Affordability and utilities minister tasked to review Alberta's electricity system and pricing

Alberta's premier says the affordability and utilities minister needs to improve power prices for consumers who are getting zapped in the pocketbook.

Minister Nathan Neudorf's marching orders, spelled out in a mandate letter issued Wednesday, ask him to study phasing out the default electricity rate that is driving up the cost of some consumer bills.

"It's not like electricity is an option," Neudorf said in an interview. "It's a life necessity. We no longer can live healthy, effective lives without electricity."

The regulated rate option, or RRO, is the default power price most customers pay if they do not sign a contract with an electricity retailer.

According to the province's Market Surveillance Administrator, 559,000 customers, or about 35 per cent of the Alberta sites with power, were paying the RRO as of March 2023. A disproportionate number of those people live in the Edmonton area, CEO Derek Olsmtead said in an email.

According to data on the Utilities Consumer Advocate (UCA) website, the RRO prices in Alberta in July were as high as 28 cents per kilowatt hour. That's more than double the winter price, when the government temporarily capped the RRO.

According to the advocate, Edmonton customers looking for a fixed-rate power contract right now could pay between 9.7 and 30 cents per kWh.

As power prices have climbed, more customers have stepped away from the RRO. Olmstead said the number of RRO sites has dropped by about 22 per cent since 2019.

Neudorf was among the clients who made the switch. Although he has a contract at his Lethbridge home, the bills were climbing at his Edmonton condominium, he said.

It wasn't until the price tag hit $250 per month, and he was sworn in as minister, that Neudorf realized he was on the RRO.

Colette Chekerda is executive director of the Alberta Direct Connect Consumer Association, and president of Carmal Energy Advisors, which provides power advice to large, industrial customers.

Chekerda said the government should have looked at retiring the RRO long ago.

"There's certainly better options for consumers out there, and the regulated rate option has probably gotten in the way of some of those offerings being enhanced over the past several years," she said.

Chekerda said Alberta's deregulated electricity market, which is supposed to lead to more competition, has driven prices higher than in some provinces where Crown corporations are at the helm.

Changes to RRO could come by fall

The challenge is that some people who have been unemployed or have a poor credit rating can't get power retailers to offer them a contract, Neudorf said.

He added that other customers who watch power markets closely hop between contracts and the RRO so they're always paying the lowest price, he said.

It means the government will likely have to devise two replacements for the RRO: one for consumers who actively want to play the market, and one for more financially precarious customers — but with fraud guardrails, Neudorf said.

He didn't rule out the idea of the government being a guarantor for people with poor credit to get power contracts.

Changes could come as soon as this fall, but the timing depends on whether legislation is required.

Ensuring Alberta has a larger supply of more reliable electricity is also a key factor to driving prices down, Neudorf said.

The premier's letter also tasks Neudorf with other electrical system reviews and changes — with an eye to affordability and aiming for a carbon-neutral power grid.

Neudorf is to review the province's pricing system, with the goal of reducing transmission and distribution costs.

He said diving into the minutiae of power pricing could be an incredible opportunity for change — it includes continuing the province's resistance to the federal government's demand for electrical systems to be net-zero by 2035, and pushback against federal taxes that Neudorf said multiply the costs.

Although critics argue climate-change measures cannot wait, Neudorf said a transition away from fossil fuels so quickly in Alberta could lead to unmanageable cost escalation.

"You just can't turn the heat off in the middle of winter," he said. "You will literally die. And the concern is the same in the summer."

NDP energy and climate critic Nagwan Al-Guneid said in a statement the government should consider more urgent relief for Albertans, such as a cap on electricity prices, while embracing more renewable energy options.

"We cannot force people to pay punitive bills while the UCP admires this problem for another four years," she said.

Neudorf is also tasked with working with Seniors, Community and Social Services Minister Jason Nixon to develop a new affordable home ownership and rental strategy that encourages new home construction.

Asked by email if he would consider rent control as a short-term measure, Neudorf said, "I keep an open mind as to the best ways to achieve this."