As of November 30, 2019 the Alberta subsidized rate cap for Regulated Rate Option (RRO) electricity customers ended. Will this policy update affect your power bills? The answer depends on whether you pay your bills to an RRO provider or a competitive provider like Park Power.
The previous NDP government installed the rate cap of 6.8 cents/kWh onto the RRO in what they claimed was an attempt to protect consumers from electricity price volatility (the RRO is a Variable Rate that changes from month to month). The rate cap was only in place for around half of Alberta electricity consumers (those on the RRO) as the other half of consumers have chosen one of the rate plans offered by a competitive provider.
While the rate cap was in place, the RRO providers were being subsidized by the government. When the RRO rate that providers were charging would rise above the 6.8 cents/kWh cap, say to 9.424 cents/kWh, the government had to subsidize the rate differential owed to the RRO providers. The subsidies owed to the RRO providers from the rate differential was originally paid for by revenues from the carbon tax. When the current UCP government removed the carbon tax (June 2019), the rate cap remained and the RRO providers were still owed subsidized revenue from the rate differential. Since there was no carbon tax revenue for these subsidies, they came our of general government revenues which cost Alberta taxpayers $40 million in July and August. See the image below for how the rate differential played out for most of 2019. (Data from the Alberta Utilities Commission)
So, the removal of the rate cap will save Alberta taxpayers money, but how will it affect Albertans’ electricity bills?
For the nearly 50% of Albertan electricity consumers that still choose the RRO, they can expect to see an increase in their electricity costs starting in December. The actual average rate an RRO customer would have paid from April-Nov of 2019 is 8.00 cents/kWh.
During the same 8 months competitive electricity providers, like Park Power, have been offering price protection to Alberta consumers through Fixed Rate options, often lower than the 6.8 cents/kWh rate cap.
In Alberta, electricity demand is highest during the winter months when it is cold and dark. The high demand puts more pressure on the wholesale electricity price which can lead to more price volatility. This volatility can lead to price spikes which, if you are paying your electricity bill to an RRO Provider, will raise your rates.
It’s time to get off the RRO and protect yourself from price volatility with a Fixed Rate Plan. These are flexible, guaranteed rates offered for various terms that never have you ‘locked in’. Save yourself some money while choosing an Alberta based company with awesome service that shares its profits with local charities.
If you are ready to make the switch head to our Sign Up Page to get started.
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