Letter of complaint filed against the Government of Alberta in response to 6.8 cent/kWh cap on electricity
FOR IMMEDIATE RELEASE
Marketing activities by government promoting misleading information to consumers
Calgary, Alberta - May 29, 2018 - On Friday, May 25, 2018, Utility Network and Partners Inc. (UTILITYnet), an Alberta based electricity and natural gas retailer, sent letters to the Market Surveillance Administrator (MSA), the office of the Auditor General of Alberta, and the Utilities Consumer Advocate (UCA) to request that a formal complaint be filed against the Government of Alberta pursuant to the MSA’s powers under the Alberta Utilities Commission Act.
The complaint was made with specific reference to the marketing activities and half-truth information being promoted by the government in regards to the 6.8 cents/kWh subsidized Regulated Rate Option (RRO) for electricity. In April, the NDP government spent $259,000 on a mail-out campaign touting the benefits of the price cap. UTILITYnet believes that the government sponsored flyer, and the underlying subsidy to the RRO providers constitutes predatory actions against competitive retailers operating in Alberta’s deregulated market.
“We are concerned that the government has intentionally created a bias in the market which will have a long term negative impact on private sector companies like ours,” said Nick Clark, Director of UTILITYnet. “Over our 40 years in business, we have invested heavily in systems development, a call center, a local data center, and other general infrastructure, all located in Alberta. At risk is our investment and the long-term viability of our company.”
Also included in the letter of complaint is:
Over the last 10 days, the wholesale price paid to generators has been running at a cost of hundreds of dollars per MWh, up to as high as $1,000/MWh. As a comparison, over the last couple of years, wholesale prices were in the mid $20 per MWh range. RRO prices increased in April to the 6.8 cent/kWh subsidized rate and Power Pool prices posted by AESO during May are three times higher than in 2017.
The government solution to increased volatility was to subsidize the RRO. This was intended, in part to protect Albertans who are financially vulnerable, but it also masks the real cost of electricity. The cost of the subsidy could reach $700 million by the end of its lifetime according to a report by EDC Associates, an independent energy-consulting firm from Calgary.
In correspondence received by UTILITYnet this week from the Honourable Margaret McCuaig-Boyd, Minister of Energy, the minister’s office expressed the opinion that “the government does not expect rates to rise above the price cap in the foreseeable future”. Yet, the RRO providers, as publicly posted on the ICE NGX website, are already buying forward hedges for July, August, and September and are actually paying about 40% more for electricity compared to today and 150% more than they paid last year. The minister is misinformed. Rates are going up.
Albertans will spend tens of millions more this summer to subsidize the RRO utility providers. RRO prices will increase again during July, August and September unless the government takes corrective measures.
“Smart consumers should be encouraged to get off of the RRO and it should be labelled correctly as the supplier of last resort,” said Clark. “For the government to tell us that they are using tax dollars to subsidize the spike in the cost of electricity and that this is being done to protect consumers is false economics. The consumer and the taxpayer are the same person.”
Recently, Diane Colley-Urquhart, who provides city council oversight of ENMAX offered an opinion letter to the Calgary Herald suggesting that the government is destabilizing Alberta’s power market.
The comments made by Colley-Urquhart are accurate. To put her comments into perspective, the city received a $2 million subsidy paid to ENMAX to help support the utility when rates in April were ratcheted back from the posted rate of 9.28 cents/kWh to 6.8 cents/kWh.
Colley-Urquhart was correct in stating that the city utility offers a competitive rate under 6 cents/kWh and so do many other competitive retailers in Alberta, a fact which was ignored in the recent government promotion. ENMAX’s best rate is 5.89 cents/kWh, Direct Energy’s lowest price today is 5.99 cents/kWh and Spot Power’s 1-year dual fuel price buster rate is 5.59 cents/kWh.
“When competitive retailers are offering rates below the RRO subsidized rate of 6.8 cents; why did the government need to spend $8.3 million last month in subsidies?” said Clark. “The competitive market is working, and the hundreds of millions that will be spent subsidizing utilities is not needed, but rather should be funneled into other worthy causes such as education or healthcare.”
Rather than subsidizing the utilities with tax dollars and promoting the RRO, the government should be promoting the benefits of Alberta’s deregulated market and the attractive lower rates offered by the 33 Competitive Retailers now operating in Alberta. For a full list of competitive market participants in Alberta and more information visit https://ucahelps.alberta.ca/retailers.aspx.
As Colley-Urquhart suggested, the province would save millions of tax payers dollars if consumers simply switched off the RRO.
Deanna McArthur
Marketing and Communications Manager
Utility Network and Partners Inc.
