By COLLIN GALLANT on November 20, 2019.
A provincial cap on electricity prices that many utility users may not have known existed will be eliminated under legislation proposed this week to implement the Alberta budget.
City utility officials says local customers will likely notice the difference on their bills going forward as higher power rates are forecast, but say they could be shielded by considering contract prices the city has offered for years, but with little uptake.
Two years ago, the previous provincial government moved to smooth out any potential cost increases due to coal-power phase-out by setting the maximum price billed to residential and small-to-medium commercial clients at 6.8 cents per kilowatt hour.
But that was all accomplished before bills were sent, and any difference with a floating market price approved by regulators was paid directly to power companies from carbon levy revenue.
That levy was cancelled by the province in May, and at the same time the consumer cap was put under review.
Bills tabled this week show the province will do away with the program that has lowered power bills in 12 of the past 23 months between a couple dollars to as much as $15 per month for homeowners.
“We’ve had some discussions with the province about implementation, and effective Dec. 1, the (cap) will not be in effect,” said Jaret Dickie, the manager of the city’s utilities business support office.
“Customers may not have seen the change on bills (since early 2018), but from the customer’s perspective they may notice higher prices (now).”
Bills 20 through 22 contain a host of measures to enact the recently introduced budget. Along with the price cap removal, the specific bill 21 also removes tuition caps, halts cost of living increases to AISH recipients and seniors benefits, provides a stance for public sector wage bargaining and creates a system to get more doctors practising in rural areas.
The 6.8-cent cap – set at the previous 10-year-average – was available to most power consumers in Alberta as the majority use the floating regulated rate option (RRO), rather than entering into contracts.
It was extended to Medicine Hat’s municipally owned power franchise area, where commodity price is set at the average of RRO prices elsewhere in Alberta.
That average saw the rate go into effect 12 times since January 2018, including eight times in the past 12 months.
“Based on the forecast, volatility will continue especially from a power pool perspective,” said Dickie. “We’re asking customers to explore energy supply contracts.”
That price, also offered currently at 6.8-cents, is based on cost-recovery and rate of return set by local administrators.
But consumers had little incentive to sign on considering that prices they paid couldn’t rise above 6.8 cents, and were lower about one-third of the time over the last year.
However, potential exposure to much higher prices are a good reason to consider signing up for set-rate pricing, said Dickie.
As for the provincial cap, actual savings are difficult to determine, since more power is typically consumed in certain months, and the commodity price makes up only a portion of the cost on a utility customer’s bill.
The highest market calculated average over the past two years was in August at 9.4-cents. Based on typical usage, the cap would have lowered the billed amount by about $15 that month.