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business briefing

Briefing highlights

  • Electricity costs on rise
  • A Trudeau comment I’d love to hear
  • Markets at a glance
  • Enbridge strikes deal for Spectra
  • Powell points to further hikes

Ohm(y)

Ontario electricity costs are rising again.

Not by much, just 0.3 per cent in July from a year earlier.

But what’s important, noted Bank of Montreal economic analyst Priscilla Thiagamoorthy, is that the jump is the first after about 18 months of declines.

It’s also important – my words, not hers – because bringing down rates was a key promise made by Ontario Premier Doug Ford as he swept to power.

He’s only just into the job, so obviously you can’t point fingers, but here’s a chart he might want to see:

There’s an interesting twist to this, and that’s the impact on Canada’s inflation rate, which shot up in July to 3 per cent. That was far faster than expected and, as pointed out by Ms. Thiagamoorthy’s colleague, BMO chief economist Douglas Porter, it was a level that tied with Norway for the highest among industrialized countries.

At play here is that Ontario’s electricity rebate of a year ago has now dropped out of the equation.

“One special factor behind last year’s softer inflation print was Ontario’s 8-per-cent electricity rebate,” Ms. Thiagamoorthy said in a report.

“While it significantly lowered household power bills across the province in July, 2017, the impact has completely faded one year later,” she added.

“As a result, the cost for Ontario homes to stay plugged in nudged 0.3 per cent, year over year, higher, amping up nationwide rates 3.3 per cent, year over year - the first increase for both since December, 2016. Bottom Line: Electricity costs are powering up again, re-exerting upward pressure on consumer prices.”

While the Ontario increase may not be a big one, she added in an interview, it’s certainly something after one and one-half years of decline.

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A comment I’d love to hear

I guess I don’t need these anymore

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Markets at a glance

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Enbridge strikes deal for Spectra

Enbridge Inc. is swallowing Houston’s Spectra Energy Partners LP in a stock deal valued at $4.3-billion, part of a previously announced to buy back subsidiaries.

Enbridge is offering a sweeter 1.111 of its shares for the units of Spectra.

“Significant weakening of the U.S. Master Limited Partnership (MLP) capital markets has adversely affected growth opportunities for MLPs, including SEP,” the companies said, referring to Spectra by its symbol.

“MLPs are dependent on consistent access to the capital markets at a reasonable cost of capital to grow their distributions,” they added.

“If SEP were to continue as a stand-alone entity in such an environment, it would be required to transition to a self-funding model using internally generated cash flow. SEP’s priority would be to strengthen its balance sheet thereby limiting future distribution growth.”

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