Remember those $75 electricity rebates last year? That's why Alberta's inflation numbers look so high now

Canada's inflation rate has cooled in 2024, while Alberta's has shot up.

Nationally, we've seen two consecutive months with inflation figures below three per cent: January rang in at 2.9 per cent and February at 2.8 per cent.

Provincially, however, it's been the opposite: Alberta's inflation rate rose to 3.4 per cent in January and then again to 4.2 per cent in February.

That may seem alarming, but it's not actually something to be too worried about, says University of Calgary economist Trevor Tombe.

That's because it's mostly the result of a temporary and artificial market intervention at this time last year — rebates on electricity bills issued by the Alberta government.

"It's a lump-sum cash amount, so shouldn't really be seen as a contributor to inflation," Tombe said.

But given the way the inflation figures are calculated, the rebates are now having a knock-on effect on Alberta's numbers.

Those rebates were worth $50 per month from July to December 2022 and then jumped to $75 for January and February 2023, before falling to $25 in March and April 2023 and then ending altogether.

The rebates temporarily drove down the actual power bills Albertans were paying, especially in January and February 2023, when they maxed out at $75 per household

And that decline was picked up by Statistics Canada's inflation-tracking algorithms.

This results in an echo effect a year later, as the inflation rates for January and February 2024 are calculated by comparing the now-unrebated prices to the rebated prices from those same months in 2023.

"It's an artifact of how we measure inflation and how the government decided to deliver the rebate," Tombe said.

"Had they just handed people money, then it wouldn't have affected the inflation calculation at all."

All this creates the appearance that Alberta's inflation rate is skyrocketing just as the national rate is finally starting to fall back into the Bank of Canada's target range of between one and three per cent. 

Statistics Canada noted this "base-year effect" created by the rebates when it released inflation figures from January, another month in which Alberta was a notable outlier.

Tombe estimates this effect accounts for the majority (0.8 percentage points) of the 1.4-percentage-point difference between Alberta's inflation rate and the national inflation rate in February.

That said, he noted there were also some genuine differences in the price changes of other goods and services in Alberta compared to the rest of Canada in February.

Natural gas and groceries helped drive Alberta's rate a bit higher in February, he said, but an even bigger factor was rent.

Next to the electricity-rebate effect, Tombe said increases in rent in February were the "next most important item" driving up inflation in Alberta, accounting for 0.3 percentage points of the 1.4-point gap between the provincial and national rates.