:12:29.580 that have access to hydro, and they have exploited those resources, and as a result of which,

00:12:36.880 they have lower prices, both for their own residents, and that allows them to trade at

00:12:45.380 premium with other provinces now what would happen if you had a true national grid whereby

00:12:54.580 all those uh all the provincial utilities were required to join a transmission system

00:13:02.340 which would you know buy and sell across a national grid subject to kind of regional differences is

00:13:08.580 is that that premium, the price between the export

00:13:14.740 and import would converge.

00:13:18.140 So it would mean that the premium that an Alberta,

00:13:22.820 sorry, a BC or a Manitoba or a Quebec

00:13:27.540 currently has selling their low cost power

00:13:32.660 would be reduced.

00:13:35.260 We all know, and this is not a secret,

00:13:38.440 that BC, Manitoba and Quebec use those export earnings

00:13:45.240 that result both from the arbitrage

00:13:47.680 of the difference between their import prices

00:13:50.880 and their export prices,

00:13:52.880 and the premium between their export prices

00:13:56.780 and their cost of production.

00:13:58.460 They use that and it's hundreds of millions of dollars a year 0.92

00:14:02.060 to reduce their own power prices.

00:14:05.100 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.

00:14:19.940 That authority would be lost under a national grid, and that's why those provinces would be opposed to joining such a grid.

00:14:28.520 So they would be worried that their domestic power prices would go up in a flash if they joined something like that.

00:14:37.040 Okay, well, what about Alberta? What about Alberta and Saskatchewan?

00:14:40.620 Well, Alberta and Saskatchewan are interesting because Alberta already, first of all, Alberta is a relatively, by design, and this is a by design issue,

00:14:51.740 Alberta has always had very limited interties with the rest of Canada and the U.S. Alberta

00:15:01.960 made this as a policy decision in the same way that, for example, Texas did in the United States,

00:15:11.760 whereby they did not want to be subject to federal jurisdiction, and so they had very limited

00:15:17.420 interties. So put it this way, Nigel, that Alberta does not have a lot of interties and does not

00:15:24.480 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

00:15:37.040 reasons for that, both historical and market reasons, because what happens now is Alberta

00:15:42.680 is one of the two provinces in Canada that has an operating wholesale market, you already

00:15:51.080 equalize prices across the province.

00:15:54.520 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.

00:16:06.640 So 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,

00:16:26.620 Given how high the prices spiked in 2022 and 2023, because of shortages that were associated with a very, you know, almost blackout that you that you pointed to, those two go hand in hand in a market system when there's a very short supply, prices go up and reliability goes down.

00:16:51.300 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.

00:17:14.580 okay now that's that's interesting so the the issue would be the price because i know we already

00:17:20.820 have a an intertie with uh northern british colombia we take power from the site dam when

00:17:25.700 we really need it but i i anecdotally i think they also charge us a lot of money for that

00:17:31.940 it's not a deal no well why would they i mean this is a transactional i mean we become all

00:17:38.500 transactional now and that's what i'm saying i'm getting at is that there are provinces that are

00:17:42.820 likely to win and provinces are likely to lose. And so anything that takes away agency from

00:17:51.220 provinces to establish their own prices is going to be fought by those people who are potentially

00:17:55.620 going to lose. So actually, you know, my first reaction when reading about what you've described

00:18:02.580 here in your report was, let's stay away from that. We don't want anything to do with a national grid

00:18:08.900 to the extent we're already doing it well done but we want to be have you know shorter links with

00:18:15.940 north south but you're saying i'm pretty sure you're saying that alberta could save money

00:18:22.720 if it took this federal plan now well again downside to getting into this i'm sure there

00:18:30.380 must be or they wouldn't be offering it well look i mean uh there would be a downside in as much as

00:18:36.960 that if it is implemented the way that is implicit in Section 2.4, again, this is not

00:18:45.760 the action plan, it is what is the intellectual infrastructure that I note in Section 2.3,

00:18:56.240 is that Alberta would be relatively easy to implement this because there's two things

00:19:04.960 that these things would require one would be to separate what are now vertically integrated

00:19:15.280 utilities so for example um bc hydro um or sas power both provincial crowns um

00:19:27.120 albert has never had a provincial crown uh but saskatchewan and albert and bc have provincial

00:19:32.560 crowns where the distribution system which is sort of the people who are the wires in the cities and

00:19:37.740 towns the transmission which is those sort of high voltage transmission and the generation

00:19:42.700 which is the actual power plants uh you know uh wind solar gas coal nuclear whatever it is um

00:19:52.920 those are unbundled and the reason that you unbundled that is that um ultimately there's

00:19:58.820 third party that controls the transmission and then you know all those generation assets beat

00:20:04.900 into the beat into the uh into the system under that scenario alberta's already done that

00:20:11.220 so it wouldn't structurally it would be relatively easy for alberta to actually do this if they

00:20:16.260 wanted to so structurally would be relatively easy it would be also relatively easy for ontario

00:20:22.260 which we also have done that i'm talking to you from toronto and so for those two provinces that