Deanna.mcarthur@utilitynet.net
403.244.7299 EXT 110
The complaint was made with specific reference to the marketing activities and half-truth information being promoted by the government in regards to the 6.8 cents/kWh subsidized Regulated Rate Option (RRO) for electricity. In April, the NDP government spent $259,000 on a mail-out campaign touting the benefits of the price cap. UTILITYnet believes that the government sponsored flyer, and the underlying subsidy to the RRO providers constitutes predatory actions against competitive retailers operating in Alberta’s deregulated market.
“We are concerned that the government has intentionally created a bias in the market which will have a long term negative impact on private sector companies like ours,” said Nick Clark, Director of UTILITYnet. “Over our 40 years in business, we have invested heavily in systems development, a call center, a local data center, and other general infrastructure, all located in Alberta. At risk is our investment and the long-term viability of our company.”
Also included in the letter of complaint is:
- A request for an investigation regarding the misdirected use of Carbon Levy dollars being used to subsidize the RRO cap. Subsidizing RRO utilities will not help to reduce Alberta’s carbon footprint.
- A request that in all future communications with consumers, the government provide full disclosure of the fundamentals of “Consumer Choice” in Alberta’s electricity market. This has always been a hallmark fundamental policy of the UCA.
- A request that all communications regarding the 6.8 cent/kWh RRO cap include information to fully inform consumers that the RRO is not “capped” but rather is a taxation subsidy.
De-stabilizing Alberta’s Electricity Market
Alberta’s electricity market is currently going through a restructuring. Coal fired power plants are being mothballed or converted to natural gas in order to help the province meet its targets of 30% renewable energy by 2030. Unfortunately, if generation plants are shut down prior to replacement facilities coming online, there is the risk that wholesale prices will spike and become very volatile.Over the last 10 days, the wholesale price paid to generators has been running at a cost of hundreds of dollars per MWh, up to as high as $1,000/MWh. As a comparison, over the last couple of years, wholesale prices were in the mid $20 per MWh range. RRO prices increased in April to the 6.8 cent/kWh subsidized rate and Power Pool prices posted by AESO during May are three times higher than in 2017.
In correspondence received by UTILITYnet this week from the Honourable Margaret McCuaig-Boyd, Minister of Energy, the minister’s office expressed the opinion that “the government does not expect rates to rise above the price cap in the foreseeable future”. Yet, the RRO providers, as publicly posted on the ICE NGX website, are already buying forward hedges for July, August, and September and are actually paying about 40% more for electricity compared to today and 150% more than they paid last year. The minister is misinformed. Rates are going up.
“Smart consumers should be encouraged to get off of the RRO and it should be labelled correctly as the supplier of last resort,” said Clark. “For the government to tell us that they are using tax dollars to subsidize the spike in the cost of electricity and that this is being done to protect consumers is false economics. The consumer and the taxpayer are the same person.”
Recently, Diane Colley-Urquhart, who provides city council oversight of ENMAX offered an opinion letter to the Calgary Herald suggesting that the government is destabilizing Alberta’s power market.
The comments made by Colley-Urquhart are accurate. To put her comments into perspective, the city received a $2 million subsidy paid to ENMAX to help support the utility when rates in April were ratcheted back from the posted rate of 9.28 cents/kWh to 6.8 cents/kWh.
Colley-Urquhart was correct in stating that the city utility offers a competitive rate under 6 cents/kWh and so do many other competitive retailers in Alberta, a fact which was ignored in the recent government promotion. ENMAX’s best rate is 5.89 cents/kWh, Direct Energy’s lowest price today is 5.99 cents/kWh and Spot Power’s 1-year dual fuel price buster rate is 5.59 cents/kWh.
“When competitive retailers are offering rates below the RRO subsidized rate of 6.8 cents; why did the government need to spend $8.3 million last month in subsidies?” said Clark. “The competitive market is working, and the hundreds of millions that will be spent subsidizing utilities is not needed, but rather should be funneled into other worthy causes such as education or healthcare.”
Rather than subsidizing the utilities with tax dollars and promoting the RRO, the government should be promoting the benefits of Alberta’s deregulated market and the attractive lower rates offered by the 33 Competitive Retailers now operating in Alberta. For a full list of competitive market participants in Alberta and more information visit https://ucahelps.alberta.ca/retailers.aspx.
As Colley-Urquhart suggested, the province would save millions of tax payers dollars if consumers simply switched off the RRO.
– END –
Media Contact:
Deanna McArthur
Marketing and Communications Manager
Utility Network and Partners Inc.
Deanna.mcarthur@utilitynet.net
403.244.7299 EXT 110