Price spikes a symptom of a broken system: MLA
The tripling of wholesale electricity prices between the second quarters of 2012 and 2013 shows Alberta’s system needs to be fixed, says Wildrose energy critic Joe Anglin.
Anglin said while that doesn’t mean power bills will triple for most consumers, big spikes in electricity prices eventually find their way down to consumers through a variety of rates and other charges. “The government hides behind this fallacy of how costs are not passed down,” said Anglin.
Even those supposedly protected by mechanisms such as the regulated rate option, which is used to smooth out pricing peaks and valleys, will be affected.
The regulated rate option merely serves as a “delaying tactic” for price increases, not a cushion against higher bills.
Commercial businesses that don’t qualify for rate regulating programs immediately feel the impact of wholesale price increases, he said.
A recent report by the Market Surveillance Administrator (MSA) shows the average pool price soared to $123 per megawatt-hour (MWH) from $40 over the same three months a year ago.
Higher demand at a time when power plants were shut down for maintenance — both planned and unplanned — and a drop in electricity available for importing led to the price increases, said the MSA.
Anglin said the continuing roller coaster price ride means there’s a problem in the marketplace.
“And that has caused the residential rates to start rising.”
The province moved to address pricing volatility, extending the buying time on regulated rates from 45 days to 120 days. Major power players have already started incorporating those changes.
Anglin said that only extends the delay time. “It doesn’t mitigate those costs. Those costs will get paid for, one way or the other.”
It’s time to sit down with the industry and come up with a better solution, he said.
“There’s lots of solutions out there. We can put an end to the spiking.”
Energy department Mike Feenstra said wholesale prices are not the rates residents or consumers pay.
“I think we need to make that very clear and I think Mr. Anglin sometimes confuses the two.”
About 60 per cent of Albertans are on the regulated rate options and 40 per cent have committed to long-term contracts with power companies at set prices.
It is not surprising to see wholesale price increases in the summer when air conditioners kick in and power demand goes up while at the same time there are outages to contend with.
“It’s not unusual in that respect. But we’re not going to take knee-jerk reactions and try to change something when we’re already working on concrete, thoughtful steps to protect consumers and stabilize prices.”
He pointed to the regulated rate option changes and the work being done currently by an MLA committee examining the recommendations forwarded by an expert panel appointed by Premier Alison Redford last year.
Feenstra said most of those paying wholesale prices are large power users that are not among the 84 per cent of large consumers not on a long-term contract.
“If there is any impact, I think Mr. Anglin is overstating it.”