Thomson: A revealing jolt of candour on the power-rate paradox

By Graham Thomson, Edmonton Journal January 31, 2013

EDMONTON – Something remarkable happened in Alberta politics this week — on Tuesday at 1:15 p.m. to be precise.

A cabinet minister answered a journalist’s question without equivocating or evading or talking vaguely about “tough choices.” The minister even managed to display a sense of humour. That’s headline-worthy news in these pre-budget days of long faces, short explanations and a widening deficit.

The refreshingly blunt politician was Energy Minister Ken Hughes, who on Tuesday released the much-anticipated report from the Retail Market Review Committee that has been navigating the labyrinthian system that is our deregulated electricity market. The expert panel had been asked to put a particular focus on the options Albertans have to purchase power for their homes.

Right now as consumers we have two options: sign a fixed-rate, multi-year contract with an electricity provider; or stay without a contract on the floating default rate, officially called the “regulated rate option” or RRO.

The expert committee’s exhaustive 390-page report strongly argues that to foster real competitiveness in the marketplace, the government should finally scrap the old RRO, thus forcing everybody to sign electricity contracts.

Hughes was asked if he, as a homeowner, has signed on to a long-term electricity contract.

“A very interesting question,” he replied, pausing for a moment before offering this confession: “I never, before becoming energy minister, spent the time to try to understand my electricity bill. I find it complicated.”

Hughes admitted he has therefore stayed on the old RRO system. “I don’t have a contract.”

It was a stunning admission. Not only does the energy minister find his electricity bill complicated, he has not signed on to a power contract, something the government was pretty much urging everyone to do when the retail end of the electricity system was deregulated a decade ago.

But Hughes is not alone. It turns out 65 per cent of Albertans have refused to sign a long-term contract and have stuck with the old RRO.

That’s the reason Hughes has rejected the recommendation to scrap the regulated rate option. He realizes the public backlash he’d face if he was to tell two million Albertans that he’s forcing them to sign contracts with electricity providers.

Hughes is sticking with the status quo, despite what his expert panel recommends.

Consequently, we have this strange oxymoron in Alberta politics: a government that deregulated the electricity market for consumers but refuses to truly deregulate the market because even the government’s ministers don’t seem to understand or trust a truly deregulated market.

And it’s just not the current bunch of government ministers. In 2005, then-premier Ralph Klein admitted he hadn’t bought an electricity contract, despite endorsing the contracts just two years before. In fact, almost nobody in the government caucus had bought into the contracts in 2005, including the energy minister at the time, Greg Melchin.

They were all on the regulated rate option that was scheduled to end Jan. 1, 2006. That date was supposedly carved in stone and, as part of their sales pitch, electricity retailers were telling homeowners to sign up for long-term contracts before the regulated rate ended and left them at the mercy of wildly volatile prices on the open market.

About 100,000 Albertans, or seven per cent of Alberta customers, signed up. The other 93 per cent, like the majority of government MLAs, seemed unsure and confused by deregulation and stuck with the system they knew, the RRO.

Realizing the public was suspicious of the long-term contracts, the Klein government then extended the RRO deadline to July 1, 2006, and then extended it another five years — infuriating some of the Albertans who signed up for expensive, long-term deals and discovered they couldn’t get out of the contracts.

Klein’s response? “I don’t want to sound insensitive,” said the man who had at one time been touting the contracts. “But buyer beware.”

It was a comment that fed into the public distrust of electricity contracts and all but killed the credibility of deregulation — that and pushy salespeople who, if they were like the two guys who came to my front door in 2005, tried to browbeat or frighten customers into signing up. The contracts these days are more flexible, offer competitive rates and allow customers to cancel their deal with a month’s notice. But old suspicions die hard.

The government will argue the credibility of deregulation is still alive but when it comes to believability and trust, the government’s deregulation plans for residential consumers have about as much life as a Drumheller dinosaur.

Most Albertans have either rejected or ignored deregulation. Or they’re simply confused by the whole thing.

I admit I’m one of the majority.

I’ll sign on to a long-term electricity contract — right after the minister of energy puts his signature on the line.

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