David Gray has been talking up a storm. An electrical storm. Since resigning as Alberta\u2019s utilities consumer advocate on July 24, Gray has conducted a series of media interviews lambasting the retail electrical market he was until recently charged to oversee. Unseemly to some, coming from a former public servant, his comments have reopened a long-simmering debate over power deregulation in the province.
Gray resigned in frustration after concluding that Albertans are ill-served by a power market in which consumers can choose between a default \u201cregulated rate option\u201d that is now only 20% regulated (the other 80%-100%, beginning next July, will be based on the 30-day forward price of power) and a long-term, fixed-price contract. Gray has characterized the five-year contracts sold door to door by the likes of Direct Energy Marketing Ltd. and Alberta Energy Savings LP as a \u201cripoff.\u201d Already, Albertans pay more for power than their counterparts in most other provinces. With the need for new transmission networks and smart metering (and, at some point, probably carbon taxes or emissions-control costs imposed on Alberta\u2019s mostly coal- and gas-fired power generation), that price is likely to go up \u2014 way up.
Gray\u2019s comments unleashed a deep well of discontent, not just among consumers but among business users as well. Some companies talked about how they had moved operations out of province, or were planning to, as a result of Alberta\u2019s uncompetitive and unpredictable power prices. Not the sort of thing a jurisdiction that prides itself on being business-friendly wants widely known.
To be fair, when the power companies calculated their five-year hedged purchases, few people realized that the bottom would fall out of the natural gas market, which has had a trickle-down effect on power prices. Few realized that North American gas reserves would virtually double as a result of shale and other unconventional gas discoveries over the past two years. So, naturally, like a fixed-rate mortgage negotiated two years ago, the five-year contracts look expensive vs the market price.
However, Gray\u2019s point is well taken: people who succumb to the commissioned sales pitch typically find their power bills going up. Then, they face hundreds of dollars in penalties for breaking a contract. The only \u201creasonable\u201d contract on offer, he says, is the one offered by Enmax Corp., which is pegged below the regulated price and, most important, breakable without penalty.
In the past, rivals attacked Enmax\u2019s heavily advertised EasyMax offering as unfair competition. Owned by the City of Calgary, Enmax enjoys a lower cost of capital and need not generate the return on investment that its private-sector competitors must, they charged. But while one study by University of Calgary economists found that the utility may be exposing Calgary taxpayers to more risk than they bargained for, neither the provincial government nor the Alberta Utilities Commission has taken action.
What Alberta\u2019s electrical market could use is more innovators such as Enmax to provide some real competition. Although there are numerous regional sellers of power, the market is dominated by the Big 3 (Direct Energy, Enmax and AES), which collectively offer less competition than the free-market believers of Ralph Klein\u2019s administration (who introduced deregulation back in 1995) had anticipated. When it comes down to it, Alberta is too small a market to be attractive to the necessary number of competitors.
The Stelmach regime, rooted as it is in rural areas less enamoured of unrestrained capitalism, has hitherto sat on the sidelines of this debate. But Gray\u2019s ruckus may force it to change course \u2014 especially if his warning about the \u201cregulated\u201d rate paid by 70% of consumers spiking upward comes to pass. Yet another review of retail power deregulation is underway. Somehow, though, I doubt Gray can expect another government appointment anytime soon.\tIE<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"
Frustration is growing over electrical rates out of sync with other market trends<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3013,3014],"tags":[2552],"yst_prominent_words":[],"acf":[],"_links":{"self":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/320700"}],"collection":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/comments?post=320700"}],"version-history":[{"count":1,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/320700\/revisions"}],"predecessor-version":[{"id":370727,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/posts\/320700\/revisions\/370727"}],"wp:attachment":[{"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/media?parent=320700"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/categories?post=320700"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/tags?post=320700"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.investmentexecutive.com\/wp-json\/wp\/v2\/yst_prominent_words?post=320700"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}