May 27th, 2024

Alberta’s default rate nearly as low as Hat’s ‘best in market’

By Medicine Hat News on April 30, 2024.

As demand has fallen in the spring, so too has power prices, meaning the province's new RRO is not much higher than Medicine Hat's rate, altered in the fall to appease unhappy local customers.--NEWS FILE PHOTO


The new default power price in the province for May essentially matches a “best in market” rate offered by the City of Medicine Hat while it evaluates its long-term rate-setting strategy.

The Regulated Rate Option from EnMax, Direct Energy and Epcor will average 7.2 cents per kilowatt hour for May, before an add-on charge brings the all-in price to 10.5 cents.

Medicine Hat used that average determine the local default rate until last October, when record high prices and uproar from ratepayers led to the change and a review of business philosophy.

The rate of the current financial quarter was determined to be 6.6 cents on April 1, under a floor price that correspondingly left the new rate at 7 cents per kilowatt hour.

The larger utilities add-on charge to recover a 2023 provincial deferral program ranges between 2.5 and 3.8 cents.

The City of Medicine Hat self-financed the provincial repayment program internally, thereby avoiding lumping local ratepayers into the province-wide cost recovery program.

Instead, a charge of 0.952 cents per kilowatt hour is pooled among all customers in the Medicine Hat franchise area, including Redcliff and parts of Cypress County.

The local rate should remain fairly consistent at a total of 7.95 cents until July 1, when a new quarterly rate is set.

Spring is typically a “shoulder season” between winter heating and summer air conditioning. Lower demand typically translates to lower pries on the Alberta market.

The RRO average was above 15 cents in January and February when the city’s blanket rate was 9.2 cents in total. Each penny difference amounts to about $6 for the average residential property per month.

The city’s energy charge is now based on the longer-term forecast price for market retailers before mark-up.

Last week, Premier Danielle Smith said the RRO options would be renamed as the “Rate of Last Resort” in regulations set to be in place next year.

While it is set under regulations, it also follows the market up and down, leading to volatility that customers may not consider judging from the name, she says.

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