By COLLIN GALLANT on April 19, 2024.
[email protected]@CollinGallant
The province has renamed the “Regulated Rate Option” for electricity as “the rate of last resort,” but Medicine Hat will still have the pricing mechanism available when it decides on its next permanent rate-setting formula, potentially in 2025.
Premier Danielle Smith outlined the name change Thursday, saying the former title gives a false impression of stability, as well as a contracting change for power retailers that she and Utilities Minister Nathan Neudorf claim will calm the default rate that set records last summer.
“It allows Albertans to take advantage of the province’s competitive electricity market,” he told a press conference in Edmonton. “Medicine Hat is a unique jurisdiction, and will retain the ability to set their own prices. This provides them additional flexibility to continue to follow the new ‘rate of last resort’ and the stabilization factors it can provide.”
He said the change doesn’t apply to natural gas, where RRO procedure is employed, and promised a review of delivery and transmission charges will be announced “soon.”
Last fall Smith told the News she saw Medicine Hat’s reaction to spiking prices – a relief package, an interim rate based on longer-term price forecasts and a business review – as a “benchmark” for the greater power market.
Local administrators said Thursday the incoming provincial changes align with local actions last fall.
“We tried to smooth out prices by looking at longer-term pricing for our default rates,” said Rochelle Pancoast, the managing director of the city’s energy, land and environment division. “The province has essentially mimicked different elements of that in a different way, but I think they too have recognized that volatile monthly (pricing) is difficult for consumers to adapt to.”
Last fall, council tasked administrators to move from the 12-year-old RRO-averaging formula to set the local interim rate that provided “best in Market” pricing while the review was being done.
The current rate is universal and based on the forecast price of power paid by retailers on the Alberta energy market before they mark it up and offer it to customers in contracts.
On Thursday, Smith said regulations expected to take effect next January would allow retailers to buy power in two-year blocks, rather than the current three-month time frame.
“A spike in the monthly price will have limited effect over two years,” Smith said. “This will soften the impact.”
Pancoast said a permanent rate formula will be examined after the city’s third-party business review is complete later this year.
“We will be revisiting it through the energy business review,” she said.
Smith told reporters the title “Regulated Rate Option” is misleadingly named because it can vary monthly according to weather and global events.
Successive governments have warned that longer contracts are generally less expensive, but still, about one-third of customers are at the varying rate.
“We think this will send the right message to Albertans that this is the rate to sign up for only when there are no other options available, because everyone in our province could use some clarity and certainty about costs right now,” she said.
Smith said in 2023, the Regulated Rate Option averaged 22 cents per kilowatt hour, about double the estimated average price had the new policy been in place.
“This will essentially become the price to beat,” she said.
Neudorf said retailers in the province’s unique deregulated market will in turn be encouraged to lower rates for other options.
New Democrat Opposition Leader Rachel Notley told reporters later Thursday the UCP is still “bumbling around” trying to fix the problem it created when it scrapped the electricity price cap in 2019.
“There’s nothing in this plan to protect citizens this summer from the kind of massive price spikes that we saw last summer,” said Notley, who added the promised stability is only helpful if prices aren’t inflated.
“Since we don’t know what the formula is that they’re going to use, we can’t actually be sure that they won’t be inflated,” Notley said.
—with files from the Canadian Press
