Myths About Alberta’s Electricity Market BUSTED
A lot has happened in Alberta’s electricity market over the last 18 months. During this time, we have published a number of blogs and fielded many comments and questions about the market.
Below are the three most common misconceptions about what is happening in the market today and how it will affect Albertans now and in the future.
Myth #1: I don’t have to shop around for an electricity rate because the government has placed a cap of 6.8 cents/kWh on prices.
The government spent over $250,000 out of the Carbon Tax fund advertising the benefits of the Regulated Rate Option (RRO), now capped at 6.8 cents/kWh. The word “cap” is misleading. A “cap” leads people to believe that generators of electricity are being forced to lower their prices, reducing the cost of electricity overall.
The reality is that generators and Regulated Rate Providers are still charging full price for the electricity they sell as the RRO. In April 2018 the average retail price of the RRO was 8.20 cents/kWh, in August 2018 it was 8.65 cents/kWh, and December 2018 the average cost was 7.58 cents/kWh. The difference between the actual rate and the 6.8 cents/kWh charged to RRO customers was paid by tax payers (out of the Carbon Tax), to RRO providers, in the form of a subsidy, simply to protect the big utilities margins.
It has been estimated that the RRO subsidy will cost Albertans over $700 million during its lifetime. In fact, the Calgary Herald recently published an article that breaks down what carbon tax dollars have actually been spent on since its inception. $37.5 million was spent on the RRO subsidy in 2018 alone. Under Bill 16 ENMAX, EPCOR, Direct Energy, and others will continuum to be subsidized until 2021.
Recommendation: Kill the bill and stop wasting our tax dollars as the utilities do not need to be subsidized.
Myth #2: The RRO is the safest place for consumers to be because they will pay less and be protected from market volatility.
Not only will the RRO subsidy cost tax payers millions of dollars over the next three years, but those choosing this rate are paying more than consumers who have chosen to leave the RRO.
There are over 20 other competitive electricity providers in Alberta’s market offering subsidy free electricity rates below the 6.8 cents/kWh RRO. These are local businesses, which employ Albertans, and support the local community.
The government’s actions within Alberta’s electricity market are what created uncertainty and caused increased price volatility. The RRO subsidy is simply a band-aid being used to help mask the problem they created.
Recommendation: Jump off the RRO, you will save money compared to the market price being manipulated by the government.
Myth #3: The subsidy on RRO rates is a legitimate use of Carbon Tax dollars.
As stated by the Government of Alberta, the Carbon Tax “provides a financial incentive for families, businesses and communities to become more energy efficient and move away from higher-emission fuels… revenue from the levy is used to pay for initiatives that reduce emissions and support adaptation and transition to a lower carbon economy…”
The argument can be made that some of our Carbon Tax dollars have been put towards worthwhile programs that will help Alberta move towards a low carbon future, but allocating hundreds of millions of dollars of Carbon Tax funds for a subsidy on RRO electricity rates is not one of them.
As mentioned above, the RRO subsidy is expected to cost Albertans over $700 million during its lifetime. That is $700 million that should have been used to further invest in carbon reduction programs. The reality is that subsidizing RRO rates does nothing for the environment.
Recommendation: Tell your local MLA to spend the tax dollars wisely and stop trying to mask the smell of a poorly designed policy.
The unfortunate reality is that the RRO subsidy is a slippery slope and a misuse of money. Regrettably, not many in the industry will openly face these facts as most have a vested interest in how the government is distributing these funds.
If it has a white stripe down its back, if it looks like a skunk and it smells like a skunk, regardless of how you dress it up or try to mask the smell, it is still a skunk. And Bill 16 stinks.
The RRO subsidy is costing tax payers millions, is hurting the competitive market, and is not the lowest cost available today. If you are still on the subsidized RRO, now is the time to become part of the solution.
Recommendation: One option, switch to NewGen Energy’s subsidy free RRO Alternative Residential Rate of 5.89 cents/kWh, guaranteed until September 2022, with no cost to sign up and no exit fees should you choose to switch or cancel. This rate is only available for a limited time and to the first 1,000 residential customers who switch off of the RRO. Click here for more information.
*Disclaimer: this is not a government rebate program. NewGen Energy is not being subsidized by the government. This offer will expire May 31, 2019 and is open to the first 1,000 residential customers who apply. To qualify for this rate, send a copy of your current ENMAX, Direct Energy, or EPCOR RRO bill to firstname.lastname@example.org