Seamless Electricity Trade between Canada and US Northeast

Abstract

We analyse how the wholesale electricity market deregulation could modify exchanges between three Canadian regions (Ontario, Quebec and New Brunswick) and two U.S. regions (New York and New England), which were already trading electricity before the regulatory change took place in 1997. We find that the pre-1997 exchanges already made possible fuel cost savings of $397.2 million per year while deregulation adds annual savings of$358.7 million. Canadian regions are the main beneficiaries under the assumption that exports are priced at the marginal costs of the importing regions. Imports from the Canadian regions, although significant, are not large enough to lower the marginal costs of the U.S. regions. Hence electricity deregulation across the border should not significantly decrease prices in the U.S. regions although the latter are becoming more dependant upon imports from Canada. Greenhouse gas emissions increase by 4.3 Mt CO2 eq. in the wake of the open wholesale electricity market because of the low cost of coal, particularly in Ontario. Environmental concerns and the limited availability of additional hydroelectric power in Canada could change the trade patterns as electricity demand continue to grow.Electricity, deregulation, trade