Lower electricity prices appear on the way for Albertans no matter what reforms win out

There's been a lot of talk recently around ongoing reforms to Alberta's electricity market. Just this week, Alberta's minister of affordability and utilities, Nathan Neudorf, spoke about some of them during an event at the Calgary Chamber of Commerce

Theyincludethe province's moratorium on renewable energy, but also a provincial review into the electricity marketand a look into thepractice known as economic withholding.

Speaking to reporters after that event on Tuesday, Neudorfsaid it was likely that all of them would conclude before the end of February 2024.

The amount of thermal generation coming onlinewas "creating the basis" for aprediction that prices are set to go down,according to Neudorf.

The province is also working with the City of Calgary on its local access fee, he said.

"So, we are looking at all of those things. I am very confident we will not only be able to stabilize [costs]but bring it down to historical prices of less than 10 cents a kilowatt hour, as well as the all-in cost to the ratepayer being at a much more affordable level," Neudorf said.

Albertans haven't been shy in expressing their frustration when it comes to how much their electricity bills have gone up this year. For thosepaying the fluctuating regulated rate option (RRO), prices peaked this summer atnearly 32 cents per kilowatt hour before gradually declining to end the year.

And though Neudorf and the provincial government are promising new initiatives to be put into practice after the various ongoing studies conclude, that 10 cents per kilowatt hour figure has long been on the radar for those who study electricity markets, such asBlake Shaffer, a University of Calgary economist.

"When I heard comments about, 'I'm confident we will be able to stabilize and bring down[prices] to 10 cents a kilowatt hour,' that is known. That is set to occur," Shaffer said.

Forward markets

That's because offorward prices, prices agreed to in advance for future electricity delivery.

Shaffer used an analogy here: it would be like knowing Halley's Comet is about to pass by Earth, then stepping outside, clapping your hands and saying, "Aha!" as it does so.

"As though you were somehow causal in somehow bringing that here.

"Power prices, starting in March, are going to be getting down into near the 10 cent level, and their forecasts are remaining that low for the next two to three years," Shaffer said.

"This isn't me doing forecasting, this is the forward markets."

Though Shaffer and others have been urging Albertans for the past two years to ensure they're on fixed rates, that will disappear as a priority for the next little while, largely due to the fact that a massive onset of new supply is due to come online.

That includes renewablesapproved before the moratorium, as well as almost 3,000 megawatts of new gas.

"That's like a quarter of the existing fleet we're adding in the span of less than a year. So with all of those coming on, we're going to be in a bit of an oversupply situation, which is a change from where we've been recently," Shaffersaid.

That isn't to say that government policy isn't important, Shaffer noted it will affect future prices in the province and what will get built in the future. It just won't have an impact on the drop inprices Albertans can expect to see in the next few months.

Renewablesmoratorium coming off in February

When asked by a reporter on Tuesday whether the pause around renewables projects could potentially be extended past the end of February, Neudorf said the pause was lifting at that point "no matter what."

"We've had some intermediate conversations with the AUC[Alberta Utilities Commission]. They're on track for getting us the information we need," Neudorf said.

"We've continued to discuss with multiple stakeholders across the spectrum, and other jurisdictions as well, as well as working with [theAlbertaElectric System Operator] and the market surveillance administrator for their input, which will be provided in time so that we can make a comprehensive path forward by the end of February."

The Opposition NDP has been calling for an independent investigation to take place into Alberta's power prices, calling the governing UCP'spositions on renewablesand the phase-out of coal to be "misleading."

"The real blame lies with the UCP's policies that allow companies to generate excess profits because of their control of the market,"said Kathleen Ganley, the NDP's energy critic, in a release.

The AUChearings into the province's strategy around renewable energy projects aredue to wrap up on Friday.