Alberta consumers to keep regulated-rate option for electricity

 By Sheila Pratt, Edmonton Journal January 29, 2013

EDMONTON – Albertans will not be forced into fixed-rate electricity contracts, and government will take steps to control costs on major new transmission lines now under construction, Energy Minister Ken Hughes said Tuesday.

Hughes also predicted that residential power bills would go up “very modestly” in the next few months as utility companies begin to recover administration and other non-energy costs that were frozen for the past 11 months while the Retail Market Review Committee produced its report.

Hughes noted he does not have a fixed contract himself and is among the 65 per cent of Albertans still preferring to pay the regulated-rate option for electricity — a fluctuating price approved each month by the Alberta Utilities Commission.

“It’s important to continue to provide Albertans with choice,” said Hughes.

Hughes also said until he became energy minister, he didn’t take time to study his electricity bill and work out which was the best deal.

“Like most Albertans, I never determined there was enough time in my day to actually take the time to make a decision,” he said.

Hughes announced several other steps to improve consumer protection and stabilize power prices — though critics said whether those steps will be effective depends on the details to be worked out later by a new MLA committee.

Companies like Edmonton-owned Epcor that offer the regulated-rate option will be allowed to buy electricity up to 120 days ahead, as opposed to the 45-day lead time currently in effect.

That could be a key factor in avoiding sudden price spikes such as occurred a year ago when prices jumped to record rates, said Epcor’s Doreen Cole, vice-president of electricity services.

Epcor is also pleased that the government decided to maintain the RRO, despite the fact the Retail Market Review Committee recommended it be abolished.

Cole also noted that Epcor customers will see 25 cents more a month on their bills for about six months to recover the costs of the freeze of ancillary costs.

Hughes said the province’s utilities advocate, a consumer office currently under the energy department, will be more independent and “will have more teeth” — though he declined to say how that might be achieved. That will be up to the MLA committee he will appoint at an unspecified date.

He also announced measures to strengthen the Alberta Utilities Commission’s powers to scrutinize costs of building new transmission lines when the companies apply for rate increases to cover those costs.

When companies apply for a rate increase, the onus will be on the companies to justify the costs, rather than on consumers to show costs are unreasonable, he said.

In addition, the government will direct the AUC to take steps to spread the cost of new transmission lines over many years, said Hughes. That directive comes instead of proceeding with a promised inquiry to look at how to amortize transmission costs.

“This current generation is not going to foot the entire bill for lines future generations will also use,” he said.

There is a “big gain for consumers” in giving the AUC more oversight of construction costs of new transmission lines, said Vittoria Belissimo of the Industrial Power Consumers Association of Alberta.

“That is a huge win so we can identify problems in advance,” she said. “ A lot of expenditures are not being incurred prudently and those costs deserve a test.”

Consumer lawyer Jim Wachowich says the package of reforms show the government is “attuned to the issue” of electricity prices and the need to make utilities more accountable for costs that go on the customers’ bill.

But it’s not clear, for instance, whether the stronger oversight measures will apply to the two new north-south transmission — projects of $3 billion — already underway.

“Huge and significant costs are already being talked about,” said Wachowich.

“Are we closing the barn door when the horse is out — or can we catch the horse? We need some clarity,” said Wachowich.

In its 390 page report, the Retail Market Review Committee called for an end to the regulated rate option which they called “a significant impediment” to bringing more retailers into the market.

But Joe Anglin, Wildrose critic, said the electricity system “does not need more middle men” in a retail market. Customers should have direct access to wholesale prices, he said.

Anglin also praised the government for shifting the onus onto companies to prove their costs justify rate increases. But he noted there are few challenges to those costs, as the government limits funding to interveners.

“So it’s not a balanced field,” he said.

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