New legislation is set to take effect January that the Alberta government says will protect power consumers from big price swings.
The Regulated Rate Option — now renamed the Rate of Last Resort — is meant to encourage Albertans to sign up for a competitive contract.
The province says this will help consumers better understand energy options and is part of an ongoing consumer awareness initiative.
“Utility bills can make or break a tight budget when every nickel and dime counts,” Minister of Nathan Neudorf said in a statement.”Our government is giving Albertans the tools needed to help save more their hard-earned dollars and make their monthly costs more predictable, while protecting the most vulnerable from sudden price spikes.”
The Rate of Last Resort will be set every two years and can only be changed by a maximum of 10 per cent each term.
The Utilities Consumer Advocate, under the Ministry of Affordability and Utilities, will need to check in with customers every three months to confirm whether they want to stick with the default or sign up for a contract.
“The team at the Utilities Consumer Advocate is available to help consumers understand Alberta’s retail energy market, including these changes, and help them identify options that will work best for their household, farm, or small business,” Utilities Consumer Advocate member Chris Hunt said in a statement.
Albertans have three options when purchasing their electricity and natural gas utilities: the default power rate, a competitive contract for a variable (floating) rate, or a competitive contract for a fixed rate.
According to the province, 26 per cent of Albertans purchase electricity through the Rate of Last Resort. Roughly 29 per cent of commercial customers and 40 per cent of farm customers purchase electricity through the Rate of Last Resort.
At the Alberta Municipalities 2024 Convention and Trade Show in Red Deer, Premier Danielle Smith said the move is to alleviate some of the financial pressures last year’s electricity spike caused for some households.
“We wanted to provide some stability to the rate of last resort because you will recall it spiked to 32 cents per kilowatt hour last year,” Smith said.
“We just know that impairs the ability for low-income individuals to manage the household budget, it impairs small business community.”
There are many reasons for Albertans being on the Rate of Last Resort over a fixed or variable rate: they may be unable to sign a competitive contract due to poor credit or other financial difficulties, or live in a rural area where a variety of power options are not available.
“I think now we’ve put in enough measures that we will see stability so even those that don’t go on a contract will not see an extraordinary price hikes,” she added.
Energy economist David Gray, who was also the former executive director of the Utilities Consumer Advocate, says stabilizing prices is a better plan for consumers and should have happened a while ago.
He adds the province’s steps to promote contracts but also stabilize electricity rates on the Rate of Last Resort may backfire.
“The rate of last resort in all likelihood is going to be the rate of first choice,” he explained. “It sounds weird because they’re trying do two things at the same time. They’re trying to shake people off of the regulated rate but at the same time making it more stable and attractive.”
“What they’re trying to do now is steady that rate knowing that they’re never going to get people off of it but wishing like hell they could,” he added.
Gray said the two-year stable rate should result in Rate of Last Resort prices of roughly 10 cents cents/kWh.
EPCOR provides the Rate of Last Resort service in Edmonton, and in the surrounding territory served by Fortis Alberta.
The company said it would continue to provide this service for the renamed energy product. Between the Rate of Last Resort and its own competitive retail electricity business Encor by EPCOR, the company said it has about 560,000 customers across Alberta.
“We have advocated for changes to Alberta’s electricity market, and we support customer choice, a fair, efficient and openly competitive electricity market, and action on affordability,” an EPCOR spokesperson said in a statement.
“As with many other legislative and policy changes related to electricity rates, EPCOR will ensure the Government of Alberta’s legislation is implemented as efficiently and effectively as possible.”