What would you rather pay for electricity? 6.8 ¢/kWh or 5.79 ¢/kWh?
Seems like a simple question, but about half of Albertans paid over 17% too much for their electricity during July. If you are on the government’s Regulated Rate Option (RRO) and paid 6.8 ¢/kWh, that includes you!
The concept of buying electricity on a Variable Rate is something that many of Alberta’s large businesses discovered 20 years ago when the utilities market deregulated. The first customers in the province to jump off the Regulated Rate were the major players in the Oil & Gas and Industrial sectors.
Yes, with at Variable Rate, there are price spikes once in a while, but there are also low valleys when generation prices fall. Averaged out over time, the Variable Rate indexed to the actual cost of electricity supplied by generators to the grid has proven to be a smart move in saving money.
At Park Power, all we have done is copied the same methodology that the biggest industrial companies in Alberta’s have been following for years and made the Floating Rate available to residential and small business owners. In July the differential was 17% more money in consumers’ pockets.
A lot has been happening in Alberta’s electricity market recently, so it’s not uncommon for the everyday consumer to feel a little confused about it all. First, it is important to understand that since Alberta’s electricity market deregulated in 2000, consumers now have upwards of 30 competitive retailers vying for their business. Each company has a different set of goals, values, programs, services, and most importantly, rates. Albertans have a choice when it comes to energy providers. That choice only affects the price they pay to use the product, it does not affect the delivery of power and gas to your home or business nor does it affect the price of delivering those products. If you want to be an informed consumer and save some money, just like the large industrials have been doing over the last couple of decades, then consider a simple switch in energy providers.
As mentioned above, there are also government regulated utility providers in the market, offering what is called the Regulated Rate Option (RRO) to consumers. About half of Albertans are still signed up on the RRO. Currently, the RRO is being subsidized by the government through the price cap that was installed by the Alberta NDP. This price cap was said to be a form of protection for Alberta electricity consumers. It may have been that, but it also came with an actual cost to the government and a more figurative cost to the marketplace.
The previous government actively promoted the regulated utilities and created this subsidy program which they called the RRO Cap. This artificially sets the RRO at 6.8 cents per kWh.
How does the subsidy work? Since it has been referred to as a “cap”, many assume that generators of electricity are being forced to lower their prices, reducing the cost of electricity overall. This is not how it works.
What is actually happening, is that generators and regulated providers are still charging full price for the electricity they sell as the RRO. The difference between the actual rate and the 6.8 ¢/kWh charged to customers is paid back to the regulated utility through a subsidy. This is the actual cost to the government.
The more figurative cost to the marketplace is the unfair advantage that the price cap gives to the government regulated utilities. It’s like the government choosing favourites in what is supposed to be a competitive marketplace.
How is the subsidy for government regulated utilities funded? Under the NDP’s Bill 16, initially this was paid out of the Carbon Levy. Today, since the provincial Carbon Levy has been cancelled, the subsidy is funded through your taxes. Over the life of Bill 16 it will cost taxpayers upwards of $500 million dollars. A few cents per kWh adds up, and in July this year alone the subsidy took $20 million out of taxes and gifted it to the regulated utilities.
Understanding the Regulated Rate Option (RRO)
In August, Direct Energy is charging 8.683 ¢/kWh, ENMAX is charging 8.805 ¢/kWh, and EPCOR is charging 10.191 ¢/kWh. You can view the RRO rates for 2019 for each regulated provider here.
We compared the prices for EPCOR (Regulated Rate Provider) and Park Power (Competitive Market Provider) during July and August 2019 to give a good idea of the price differential.
| JulyPrice/kWh | AugustPrice/kWh | |
| Park Power) | ||
| Actual retail price charged: | 5.79 cents | 5.9 cents* |
| Gov’t Subsidy Paid to Park Power : | $0 | $0 |
| EPCOR Energy RRO | ||
| Actual posted RRO price: | 9.5 cents | 10.2 cents |
| Gov’t capped retail price set at: | 6.8 cents | 6.8 cents |
| Gov’t subsidy paid to EPCOR: | 2.7 cents | 3.4 cents |
| * 30-day current moving cost and retail price of electricity (as of Aug 15, 2019) |
How can Park Power’s price be so much lower? We work in collaboration with the UtilityNet Group, an Alberta based Calgary company, founded in 1978. The focus of UtilityNet during the first 30 years was providing energy management services to the Oil & Gas sector. During the last decade it introduced a retailing option to residential consumers and today the network has customers in over 400 communities all over Alberta.
Park Power, together with 20 other Energy Marketers, is part of a dynamic, innovative, collaborative group, whereby all overhead is minimized and shared. We do not have highly paid executives and we didn’t ship jobs out of the country. Our efficient, automated data processing and billing centre as well as our friendly Customer Care centre are based right here in Alberta.
If you are on the government Regulated Rate the smart move is to switch over. Not only will you be saving yourself and other taxpayers money, you will be supporting a 100% local Alberta energy company!
The bottom line is easy to understand. Why pay 6.8 ¢/kWh when you could have paid 5.79¢/kWh?
