Next summer, the Alberta Conservatives plan to take their final step to create an artificial market for private electricity retailers. The outcome is simple: regulated power rates will be made more unpredictable so Albertans will become interested in private power contracts that are overpriced, but provide predictable bills.
It is not too late to make the Conservatives reverse course. The government plans to hold a review of the policy this fall.
This can be reversed with no negative impact on the budget or the power grid, simply by returning to the old Regulated Rate Option.
The old Regulated Rate Option gave Albertans predictable and affordable power bills based on market prices. Utility companies bought electricity on a quarterly or even annual basis to stabilize residential power prices.
As a matter of public interest, I am encouraging the government to restore the old Regulated Rate Option.
Under the new Regulated Rate Option, which will be fully implemented on July 1, 2010, the stability of the old system will be removed entirely, exposing customers to huge price swings. Albertans who want stable power bills will have to pay a premium to a retailer to get them.
The government’s vision for the residential electricity market was to see a large number of private companies competing. Instead, the number of retail companies serving residential customers dropped from four to three, and the contracts offered are usually more expensive than the regulated rate. How this helps Albertans is a great mystery.
Some contracts which bundle electricity and gas together require a payment of $800 just to switch back to the regulated rate.
Two “model” power markets — in the U.K. and Texas — were examined by Alberta’s Market Surveillance Adminstrator in February 2009. His findings show those markets only succeeded at the public’s expense.
In the U.K., energy prices doubled after they moved to a retail market in 2004. In Texas, the private power market only succeeded after the government forced regulated utility companies to post falsely inflated rates that private retailers could easily beat.
It is true that deregulation has been a success for the large industrial wholesale market in Alberta, and I don’t oppose deregulation for that market. But there is nothing to be gained for the average family.
Those who don’t sign contracts will be exposed to spot market prices that are increasing every year. Since 2005, the number of hours the spot market price has been above $900/MWh has increased seven-fold.
Natural gas is our only local example of residential utility deregulation, and the policy has been a disaster. The government has been forced to subsidize rates to the tune of $1.9 billion over six years so Albertans can afford to keep their furnace running.
Of three companies selling residential power contracts, only Enmax offers prices that can match and even beat the regulated rate. Enmax is publicly owned by the City of Calgary and run by unionized workers.
A stable Regulated Rate will cost the government nothing, protect Albertans from soaring power bills, and encourage other private electricity retailers to become more competitive.
I encourage all Albertans to contact their MLA and voice their disapproval. There is nothing to be lost in doing so, while remaining silent will leave many Albertans with less money in their pockets to support their families.
Doug Knight is the President of the Alberta Union of Provincial Employees.