00:20:28.420 did that 25 years ago it would be relatively easy i'm not saying it's a good thing i'm saying i'm

00:20:33.700 just sort of describing it because i'm not advocating for it but it would be a relatively

00:20:38.180 easy thing to do what you would lose though you would lose the authority to or the agency to

00:20:47.060 establish your own um uh electricity policy because that would now longer be done by the um

00:20:56.980 by the the federal government or yeah yeah yeah and then uh so so asa way basically would be

00:21:04.500 dissolved uh and so with the iso in in ontario and you'd have a kaiso a canadian you know uh

00:21:14.660 I think there's a tremendous number of people in Alberta who are

00:21:19.860 giving careful consideration on how they will vote when they're asked to cast an opinion about

00:21:27.380 Alberta independence in October. I am going to make a bet that if you care a lot about

00:21:34.900 Alberta independence, what Mr. Carney is offering in this paper is not for you,

00:21:40.100 because you would lose that agency that you have just discussed you you wouldn't be able to control

00:21:49.780 your own power that brings okay that brings me i was going to say i mean it's not just

00:21:58.100 the it i mean what i'm going to say is that constitutionally um and jurisdictionally uh

00:22:05.460 the the problems the feds the federal government know this uh and and have in the strategy

00:22:13.860 implicitly accepted it however uh what happened in the us and what happened in australia for

00:22:22.100 example that did similar things it's not that it's being pushed from top down is that what happens is

00:22:28.420 the national governments or the federal governments provide incentives and inducements, right?

00:22:36.540 So that's what I was talking about.

00:22:38.260 If you offer a physical interconnection, are there any strings of tied, right?

00:22:42.740 And so that's what I was getting at, is that I don't think there's an imposition problem.

00:22:47.840 I think there's a potential problem for inducement and facilitation that can lead to what is ultimately a loss of provincial sovereignty over energy that applies not just to Alberta and Saskatchewan, but to every single province.

00:23:06.280 which is why, you know, I would be saddened by the idea that the grid that we've built based on provincial grids and the primacy provincial grids would be weakened by any such moves.

00:23:25.060 And Giorno, we're fast running out of time.

00:23:27.320 There's one last thing that I just want to get you to pass it.

00:23:30.360 Just give me a personal opinion on it.

00:23:31.860 It doesn't have to be an exhaustive study.

00:23:33.300 But like all provinces, Alberta is supposed to achieve a certain net zero for carbon by 2050.

00:23:43.620 The province is expanding rapidly.

00:23:47.560 I think you may have seen the headline yesterday that 80% of all the jobs created in Canada last year were created in Alberta.

00:23:55.600 So they're coming here.

00:23:56.660 They're buying houses.

00:23:57.780 They want schools, hospitals.

00:23:58.960 And the power demand is going up like that

00:24:02.180 Just at the same time that the federal government is existing

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

00:24:10.540 It really doesn't go hand in hand

00:24:13.020 Would you suggest that Alberta just take a very strong position on this

00:24:21.180 And say, look, if we're going to be the flywheel for the Canadian economy

00:24:25.800 We need relief from this foolish aspiration to be carbon net neutral by 2050.

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

00:24:35.340 Well, look, let me give you a slightly different answer

00:24:39.560 and that the market system that Alberta adopted in 2025,

00:24:50.600 which, among other things, have led to very high prices,

00:24:55.800 And low reliability handcuffs you to both from a price perspective, reliability perspective, and a decarbonization perspective.

00:25:07.380 So you are moving towards both a net zero, and we can debate whether it's even feasible, but you are trying to meet net zero, reliability, and affordability,

00:25:21.680 three very challenging things in and of themselves with a system that is just not built for it.

00:25:27.720 And so my first recommendation, again, I've written about this for the AFL.

00:25:33.620 My first recommendation is to scrap this experiment that you've done for the last 25 years

00:25:38.400 of a deregulated, unstructured market.

00:25:42.920 It hasn't led to positive results.

00:25:46.020 And in the future, Nigel, all of those things that you talk about,

00:25:49.500 Whether, you know, you want net zero or not, whether, and I think we all want affordability and certainly reliability, 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.

00:26:11.620 Okay. I'm sure the AFL was very, very pleased to hear your blessing on their position for that one.

00:26:19.500 uh look this has been great i i really appreciate you coming on the program

00:26:25.180 it's one of those things where you know as long as the light comes on when you flick the switch

00:26:29.900 that's about all most people are interested in energy but boy oh boy if things are seriously

00:26:35.580 altered and the price of turning on that light switch goes up and you're not even in control

00:26:43.020 of your own utilities it's a massive it's a massive issue and i congratulate you on the

00:26:47.820 paper and getting that information out there. So look, ladies and gentlemen, Edgardo Sepulveda,

00:26:55.020 utilities economist, got some really important words for Alberta right now. Thank you very much

00:27:01.340 for coming on the program, Edgardo. And for the Western Standard, I'm Nigel Hannaford.

Western Standard - July 20, 2026

HANNAFORD： Hands off Alberta's electricity

Episode Stats

Summary

Transcript