Alberta’s deregulated power market is causing record high utility prices and threatening the viability of some local businesses, say opposition parties.
Liberal Kent Hehr, the Official Opposition energy critic, says market forces have worked against, rather than for, consumers.
“Albertans now pay among the highest power prices in the nation, because the government hasn’t managed the grid properly or properly incentivized utility companies to build more baseline generation,” he says.
“The result: more money out of your pocket to make big power companies rich.”
Last week, record low temperatures across the province leading to high demand, combined with unplanned outages at three power plants, caused the kilowatt-hour price to spike to its maximum level of over 99 cents.
When the Conservative government deregulated the energy sector in the late nineties they claimed market competition would lead to savings for consumers. But as the deregulation dreams faded, consumers faced unpredictable price spikes and the decision became increasingly controversial.
The majority of Alberta’s consumers have chosen not to commit to lengthy fixed-rate contracts, preferring the Regulated Rate Option (RRO)—a default price based on the next month’s projected market price of electricity.
The RRO price per kilowatt-hour rose to 13 cents in December and 15 cents in January, nearly double the 2011 average of 7.7 cents.
Hehr says electricity is an essential service that must be affordable for everyone, especially in the winter months.
“The PCs promised that deregulation would open up the power grid to the free market and everyone’s power bills would drop. Well, it hasn’t turned out that way,” he says.
But Evan Bahry, executive director of the Independent Power Producers Society of Alberta, says the prices are proportionately fair because the province’s generation supply has expanded significantly, and is still cheaper than greenfield coal or wind plant alternatives.
“From our perspective, the competitive market has worked for Albertans. Over the past decade, Alberta’s net generation capacity has increased by 40 percent, while wholesale power prices have increased by less than 10 percent,” he wrote in a recent Calgary Herald op-ed.
“To get a sense of just how much supply we’ve added, SaskPower has a total of 3,500 megawatts to serve their entire province. In Alberta, more than 5,400 megawatts of new supply was added in the past decade alone.”
Although Energy Minister Ted Morton has said he’s “not happy” about the province’s recent supply-driven price spikes, he agrees with Bahry that prices are relatively competitive.
Businesses Suffering
NDP opposition leader Brian Mason says deregulation has only benefitted power generators, whose profits have risen as much as 25 percent from 2010 to 2011, while local businesses are suffering from increasingly burdensome utility bills.
“When Alberta businesses are sending workers home because they can’t afford power, it’s a sign deregulation is the Alberta disadvantage for industry,” Mason says.
He claims some businesses have had to shorten their operating hours or cut back on staff to compensate for escalating power prices, citing Oldcastle BuildingEnvelope as an example. Oldcastle’s Calgary manager Darren Peck shut down production for two days and sent hourly wage employees home because of recent high power prices.
“We are completely at the mercy of power companies,” Peck said in a news release.
Mason has started a petition and a social media campaign opposing deregulation, as well as a hotline for Albertans to share their stories of “power price pain.”
Alberta is currently the only province in Canada with fully competitive wholesale/retail power markets.
A fundamental feature of the system is that the price is impacted by short-term market forces rather than long-term rate regulation. Prices have proven to be highly volatile in the province, impacted by such factors as extreme weather, facility outages, demand growth, and supply availability.
Hehr and Wildrose Party leader Danielle Smith called for a review of the deregulated market last November when TransAlta, Canada’s largest publicly traded power generator, admitted to blocking power imports into Alberta in 2010, creating a false shortage that increased electricity prices.
The Market Surveillance Administrator levied a penalty of $370,000 on TransAlta for the price manipulation, an amount that is being reviewed by the Alberta Utility Commission.
The penalty is the highest of its kind ever proposed in the province. However, the Industrial Power Consumers Association of Alberta estimates the manipulation could have cost consumers close to $5.5 million.
