Electricity prices set to spike in Alberta this month

By Miriam Ostermann, Associate Editor

Unseasonably low temperatures won’t be the only thing driving up electricity bills in Alberta this month as rates are set to nearly double in April, tugging on the purse strings of certain customers and the provincial government.
Electricity rates for Direct Energy Regulated Services, Enmax Energy, and Epcor Energy customers will be jumping from historically low rates to nearly twice their value.
According to the Alberta Utilities Commission, which determines the rates, the Enmax Energy rate will hike to 9.28 cents per kilowatt-hour (kW-h) in April from 5.11 cents per kW-h in March. Epcor Energy has increased to 7.7 cents per kW-h from 4.5 cents per kW-h and Direct Energy is jumping to 7.9 cents per kW-h from 4.5 cents per kW-h.
However, the Alberta Government’s footing some of the bill with the regulated rate option cap, that’s set at 6.8 cents. The cap will apply to those without fixed rates and on plans with floating rates that follow the regulated rate option (RRO) with the cap, where the government will pay the difference with money from the carbon levy.
With the largest rate increase in comparison to other energy companies, Enmax Energy was among those taking a proactive approach and reached out to their customers who will be affected by the changes – a small percentage of the customer base.
“The government price cap will not be applied to every customer’s plan. It depends what plan you’re on; our rates have historically been quite low and so this is the first time that we’re seeing the price cap actually come into effect,” said Enmax Energy Media Relations Specialist Gina Sutherland. “But we did proactively let customers, who the price cap will not apply to, we sent them e-mails last week to give them a heads up that they will see some fluctuation in the market and to let them know in advance.”
The affected part of the electricity bill, or the energy component, makes up between 20 to 30 per cent. On average, where a household uses 700 kW-h, those customers not on a fixed rate but affected by the RRO, and therefore only experiencing a two cent difference, could see an increase of roughly $14 a month.
However, the rate increases didn’t come as a surprise to industry experts who said the increases are not out of the ordinary and have been expected for months.
“This April price isn’t anything other than the norm, in fact it’s closer to the historical average than where we’ve been, and for the past three years we’ve had record low prices for electricity so we’re just reverting back to the historical norm,” said Blake Shaffer, the former director of trading at TransAlta and a PhD candidate in economics at the University of Calgary.
“It was not surprising at all, markets have shown this for months now. I would say the context is really important here. We’re not talking about a price spike or anything out of the ordinary. We’re just returning to the norm from something that was unsustainably low for three years. These were the lowest prices since we became a competitive energy market in 2000. It really wasn’t economic for any plants to run for any long-term plans.”
TransAlta retired one of their coal power-generating units at the turn of the 2018 calendar year, and mothballed – or temporarily shut down – several more in an attempt to transition to cleaner energy. Shaffer explained that when it comes to electricity, generators pay the bill for the carbon tax and depending on the type of plant that could mean shelling out money or reaping the benefits.
“In effect a gas plant pays no carbon tax, a coal plant will pay something, and something that doesn’t emit receives, so that’s changing the baseline,” he said. “What that’s intended to do is it dampens any effect on prices from the carbon tax but it sends a shift within the type of fuel that generates power form coal to gas. There is a limited direct effect. Where it does have an effect and part of the reason why prices are rising is coal plans are shutting down. It’s sort of like chasing your tail. They shut down because prices are low, but by shutting down prices rise a little bit.”
Nearly half of Albertans are projected to be on plans with floating rates following the regulated rate option with cap. Electricity rate increases have taken effect this month across the province.