Alberta's regulated rate roller-coaster: Why some electricity bills have been so high

Melanie Green has been stuck on a two-year roller-coaster of spiking power prices.

Like roughly a third of Alberta electricity customers, she's on the default regulated rate option (RRO), and her recent bills have been sky-high.

In September, she opened a bill with more than $260 in electricity charges for her Fort Saskatchewan, Alta., home $100 more than what she paid for the same period last year, even though she actually used less power.

And that's on top of inflation straining her budget beyond its limit every month: weekly grocery trips for her family of four regularly cost around $350, when she used to get what she needed for $200.

She's heard the advice to get a fixed electricity contract, which would keep her monthly costs calculated on one rate for a set term.

But to lock in a lower rate, electricity retailers often requirethat you meet their credit standards, or they ask for a deposit upfront, up to30 per cent of the estimated annual bill.

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Green says the cost poses a barrier that she can't afford.

"We really do not have the ability to choose ...because we can't just switch," she said.

"You also have to pay the arrears on your account. So sometimes in winter, my bill might be up to, like, $700. There's no way I can pay the arrears plus the deposit on that."

Alberta's Utilities Consumer Advocate fields calls from people who need help with their utility bills, whether it's gettinginformation on their options or mediation for a billing dispute.

Executive director Chris Hunt said rising costshave been a big concern for Albertans as the RRO rose from about 16 cents per kilowatt hour in May to 32 cents per kilowatt hour in August.

"We had basically twice the number of calls that we did this September as opposed to the previous September," he told CBC News.

"It's been very difficult for people. Those that were able to exercise their retail options and look for competitive rates and lock into a stable rate did much better weather that storm than others who either didn't, or couldn't."

Green said she doesn't believe her family is the only one in this bind.

"We're just in a cycle of trying to catch up before it gets cut off. This is the best we can do."

What's driving up costs?

From July 2022 to April 2023, the provincial government gave out monthly electricity bill rebates up to $75. If you received them at the time, that's one reason you're noticing higher costs now.

In Alberta, you might payfor electricity based on the default RRO through companies like Epcor, Enmax or Direct Energy Regulated Services.

Oryou can have a contract with a competitive retailer, which can be basedon a fixedrate that stays the same for a set period, or a floating rate thatgoes up and down with market prices.

But anyone who isn't locked in on a fixed-rate power contract in recent months has been ona rough ride.

Economist Joel MacDonald said for people on the RRO or a contract with a floating rate, electricity costs were "exceptionally high" this summer.

"What you had was neighbours or business neighbours, one person seeing their electricity rate triple, and then walking next door and saying, 'Aren't these electricity rates crazy?' And their neighbour saying, 'Actually, mine are staying about the same,'" he said.

The RRO is tied directly to the market price of electricity, so it fluctuates every month.

In the past, the RRO was reliably less than 10 cents per kilowatt hour. It first spiked above that threshold in July 2021, and it hasn't gone back below it since.

The provincial government instituted a cap that suppressed it to 13.5 cents per kilowatt hour for the first three months of 2023, and that temporarily sheltered RRO customers from soaring rates. Costs above the cap are deferred across RRO electricity bills until the end of 2024, adding about 2.5 cents per kilowatt hour to the base cost.

But the RRO surged again this summer, up to a high of 32 cents per kilowatt hour in August.

In comparison, the average fixed rate offered by competitive retailers is about 12 cents per kilowatt hour. Consumers whohave been locked in longer have even lower rates.

Provincial government eyes RRO

Last week's speech from the throne outlined plans for "a package of substantive reforms" to Alberta's electricity system.

Affordability and Utilities Minister Nathan Neudorf said changes to the RRO are up first.

"The name of it implies that it's regulated and protected, and a lot of consumers think that they have this protection that's not actually there," he said at the legislature Wednesday."So that's where we're likely to start."

He said there still needs to be a default power option for newcomers who have yet to build credit in Canada, or people with other barriers to signing a contract with a retailer.

But for people stuck on the RRO,Neudorf didn't commit to a new round of subsidies.

"[The RRO] is trending, continues to be forecasted to trend down in the months ahead. We'll monitor that, but hopefully if that's true, the relief is already there."

Market forces at play

University of Calgary economist Blake Shaffer said ownership of power plants in Alberta has been concentrated with a few companies. After the province's power purchase agreements expired at the end of 2020, a lack of competition is the main factor sending electricity prices up.

He said costs for consumers should ease with three large power plants coming online, reducing the major companies' ability to exercise market power.

Shaffer added that the companies aren't doing anything illegal it's how Alberta's power market works.

"While it is not nice for the consumer during these periods of high prices, the general idea is that high prices beget new entry, which is what we're seeing."

However, a recent development could change the forecast.Last week, Alberta's largest generator, TransAlta, announced the acquisition of Heartland Generation, another big electricity generator.

The plan still has to be approved by regulators, but Shaffer said it would be another increase to market concentration, bringing more risk for higher prices.

What now?

The RRO dropped to just below 20 cents per kilowatt hour for November. But the dark, cold days of winter are coming, and electricity consumption will peak as more people spend time inside.

Shaffer said that based on forward markets, the RRO should be on its way down.

"We're going to have high prices through February not as high as they were in August but in the sort of 15 to 20 cent range," he said.

"After we get through this winter it looks like we're back in a world where fixed or floating is going to be a personal preference."

He added getting a fixed rate is still the best strategy for the momentif you can.

Hunt, with the Utilities Consumer Advocate, encouraged people to reach out for help navigating their utility bills if they're struggling.

"In addition to advising them on retail options are, our mediation officers are aware of what social programs are out there to assist consumers that are really struggling," he said.

"And if they need some kind of emergency relief, we can connect them with various agencies that have some programs in place to help people."