Alberta maintains the default electricity rate and renames it the last resort rate

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Last Resort Rate.

You may call it Alberta’s default electricity price or feed-in rate option (RRO), but the name of the energy pricing option used by almost a third of the province’s consumers is about to change.

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After examining several options over the past year, including phasing out the RRO, the Alberta government will announce several changes to the default electricity rate on Thursday.

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Among those measures will be a change to rename the Rate of Last Resort, as the province seeks to encourage consumers to abandon the volatile default price and instead examine available contracts from retail providers, whether with a rate floating or longer term.

It will also make technical changes to how the default rate is ultimately determined, saying these modifications should reduce the volatility (and potentially lower prices) that have affected thousands of Albertans in the RRO.

Public Services Minister Nathan Neudorf said the name change was recommended by a working group that examined the default rate. Its goal is to help educate people so they understand that the regulated rate is volatile.

“The word regulated (being) there has given a lot of people the understanding that it is protected, in some way, and it is not,” Neudorf said in an interview.

“Changing the name to something a little more drastic – which is where we’re going with the Last Resort Fee – will give momentum and awareness to consumers that maybe they should look for something a little more stable.”

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In Alberta’s deregulated energy market, consumers can contract with one of more than 50 retailers or stay with the default tariff.

According to the RRO, rates are set each month by the Alberta Utilities Commission (AUC), based on the province’s wholesale electricity rates.

With electricity prices skyrocketing over the past two years, the default price has swung wildly and hit consumers.

The rate in Calgary jumped from 16 cents per kilowatt hour (kWh) last May to a record 31.9 cents in August. With wholesale prices lower this year, the RRO has fallen to 12.8 cents per kWh in April.

Many Albertans dropped the default rate last summer as prices soared, “however, with population growth in the province, that number is largely unchanged,” Neudorf said.

About a third of commercial customers, 46 percent of agricultural customers and 29 percent of residential consumers are now in default.

However, some vulnerable Albertans may not be able to get lower-priced contracts from retailers (if they have credit problems or simply moved to the province) and need to access the default rate, he said.

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More than half of Albertans were under RRO in 2016, when the default rate averaged just 4.2 per kWh.

Neudorf hopes the new nickname will prompt people to consider leaving the RRO.

“It’s an uncomfortable term, the rate of last resort,” he added. “That name creates discomfort and we hope it just teaches them that they have options.”

In the mandate letter sent by Premier Danielle Smith last year, Neudorf was asked to review several aspects of Alberta’s electricity system, including “exploring the potential phasing out of the feed-in tariff option for electricity.”

While discussing the concept, the minister said the default rate is “quite fundamental” to the functioning of the deregulated system and is sometimes considered the benchmark rate. (For example, the City of Calgary has partially based its franchise charges to customers on the monthly default rate, which caused an increase in council revenue last year.)

In some rural areas, options for electricity contracts may also be limited and RRO is sometimes the only option.

As part of the regulatory changes, the province will require RRO providers, such as Enmax or Epcor, to contact the consumer within three months of delivering power and confirm whether they wish to maintain the default rate.

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The changes will give default tariff providers more flexibility in how they purchase energy, purchasing electricity over a longer period of two years for the RRO tariff (compared to the current three months), so could potentially stabilize prices. prices through coverage.

“It becomes the exchange rate to beat because it is more stable and more predictable,” Neudorf said.

“We expect the industry to express some discontent with these (changes) because it will put downward pressure on them and their competitive offerings.”

Government forecasts have indicated that the default electricity rate last year would have averaged less than 12 cents per kWh under the proposed changes, instead of the nearly 22 cents achieved during the current three-month procurement period.

The changes will be introduced through regulations and legislation later this spring and are expected to be implemented by January 1, 2025.

Chris Varcoe is a columnist for the Calgary Herald.

[email protected]

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