Albertans warned of power ‘price spike’
By Darcy Henton, Calgary Herald April 18, 2014 6:37 AM
Below is a response from a colleague of Park Power, Nick Clark of Utility Network and Partners Inc.
Dear Minister,
The numbers are clear: Some consumers are going to be hit with a massive price increase in May. But not all.
Maybe now is the best time to promote the benefit of “Fixed Priced Contracts” verses the “RRO”. In May RRO prices will go from approximately 7 cents into the range of 10 to 11 cents per kWh. This is a +50% increase in the cost of electricity which will impact 70% of residential consumers in Alberta.
But when the RRO is officially published for May, the actual RRO might be slightly higher than the Consumer Advocate’s estimate of a 30 to 40% increase, as referenced in the above article. The NGX Electricity Index reported an increase of +60% re the Alberta Flat RRO Price Index and an +80% increase in the NGX Alberta Extended Peak Index (comparing April hedges to May’s numbers).
No matter which number you use: the bottom line is simple … the RRO published by ENMAX, EPCOR and DIRECT is expected to up substantially on May 1.
Good News:
Wholesale prices are expected to drop in June. The forward market is already softening based on AESO’s re-statement and projected increase in generation supply during June.
More Good News:
30% of consumers in the province have discovered that there is no sense staying on the government’s RRO plan (and having to deal with the volatility or price spikes). There are dozens of lower prices available to consumers in Alberta. The average RRO over the last 18 months was approximately 8.5 cents. But, compared to guaranteed priced contacts available, consumers can buy electricity for as low as 6.9 cents per kWh today (guaranteed as a fixed price until the end of 2016 & no exit fees). This is more than 20% below the historical RRO prices. Ask yourself – why pay more? An electron is an electron regardless who you buy it from. And, the current wires company that delivers electricity to the consumers home will not change. The process of switching off of the RRO is seamless.
During April, the wholesale market in Alberta this month is exceptionally low. Residential consumers on the “Flow-Through” rate are profiting handsomely, (Flow-Through prices are directly linked to the actual prices posted by AESO and paid to the generators). The 30 day moving average retail rate (as of April 18th), offered by independent retailers, is currently only 4 cents per kWh. Amazing prices! If generation supply during the balance of April remains relatively stable, then prices paid by customers on the Flow-Through rate will be well below the April RRO. Ask yourself, when was the last time you paid only 4 cents per kWh?
Deregulation Simplified:
The retail market in Alberta is dynamic. It is hoped that as Minister of Energy you will support a communications program to help consumers find the best rate that fits their needs. This was one of the key recommendations in the Retail Market Review Committee report. Consumers can be protected if they are given good information upon which to make informed decisions.
The government set up a process and encouraged new retailers to enter the market, focused on giving consumers a variety of rate plans. This has proven to be successful. This month, consumers are paying as low as 4 cents per kWh on the floating market rate plan and others are locked in for the long term ranging from 6.9 to 7.9 cents per kWh. The Big Utilities Retailers are offering fixed rates in the mid 8 cent to 8.9 cent range. Compare these prices to the double digit prices consumers still on the RRO will pay in May. Possibly, the RRO should be phased out and our government should actively promote the private sector option.
www.ElectricityShop.ca is an informational web site with all the information consumers need: Just one click to find the rates of all retailers in Alberta. There is no reason to get stuck with paying 10 or 11 cents per kWh in May when prices from competitive retailers in Alberta are available at substantially lower prices. One Click to find a comparative chart of all retailers prices in Alberta.
Alberta’s retail electricity market gives consumers a choice of service providers. A list of retailers and a price summary is available with the Utilities Consumer Advocate.
We hope that you find the above information of value. Most importantly, it is hoped that all our MLAs will tell their constituents: ‘rather than complaining about the RRO, simply open your minds, put your hand on your wallet, stop paying the higher rates to the old utilities and consider signing up on a fixed term contract.
Deregulation is working and consumers have the opportunity to save some money and stabilize their monthly electricity bill. It is called Consumer Choice! Consumers can elect to continue to pay more and stay on the RRO as provided by the old utilities or switch. But, it is time for our politicians to simply stop trying to pander to the market for votes. The market is working – let it work.
The government commissioned a market review report (RMRC) undertaken by Mr McDonald and his team of MLAs and Kathryn Wood. Please publish the findings and consider implement the recommendations. This will be a positive step in the right direction.
Regards, Nick
Nick Clark, Managing Partner
Utility Network & Partners Inc.
1316 9th Ave SE Calgary AB, T2G 0T3
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