Determining the effects on residential electricity prices and carbon emissions of electricity market restructuring in Alberta

• Author / Creator

  Jahangir, Junaid Bin

• When electricity restructuring initiatives were introduced in Alberta, and finalized with the institution of retail electricity market competition in 2001, it was argued that the changes would deliver lower electricity prices to residential consumers. However, residential electricity prices in Alberta increased dramatically in 2001, and have never returned to their pre-restructuring levels. Proponents of restructuring argue that electricity prices would have been even higher under continued regulation, citing the effect of considerably higher natural gas prices and the roles of other variables. However, many Alberta residential electricity consumers tend to attribute their higher electricity prices to factors such as market power and manipulation associated with restructuring. Since the effects of restructuring on electricity prices cannot be evaluated by simply comparing prices before and after it occurred, the main objective of this thesis is to determine what electricity prices would have been under continued regulation, and to compare them with what was actually observed. To determine these counterfactual electricity prices, a structural model of the determinants of Alberta residential electricity prices is developed, estimated for the prerestructuring period, and used to forecast (counterfactual) prices in the postrestructuring period. However, in forming these forecasts it is necessary to separately account for changes in explanatory variables that could be viewed as occurring due to the restructuring (endogenous) from those changes that would have been likely to have occurred anyway. Information from US jurisdictions is used to account for this endogeneity issue through simulation analyses. Results suggest that for 2001 to 2004, residential electricity prices in Alberta would generally have been lower under continued regulation. Since electricity market restructuring is not necessarily directed only at lowering the electricity price, its impact in Alberta on carbon emissions is also investigated. Specifically, the approach developed in the context of electricity prices is applied to determine counterfactual carbon emissions. While it is found that carbon emissions would have been lower under continued regulation, this result should be viewed cautiously given model estimation issues. However, the approach developed to construct both counterfactual electricity prices and carbon emissions is an improvement to that observed in the literature.

• Subjects / Keywords

  • Counterfactual electricity prices
  • Alberta electricity market
  • Residential electricity prices
  • Electricity market restructuring
  • Carbon emissions

• Graduation date

  Fall 2011

• Type of Item

  Thesis

• Degree

  Doctor of Philosophy

• DOI

  https://doi.org/10.7939/R3F421

• License

  This thesis is made available by the University of Alberta Libraries with permission of the copyright owner solely for non-commercial purposes. This thesis, or any portion thereof, may not otherwise be copied or reproduced without the written consent of the copyright owner, except to the extent permitted by Canadian copyright law.