Province targeting electricity stability as primary affordability focus as fuel tax set to return

Earlier this year, the province vowed to reform its electricity system to control prices that have skyrocketed

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Fixing the province’s electricity market is on the top of the Alberta government’s list to improve affordability in 2024, but short-term relief measures aren’t in the cards.

Alberta’s fuel tax will be phased back in starting in the new year after being paused for much of 2023. And with oil prices falling in recent months, it’s likely Albertans will see 13 cents a litre added to their bill to fill up.

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The Alberta government stopped collecting its tax on gasoline last January, and extended it in mid-June until the end of 2023.

Affordability and Utilities Minister Nathan Neudorf said Tuesday that the government is looking to “structurally correct the actual cause” of high electricity prices and decided against measures such as rebates.

“If we stabilize our system and allow for long-term investment, we’re not just . . . putting a Band-Aid on it for a short period of time,” he told the Calgary Chamber of Commerce.

Earlier this year, the province vowed to reform its electricity system to control prices that have skyrocketed — particularly in Calgary. It’s currently undergoing several separate reviews of the Alberta Electric System Operator (AESO), the Market Surveillance Administrator (MSA) and the province’s transmission lines.

Neudorf said consumers could expect changes in the March to September 2024 time frame.

“I believe (the reviews are) all due to be done before the end of February so that we have time to . . . incorporate it into our planning and then make it public as quickly as March 1, at least in whole or in part,” he said.

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Fuel tax to return in new year

Neudorf, meanwhile, said he’s closely watching West Texas Intermediate (WTI) crude prices as the province’s gas tax prepares to return Jan. 1.

Under the program’s graduated system, consumers are subject to a 13 cents per litre tax when the West Texas Intermediate (WTI) price falls below $80 a barrel — a number that has fluctuated drastically over 2023. Alberta reviews the average price of oil each quarter to set the benchmark, which hasn’t been finalized yet.

With WTI sitting below $80 since early November, it’s likely gas prices will be subject to that 13 cent addition come Jan. 1, said Calgary-based fuel expert Vijay Muralidharan.

The WTI price on Tuesday was hovering near $70 per barrel.

“My understanding is that you’ll be paying that 13 cents,” said Muralidharan, director of R Cube Economic Consulting.

Neudorf confirmed on Tuesday the tax holiday will end Jan. 1.

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“If you’re not collecting that tax, that has a material impact to our budget and our investment in roads and other critical infrastructure,” Neudorf told the audience.

Nathan Neudorf at the Calgary Chamber of Commerce
The Calgary Chamber of Commerce hosted the Honourable Nathan Neudorf, Minister of Affordability and Utilities in Calgary on Tuesday, December 12, 2023. Darren Makowichuk/Postmedia

Basic necessities costly in Calgary

West Texas Intermediate (WTI) has gone from $93 a barrel in late September to the $70 range this month, continuing a steady decline amid turmoil in the oil markets.

For a 50-litre tank, the tax will add about $6.50 to fill up, and more than $9 for a 65-litre tank.

The tax comes as new Statistics Canada data show basic necessities in Calgary now cost more than any other major city in the country.

The annual market basket measure in Calgary rose from $51,861 in 2021 to $55,771 in 2022 — more than Vancouver and Toronto. The market basket measure defines how much a family of four would have to earn to afford a basic standard of living.

The latest ATB Finance report, released Tuesday, said that after a year of fighting inflation, 2024 will likely be marked by “the wait” for inflation to trend back to two per cent. Meanwhile, after record-breaking migration, Alberta will see more modest population growth over the next two years, according to its projections.

Much interest will be centred around whether the Bank of Canada cuts rates from five per cent, which ATB said will likely hold until the middle of 2024, “at which point there should be much clearer evidence that the trend back to two (per cent) is durable.”

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