Open Letter to the Editor: Utility Bills a Crock of Confusion?


By: Nick Clark


Graham Hicks a journalist for the Edmonton Sun hit the nail on the head in his article last week. Only, his article didn't go into the issue in depth enough and we fear it could leave some people thinking that deregulation is a dirty word. Is it?

A lot has changed in Alberta since our province deregulated the industry. Today we need to focus our attention in the right direction, and, for many Albertan's, if they understood a little more about the market they could cut the cost of their monthly utility bill.

Deregulation Isn't a Dirty Word

Almost 20 years ago Alberta deregulated the generation of energy in the province. About $17 billion was subsequently invested by the private sector in building a fleet of generation facilities - unlike other provinces who financed the building of generation plants themselves, which added the cost to the provincial debt.

Deregulation opened the door for companies like UTILITYnet to expand their business in Alberta. We were one of the first companies to offer the concept of Self-Retail to our commercial clients and opened a small boutique retailing venture in the province. For larger commercial users, the Self-Retail concept saved our clients millions over the years as they were able to purchase electricity directly from the grid, bypassing their old utility, and significantly lowering their cost of electricity.

The vision of deregulation was designed to encourage people and companies to invest in the province. From this perspective, it brought a number of investment dollars and good paying jobs into the province. However, in the early days of 2000, and until the kinks were worked out of the experiment, the market was like a roller coaster. Prices soared, consumers had to deal with billing errors and contracts that locked them in for years at a time. Many called deregulation a failure, however in time these problems were solved.

Things have change dramatically. Today, energy prices are now the lowest in North America. Some consumers may remember paying 12.5 cents/kWh in the early years of de-regulation. Last year the average retail price of electricity sold by Spot Power was only 3.2 cents/kWh. During the last few years the market has been stable, a great place to invest into, retail prices have fallen and the market has been well functioning.

As we look to the future, we are preparing for the next round of challenges which will result in an increase in price volatility as the government starts to close coal plants, hands out subsidies on renewables, and continues with a host of changes in the energy market all linked back to the implementation of the Carbon Levy.

What Exactly was Deregulated?

The most widely misunderstood piece of Alberta's electricity market is what exactly was deregulated, what continues to be regulated today, and how that is translated on a consumer's utility bill. This misunderstanding is what we believe is the key driver behind the anger some in the province have towards the de-regulation of the industry.

"Billing gobbledygook" and "legal day-light robbery!" is how utility bills were described in the Edmonton Sun article where Graham Hicks called utility bills a "crock of confusion". To many consumers who are in the dark, it is easy to understand and relate to these comments. In an attempt to clarify some of the information found on an electricity bill, below is a look at the line items and where each of those charges come from.


As shown in the chart above, the charges a consumer sees on their electricity bill can be split into two categories, regulated and de-regulated. De-regulated charges vary depending on which provider you choose to supply you with electricity. Regulated charges are set by the Wires company and submitted to the Alberta Utilities Commission for approval. Delivery charges will remain the same no matter who you choose to provide you with energy.

Here's where the anger comes in.


At one time, there was a rule of thumb that the cost of energy made up about 50% of a consumer's monthly utility bill and administration fees plus delivery charges represented the other 50%. Today this ratio has changed dramatically. As an example, for a residential customer in the ATCO territory, 75% of their bill is related to delivery costs and only 15% accounts for the energy itself.

Forget all the riders, options, and complex calculations. Distill the cost you pay in terms of cents per kWh consumed and compare the numbers. This is a snapshot of cost of delivery for an average homeowner across the province as cents per kWh.




In a previous blog, we did an analysis of delivery charges across the province. A consumer in Northern Alberta pays upwards of almost 16 cents per kWh for delivery, whereas in Calgary, consumers pay about 6 cents/kWh. That's over two times as much for delivery compared to the rest of the province. The cost of electricity itself is only about 3 cents/kWh for customers regardless where they live. This is why people are upset.

Time and time again we run into consumers who are frustrated with their utility bill - but the only costs that have gone up are those that are regulated.

