Escalating Electrical Power Bills – April 2012, LeRon Torrie

All Electrical bills now have two parts:  the actual energy charges and the delivery charges.  In 2003, the PC Government instituted what was called Electrical De-Regulation which introduced competition into the electrical generation sector.  There was a period of extreme billing disruption and problems, but by and large, the effort was successful.  New generation capacity was built and energy rates have come down, due in part to competition but also due to current depressed natural gas prices.

             While competition was introduced into the generation, the transmission and distribution sector, or Wire Service Providers (WSP) remained a virtual monopoly situation, regulated by the Alberta Utilities Commission.  Our escalating electrical bills are due to this aspect of the Alberta electrical grid or network that delivers our power to us.

            In October 2003, in response to the public outcry against the problems initially caused by electrical de-regulation, the Premier appointed a Consumer Utilities Advocate or UCA to mediate and seek ways to mitigate the problems.  The UCA  set up an advisory council of ordinary Albertans to bring grass roots input to the problem.  I was appointed, as an irrigator, to sit on that council which I did for 2 years.  We were given an intensive training course in the structure and operation of the electrical grid system.  Our appointed function was to help the UCA bring forth policy recommendations to the Government to protect  Consumer interests in the new electrical environment.  Incidentally, the objective was never reached, the government did not like our recommendations,  and the council was summarily dismissed 2 years later!

            One key Council recommendation that was not heeded was the need to rein in the escalating WSP costs, even back then!  These WSP rates are approved by the  AUC at Public hearings.  WSP companies like Fortis present their cost data to the AUC periodically at hearings and are then granted the right to set their rates based on those costs plus a guaranteed Rate of Return.  In the past, all these hearings were held in public and outside Interveners could also examine the cost data and question it before a decision was made.  Often inconsistencies and inaccuracies were found.  I observed this firsthand at the UCA.  The current PC government has stated its intention to “streamline” this process as it is deemed “inefficient”.  Inefficient for whom?  Among other things, the new proposals will limit access to the process by outside Interveners.  I am seriously concerned by these proposals based on my UCA Council experience.

            In this environment, the current PC government recently passed Bill 50, which authorized the building of two major and extremely costly transmission lines: $16 Billion! Not million but Billion.  This Bill bypassed the normal process of having public hearings to determine the need for the lines, their costs and the awarding of construction contracts if approved.  Cabinet made these decisions behind closed doors.  The result is that two tremendously expensive transmission lines are being built, paid for by you and me and our posterity, giving the builders a Guaranteed 9. 25%  return on their investment and also giving them ownership of the lines once built.

            Numerous competent industry groups and independent analysts, including the  government’s own UCA,  have stated that the lines also constitute a massive, unnecessary overbuild and that the costs will double and perhaps triple our current bills!  I am not competent to judge that.  However, I have noticed my own escalating power bills as an irrigator who pumps with electricity and I am concerned.   The culprit is primarily the escalating Transmission cost.  Incidentally, you may not have noticed the increases in your electrical power bills yet but you will!

Every year in February after all my prior year’s pumping bills are in, I review and analyze them and then use that data to project my cost for the upcoming pumping season.  I just completed a thorough review and analysis of my 2011 pumping Bills which reflect about 600 Hp total and I was shocked.  Although my pumping hours were only about 400 hours per pivot, which is about 50% of my long term average, my total bill was much higher than I had projected.  The cause was not energy costs.  I have a contract with Enmax, EasyMax, for energy and that cost is locked in for 5 years at 7 Cents/Kwh. (Their current rate is 8 cents). The cause of the much higher bill was increased WSP Charges assessed by Fortis.  Fortis applies in advance of each year for rate approvals which are always granted.  Those rates are published and you can get them on the Internet which I had done last year at this time.  However, Fortis applied for interim rate increases and used them for much of the irrigation season which is why they were higher than I expected in 2011 and will be higher again in 2012.

I have made a study for many years of the structure of electrical charges.  Fortis is now allowed to levy 2 specific types of charges:  1) Distribution Charges – which depend on the motor HP or Peak demand or transformer size for a farm yard or residence.  Generally these charges represent the local distribution cost of the single and 3-phase lines we see out in the country.    2) Transmission Charges – which are solely based on the amount of Kwh they carry to your service.  These charges generally reflect the costs of the metal tower high-voltage transmission lines carrying electricity from the generators out to the various local distribution networks.  These charges may be actual Fortis charges or flow-through charges that they are simply passing on.

For 2012, the already approved Fortis tariffs or charges are posted on their website although they are not prominently displayed!  Here is the link:  From that page, choose the link to “Rates, Options & Riders which will give you a PDF file with the various approved tariffs for the different kinds of services.  To view the prior year’s tariffs, choose the appropriate links on the left side of the opening page from this link.

For Irrigation, the 1) Distribution charge is up 5% ( not bad).  However the killer is the 2) Transmission Charge which is up 76%!!!  For farm residences, the Transmission increase is 35% and for regular residential the increase is 30%.   Something is clearly out of control!  I wish I were mistaken but I am not.  The total Transmission tariff for irrigation is now  up to 4.4 cents/Kwh or 55% of the Enmax Easymax Contract energy rate of 8 cents/Kwh and that does not include the Capacity charge!    For farm-irrigators who have hardly irrigated these past two wet years, there is going to be a massive shock when the pumping bills start to roll in for 2012 which is looking like a dry year!

Electrical Bills are fast becoming like our Telephone bills.   Long Distance charges are the least of our concern anymore; it is the fixed charges or monthly service charge we pay attention to.  Power bills are quickly following suite although the energy is still significant depending on your contract or provider.  I have no doubt that we are all collectively already beginning to pay for this massive transmission overbuild and I feel this is only the beginning!

The Regulatory System needs overhaul and the symptoms are two-fold:  1) insupportably high Guaranteed Rates of Return on poorly scrutinized WSP expense submissions and 2) the Massive Overbuild of transmission lines for which we are only just starting to pay!    This situation has to be fixed and it appears that the ballot box is the only remedy we have!  This is a “Shocking” election issue, one among many!