It’s difficult for most Albertans to decipher the complexities of Alberta’s deregulated electricity system, but it is not difficult to conclude that our so-called market-based electricity system is not working. One only needs to read the bottom line of last month’s electricity bill for confirmation.
Albertans were told 16 years ago that it was in our best interest to dismantle one of the best-regulated electricity systems in North America for a market-based system that would lower the price of electricity. So how much longer do we wait?
Over the last couple of weeks, industry representatives provided testimony to Premier Redford’s Transmission Review Committee hearings. The Alberta Electric Systems Operator (AESO) and other industry representatives praised our market-based system as a shining example of the success of deregulation. I have a question for these representatives: What market-based system?
The AESO prices electricity approximately every two hours for Alberta’s wholesale electricity market. Every two hours generators offer to sell their electricity based on market demand. This is how the price is set, and it is called the stacking order.
The stacking order is a simple creation of the AESO, and it favours the generators and transmission line companies at the expense of the average consumer.
For example, when the AESO requires 8,000 megawatts to supply the market for the next two hours, hydroelectric power might offer to provide 4,000 MW of electricity to Alberta’s market for free.
Coal generators might offer to sell 3,800 MW for $45 a megawatt. The remaining 200 MW might be provided (bid) to the market by other suppliers for $450 a megawatt. This completes the total 8,000 MW required by the AESO to meet the expected demand.
AESO accepts hydro’s offer first, and then accepts coal’s offer and so on. This is called stacking. How is this price passed along to the consumer?
All the generation suppliers (hydro, coal and the other suppliers) get paid the top rate of $450 a megawatt — regardless of what price they were willing to sell to the market!
In this example, Alberta’s consumers don’t get the benefit of free hydroelectric power. Alberta’s consumers don’t get the benefit of $45 a megawatt from coal electricity. As long as demand remains close to the 8,000-MW level for the next two hours, consumers pay the full price as if the total 8,000 MW cost $450 a megawatt, even though 50 per cent of the electricity was offered for free and another 47.5 per cent was offered for $45 a megawatt!
If this wasn’t bad enough, when hydro and co-generated electricity in Alberta drive the wholesale price of electricity to $0/MW, the AESO interferes and clears the market (cancels all bids). The bidding process then starts over again.
Alberta’s electricity system is not a market-based system. It is a scam that guarantees the maximum price for the lowest cost electricity!
Consumers are victimized by this pricing mechanism. Alberta didn’t move to a deregulated system. Alberta went from a regulated system to a rigged system, and it’s time we unrigged Alberta’s electricity market!
Joe Anglin
Rimbey