The Dark Underbelly of Retail Electricity Prices
Dear Premier Smith,
Congratulations on your victory in the provincial election. We are writing to you with a few suggestions to address the affordability crisis in Alberta.
Giving consumers a choice in a deregulated market has worked out very well for two-thirds of consumers in Alberta, but there are still about 500,000 residential consumers overpaying for electricity. These are the people that need help. And they need help today, just not in the way you think.
We recommend that one of your immediate priorities should be to give Albertans sound advice on lowering their monthly utility bills. This can be done immediately and will help many people in our province regardless of political affiliation and without utility subsidies rate caps. The more difficult task will be to fix the fundamental problems in the electricity market.
You heard consumers during the election: From the grocery store to the monthly utility bill, many Albertans feel squeezed financially because of inflationary prices. Electricity is an essential service, and the increase in Regulated Rate Option (RRO) prices will come as unwelcome news, given that these prices increased the day after the election.
Do consumers know they have options? Do they know where to look? They need to hear these answers from you and your new Minister of Affordability and Utilities.
Simple Fact
Competition drives prices down. Consumers have more choices today than ever when it comes to signing up for electricity or natural gas services. Most importantly, many small local community-based retailers offer better rates rather than the RRO providers.
Energy prices made the news during the provincial election, with promises to cap rates as a solution to prop up the regulated utilities. Let’s be clear, “caps and subsidies” do not work and are not needed, especially when competitive, stable rates are already available in the 12 cents/kWh range.
Earlier this year, customers on the RRO were given a 13.5 cents/kWh price cap, while in reality, this was a deferral subsidy that RRO consumers must now pay back. The $201 million interest-free loan from the government to RRO providers only serves to mask the problem and does not solve the affordability issues due to inflation. We implore you to please not do this again, especially as RRO prices are projected to balloon toward 30 cents/kWh this summer.
The post-election reality is this: RRO prices are increasing. On June 1, Direct Energy increased its rates up from 16.6 cents/kWh to 17.6 cents. ENMAX and EPCOR increased their rates into the 18 cents/kWh range. Consumers in Lethbridge are now paying 19.5 cents/kWh, and the members of the rural farming community in the EQUS zone are being billed as much as 26 cents/kWh.
Little Known Secret
Someone needs to be bluntly honest with consumers still on the Regulated Rate Option and simply tell them to get off the RRO. If they do, they don’t have to pay the extra 2.5 cents/kWh added to RRO rates over the next 15 months. The average homeowner could save upwards of $300 just by switching.
Not only will many of the ½ million consumers who are overpaying for electricity save over 30% in lower monthly energy rates, but they will also avoid paying back their share of the $201 million that your government gave the big utilities to finance the deferral program.
Do people know they will not be required to pay back the deferral if they exit the RRO program? Right or wrong, encouraging consumers to dump the RRO rates and lower their utility costs is the smart thing to do.
Shop Smart
Consumers hunting for lower rates should check out the Utility Consumer Advocate and ask for help (310-4822). There are over 50 retailers in Alberta offering lower rates than the RRO.
Unfortunately, some consumers will not qualify for lower competitive rates and will be stuck. Respectfully, we recommend a solution to help those who are vulnerable so they can avoid becoming victims of energy poverty. Consider the attached proposal, which we have titled the Transition Rate Option (TRO); a solution that doesn’t replace the RRO but rather accomplishes the goal of assisting vulnerable Albertans in a targeted fashion.
Consumers should be vigilant when looking for an alternate supplier and deciding what is best for their household. Looking at the energy rates is not the only factor to consider. Check out product terms, extra admin fees, or early cancellation fees. We also recommend finding a local retailer engaged in and financially supporting community-sponsored support programs. For a list of recommended community retailers, here is a link to a number of providers who work with community partners.
Shopping locally can make a difference; people just need to know.