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Alberta proposes legislation capping electricity supply rates for 4 years

Vastly variable electricity costs in the province of Alberta would be brought under control by a rate cap, if new legislation is approved.

The Alberta government on May 23 introduced Bill 16 to establish over a four-year period a cap on rates that customers taking service under the province's regulated rate option would pay for electricity supply. It passed a first reading in the Legislative Assembly that same day and passed a second reading on May 24.

"Electricity is a basic necessity and Albertans shouldn't have to worry about their power bills spiking from one month to the next," Minister of Energy Margaret McCuaig-Boyd said in a news release. "This cap would help make life more affordable by ensuring Albertans aren't burdened with price volatility as we transition to a cleaner electricity grid and more stable electricity market."

Alberta's long-term plan to move its electricity sector away from coal over the next decade or so is expected to be costly. One recent estimate put the effort at C$12.4 billion by 2030, including the switch to a capacity market from the current market structure, the closing of coal-fired power plants and termination of power purchase agreements for their output, and the addition of several thousand megawatts of new generation resources, primarily renewables. That estimate, by consulting firm EDC Associates Ltd., does not include any related transmission system upgrades.

The provincial government first announced plans for the rate cap last fall. The 6.8 Canadian cents/kWh cap is to take effect June 1 and run through May 31, 2021. If the monthly cost of electricity is below the cap level, consumers will pay the lower amount. The energy ministry said in the past six years that the regulated rate option charge has ranged from as low as 2.7 Canadian cents/kWh to as high as 15.3 Canadian cents/kWh, causing the average residential customer to pay anywhere from C$20 to C$90 a month for electricity supply.

During discussions in the Legislative Assembly, some members asserted the New Democrat-led government was not telling consumers the whole story. MLA Todd Loewen of the Wildrose Party on May 25 suggested the rate cap bill was introduced because the government expects rates to double during the next four years. "This bill is really all about hiding the true cost of electricity from Albertans," he said.

Loewen and MLA Don MacIntyre, also a Wildrose member, said the legislation is unnecessary, because ratepayers already have choices including a fixed rate and a floating rate, both of which are currently below the proposed cap.

The energy ministry in its statement said the government would use "a variety of market and other tools" to keep the market rate of electricity below the cap level. It said future regulations will determine how payments would be made if market prices run above the cap level.

The Wildrose legislators cautioned the Alberta government from following the example of Ontario, where earlier in the week that province's financial accountability officer warned that an electricity rate reduction plan proposed by Ontario's Liberal-led government could result in a net cost of C$21 billion over 29 years.

"This government has tried repeatedly to distance themselves from their friends in Ontario," MacIntyre said. "That debacle, nevertheless, step after step after step, is definitely following in their footsteps."