Building a Utility for the People - They Told Us We Were Crazy
By: Nick Clark and Madeline Low
We began buying energy on the Spot market and adding a cost of 1 cent per kWh. It was the birth of a simple formula. To manage the complexities of residential billing processes we leveraged all the technology horsepower that we already had in place for our industrial and commercial clients.
People told us we were crazy and that no one could compete with the government utilities. Well we begged to differ. With encouragement from the folks of the government of the day and support from our growing list of customers, the rest is history. We launched a new idea: online retailing energy with no sales people and keeping our operating cost low. From there, we signed up one customer at a time.
Today, we have customers in over 300 Alberta communities, and are still adding one customer at a time. Most importantly, our guaranteed rates are lower than the government capped Regulated Rate Option (RRO). No one can compete with government utilities? We have proven that it is possible. Some of the smallest Energy Marketers in the province are offering rates below the largest of government subsidized retailers.
When we opened the first Energy Marketing online storefront we knew we wanted to be different than the large Regulated Rate Utilities that dominated the market. We knew we wanted to be better.
Today, there are over 20 Alberta Energy Marketers similar to Spot Power in our network which we have helped incubate. Collectively we have become the new People’s Utility, competing against the big retailers and the government’s subsidized regulated utilities.The People’s Utility of Alberta is focused on providing local customer services; lower energy rates; educating consumers on the energy market; providing innovative services; and, un-complicating the complexities of buying energy.
The cooperative of our Energy Marketers firmly believes that buying energy in Alberta should be simple, hassle free, with open contracts, with zero penalties, and fairly priced. Most importantly, we believe that provincial regulated utilities should not be allowed to ship jobs offshore and receive carbon tax dollar subsidies to help guarantee their profit margins.
A Breath of Fresh Air for Alberta’s Electricity Market
When we entered the market our first order of business was to eliminate contracts that locked customers in to a rate and required them to pay penalties if they ever wanted to leave or simply change to a lower rate plan.Today, through any one of the Energy Marketers in our network, consumers are offered both variable and low guaranteed rates which span out into 2024. One, three and five-year terms are available. Yet, we give customers the ability to switch rate plans or cancel their agreement with just 10 days notice and zero penalty fees.
When this was accomplished, we decided we could do more and introduced:
- Special and lower rates for seniors
- A strong community focused program of giving back to those in our local neighborhood
- Pick-a-date program: letting our customers pick the date when they pay their utility bill
- Budget billing: to help customers better manage their household expenses
- A unique loyalty payment program which allows customers to earn rewards points
- A number of green energy options focusing on the future
Concerned About the Future
We have a simple message to our government; please stop for a second and try to understand the damage that is being caused to the private sector by artificially subsidizing the big utilities and creating an unlevel playing field. This message is targeted to all political parties: support the private sector.Today the private sector and other businesses like ours have never been more at risk. Current government policies, subsidies, and outsourcing (under this government and the previous governments) has had a major negative impact on the future health of our industry. The only people that will be happy with increased electricity rates, subsidies, and hidden taxes are distribution companies that love the ability to increase their rates, and those in the generation business who will profit from the new capacity payment scheme to guarantee them new profits. This is not sustainable and eventually consumers will say enough! You cannot break the system and try to fix it with subsidies.
We are wrong to leave our children with a growing debt that they will have a hard time paying down or leave them a dwindling workforce ravaged by outsourcing.
Changes Need to Be Made
Alberta’s electricity market is going through a restructuring. The province will phase out coal-fired power plants and try to reach a goal of 30% of electricity generation coming from renewable sources by 2030. In addition to this, to try to encourage more investment in Alberta’s power market, a new capacity market will be introduced in 2021. The bottom line is simple: consumers will pay more. Remember the government doesn’t have any money – it is coming out of the consumers pocket one way or the other.With new policies already in the works, electricity prices have become unstable and an increase in prices has begun. In preparation for this the government has introduced a subsidy on the Regulated Rate Option (RRO). Regulated Rate providers like ENMAX, EPCOR, and Direct Energy are receiving millions of dollars in subsidies to keep their rates artificially at 6.8 cents/kWh. Funding for this subsidy is coming out of the Carbon Tax. $70 Million in subsidies estimated this fiscal year alone.
Why are we concerned? This policy is tilting the playing field towards the RRO utilities and away from small independent companies like those in our network. Additionally, many of the RRO utilities who are being subsidized are the same companies that have outsourced hundreds of jobs outside of Canada.
Regulated Utilities Cut Costs, Increase Profits and Ship Jobs Out of Alberta
Have you ever heard of the Local Multiplier 3 (LM3)? It was developed by the New Economic Foundation as a simple and understandable way of measuring local economic impact. The multiplier effect measures the number of times a dollar circulates within an economy. It was developed on the idea of the ‘leaky bucket’. Think of this: ATCO outsourced over a billion dollars when they signed a 10-year deal with Wipro, a company out of India. $100 million a year. Direct Energy did the same and even sold off all their natural gas holdings for $700 million to a group from China. To a lesser degree ENMAX did the same by outsourcing their IT jobs to India – our government turned a blind eye. How many dollars using the multiplier will be lost to our economy? Add it up and it is costing Alberta over $300 million a year.If you imagine the local economy as a bucket full of water, every time you spend money that goes outside the local area, it leaks out of the bucket. Generally, our energy is focused on trying to pour more money into an area so as to keep filling up the bucket. However, a better starting point for strengthening the local economy should be to try to prevent the money leaking out in the first place. Remember – the money leaking out is your tax dollars.
In the coming weeks through a series of blogs, we will try to help residential and small business consumers of electricity and natural gas in the province truly understand what is going on. Staying true to our original goals of simplifying the market and being transparent, we will try to remove the confusion with straight talk and we will point out problems in the energy retail industry.
On the target list of future blogs: Understanding the RRO, Transmission Rates, The Balancing Pool, a closer look at retailers like Direct Energy, ATCO, ENMAX, EPCOR and Just Energy, and more.
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Madeline Low & Nick Clark
Concerned Albertans