Recently the government put a cap on the deregulated energy portion of a consumer's bill of 6.8 cents/kWh. But over the last four years, energy prices have declined. Today, retail prices indexed to the cost of energy have never been lower. It should be evident that the cost of energy really isn't the problem. So why try and regulate the only portion of a consumer bill that has been on a downward trend?


With all of the above information, consumers should be armed with the knowledge required to better understand the different pieces of their utility bill. For an even more in-depth look at the items found on a typical energy bill click here.

Competition Spurring Innovation

Deregulation has spurred innovation of items beyond price. Some examples of innovative programs and features offered by Spot Power and other competitive market participants include:

No Contracts/Exit Penalties: When we entered the retail market we believed that consumers deserved better than being locked into contracts with high exit fees. We killed the concept of penalty clauses and introduced a 10 day opt out clause with no exit fees to our agreements.

Special Senior Rates: To support those who built our province into what it is today, we introduced a unique rate plan offering seniors lower prices.

Green Energy: To encourage the support of Renewable Energy Generation in the province we created a program in partnership with Green Alberta Energy to help make greening a portion of a consumer's consumption affordable.

Micro-generation Benefits: To help promote PV solar micro-generation in the province, we created the Light Up Alberta program which pays a premium on electricity exported to the grid.

Pick-a-Date Option: Most recently, to help consumers manage their monthly payments in today's tough economy, we have adopted a new concept of allowing customers to Pick-a-Date in which they pay their monthly invoice.

Equalized Monthly Payment Option: This program helps consumers budget a specific amount for their utilities each month to make it easier to organize their expenses.

This innovation, in a market that fosters competition, has allowed a small, locally owned company like Spot Power to compete head to head with the big utilities. Without deregulation, the lower prices we see today and the unique product offerings in the market would not exist.

None of the programs listed above are funded by or sponsored by the government. All were created through entrepreneurially driven decisions, creativity of Albertans, and private investments. We are proud of how far we have come and of the unique options we can offer consumers. When we opened Spot Power in 2008 we were a lone voice competing against Direct Energy, Just Energy, Enmax and Epcor. Today, there are a number of competitive participants in the market.

The Market is Full of Competition

Of course, we would love to see you move over to Spot Power, but today there are scores of other independent Energy Marketers in Alberta to chose from. If you don't choose us, we encourage you to buy local, support the private sector, be proud of the success of Alberta's deregulated market, and challenge our government to get control over the regulated portion of the utility bill.

Here is sample list of independent Energy Marketers in Alberta. (For a full listing of options in the Province visit the Utilities Consumer Advocate website):

Adagio Energy
Alberta Cooperative Energy
Bow Valley Power
Brighter Futures Energy
Burst Energy
Camrose Energy
Choice Energy
DGN Power
Echo Energy
EMCO Energy 

When it comes to trying to understand your utility bill or when buying any product or service, including electricity, you need a partner you can trust. A partner who understands and cares for your needs, a partner who is a local Alberta company, who truly has the importance of customer care embedded into its operations, who is innovative, who delivers value, and is willing to invest in making their industry better.

Arguably one of the most important things to look for would be a company that supports Albertans. Unlike some of the big names in the utility business, Spot Power and a number of other local Energy Marketers have not shipped jobs offshore (Enmax to Tata; ATCO to Wipro; and Direct Energy to HCL). We are an Albertan company employing Albertans. We are located in historic Inglewood in Calgary, drop in anytime to visit us at 1316 9th Ave SE Calgary.

Get Involved in the Market

Are you an entrepreneurially minded individual? Have you ever considered entering the energy market and creating your own private and independent business? Want to create an extra monthly income stream? Are you a small community and want to create new income to help fund projects in your local municipality, similar to the success that Olds had with Mountain View Power or Echo Energy in Lacombe. You may want to consider entering Alberta's energy market as an Energy Marketer. UTILITYnet is celebrating 40 years in Alberta's energy industry and has helped incubate numerous companies, and in doing so has strengthened the foundation principle of deregulation. Contact UTILITYnet for more information on entering Alberta's competitive energy market.
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