Summer power prices to surge for Albertans on regulated rate plans

Albertans on regulated rate plans can expect a significant spike to their electricity bills this summer, with an expected surge in power prices.

Prices will climb to about 28 cents per kilowatt-hour in July, as high anticipated usage coupled with market factors and deferred repayment of affordability measures put in place earlier this year combine to drive rates up. The price is up from 16 cents/kWh in May and 16.7 cents/kWh in April.

The summer rate is an “incredibly high” price that ranks near all-time records, said Alberta utility consumer advocate Joel MacDonald. But not all homeowners will feel the same pinch.

“What’s going on in the electricity market is confusion, because one neighbour’s electricity bill has been the exact same for two years, and then his next-door neighbour has tripled,” said MacDonald, who owns energyrates.ca. The difference lies in the regulated rates option, or RRO.

The RRO is a floating electricity contract that sees consumers pay a rate for power that changes monthly based on the market price of electricity, rather than being locked in to a fixed price. It’s the default option for consumers who don’t sign on with a competitive retailer, and is also commonly used by consumers with barriers such as poor credit scores.

The result is the potential for significant month-to-month price swings, with consumers possibly on the hook for extremely high rates such as those expected this summer.

“The most advantageous products are the competitive retail products, with costs significantly lower than the RRO,” said MacDonald, who urged Albertans on the RRO to move to a fixed rate. He said that change can be done without penalty with 30-days notice, and added the major swings come from Alberta’s electricity market model, which is unique in North America.

“The reason Alberta is so volatile is because we have what’s called an energy-only grid. Generators are only paid when they’re contributing electricity to the grid . . . This doesn’t incentivize generation companies to have standby generation, so in times of high demand there’s not excess generation to turn on.”

Several elements play into this summer’s rising rates, including an ever-increasing demand during hot weather, a trend MacDonald said is driven by climate change, as well as the carbon tax.

But also playing a role is the repayment of about $200 million that Alberta loaned utility companies to cover the gap between RRO prices and the 13.5 cent/kWh cap on electricity payments put in place for three months at the start of 2023 as part of Alberta’s Affordability Action Plan.

The deferred repayment will take place over 21 months, through to December 2024. It’s only RRO consumers on the hook to pay back that loan, with the deferral accounting for 2.7 cents of the June rate. As more consumers switch away from RRO plans, that burden will increase for those who remain on those contracts, as a shrinking pool of Albertans shoulder the deferral cost.

In a statement, Andrea Farmer, the press secretary for Alberta Affordability and Utilities Minister Matt Jones, said the deferred rate cap was meant to shield consumers against high energy prices over the high-demand winter months.

“We share Albertans’ concerns about high electricity rates and our government continues to monitor and review the electricity system as part of our commitment to keep life affordable for Albertans,” Farmer said.

The Opposition NDP criticized the UCP’s handling of utility prices, calling for an “emergency cap” on power prices as well as an investigation into why they’ve skyrocketed.

“We recognize the cap is not a solution forever and that is why the investigation is needed,” said NDP energy critic Kathleen Ganley.

“Something must be done to shelter families from the burden of massive power prices that are hitting record highs again as Albertans continue to struggle with an affordability crisis.”

Twitter: @jasonfherring

You can read more of the news on source