Province unveils plan to protect Albertans from power price swings

The Alberta government is proposing measures, to take effect in January 2025, that aim to protect power consumers from wild price swings.

Albertans have three options when purchasing their electricity and natural gas utilities: the default power rate — currently called the Regulated Rate Option (RRO) — a competitive contract for a variable (floating) rate, or a competitive contract for a fixed rate.

Premier Danielle Smith says the RRO is misleadingly named because it can vary monthly according to weather and global events.

She says her United Conservative Party government aims to introduce legislation this spring renaming it the Rate of Last Resort so consumers can better understand what they’ve signed up for.

Smith says her government is also planning set the Rate of Last Resort every two years for each provider so that there isn’t so much volatility.

The government would also require providers to confirm with customers, within 90 days of providing their services, whether they want to sign on to a competitive rate or stick with the default.

It would also have providers share with customers how to access Utilities Consumer Advocate resources and remind them of their options on their monthly bills.

Alberta’s for-profit retail electricity market is home to over 50 power retailers that provide fixed and variable rate contracts.

The province said tens of thousands of Albertans moved off the default rate in 2023, and said those still on the rate should consider their options.

EPCOR provides the RRO service in Edmonton, and in the surrounding territory served by Fortis Alberta, and said it would continue to provide this service for the renamed energy product.

Between the RRO and its own competitive retail electricity business Encor by EPCOR, the company said it has about 560,000 customers across Alberta.

“We support customer choice, a fair, efficient and openly competitive electricity market, and action on affordability,” said a statement by the Edmonton-based company, adding it looks forward to working with the government on the initiative.

“EPCOR has advocated for changes to Alberta’s electricity market that would reduce the price of power paid by our customers,” the company said.

Affordability and Utilities Minister Nathan Neudorf said the government it is also looking at distribution, transmission and generation fees, which for some consumers can make up a large percentage of their power bills.

Previous updates to electricity market rules

The province began unveiling changes last month in what could be a series of significant tweaks to Alberta’s electricity market.

The rules that govern the province’s current system were designed at a time when the bulk of Alberta’s power needs came from coal, and don’t necessarily work for a system that is now driven by natural gas and renewables.

In March, the province said it was updating its electricity market rules with new temporary measures it says will help lower consumers’ utility bills.

The new measures are aimed at the practice of “economic withholding,” a strategy regularly used by power generators in Alberta’s unique-to-Canada free-market electricity system.

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Under Alberta’s competitive market design, electricity suppliers submit offers into the energy market known as the power pool every hour.

The Alberta Electric System Operator then dispatches the suppliers’ electricity, starting with the lowest-priced offers and moving higher until the province’s power needs for that hour are met.

Economic withholding is when power producers deliberately hold back some of their supply, offering it at a higher price. It’s a gamble that can pay off if the operator needs that power, since the producer makes more money, but backfires if the province’s power needs are met before it gets to the higher-priced offer.

The practice is not illegal, but has been highly criticized recently as one of the factors contributing to soaring consumer power bills in the province, as well as a growing number of occurrences where power prices in the province have been higher during off-peak periods than during periods of peak demand.

Under former Premier Rachel Notley’s NDP government, there had been a plan to transition from an “energy-only” to a capacity market, but the UCP later scrapped it.

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— More to come…

— With files from Karen Bartko, Global News

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