Alberta electricity prices are soaring, and to help battle high prices, the province has announced rebates for residents, an approach St. Albert MLA and Associate Minister of Natural Gas and Electricity Dale Nally says makes better sense than a price cap.
Nally said nearly two million families, farms and small businesses will receive three $50 rebates designed to retroactively help with bills from January, February, and March.
The associate minister said the province chose to do a rebate rather than a cap to help quell high electricity prices because a cap doesn’t stop the actual price of the product from going up, and the province wants to be transparent about what the true cost of electricity is.
“We also don't want to take today's electricity costs and hang it on our grandchildren to pay off in the future. We don’t think that is a responsible approach.”
Nally said a price cap is unnecessary because consumers can get a fixed-rate contract, which essentially caps their price for the resource.
Nally said anyone who is concerned about high prices on their electricity bills who wants to benefit from a fixed rate should call the utility consumer advocate. The organization is a non-government entity that provides non-partisan advice to help customers find the best contract for them.
“If you do take the (regulated) rate, it means you will benefit from when the costs go low," he said in regard to whether a fixed rate is better than a fluctuating rate. "I can't say what is the better option. I can only say that for consumers that want the security of a fixed rate, they might want to take a look at a fixed-rate contract,” Nally said.
Albertans do not need to apply for the electricity rebate, and it will be automatically applied to anyone who used fewer than 250 megawatts of electricity in January, February, and March.
The main reason for soaring prices, Nally said, is a spike in demand.
“What we've seen over the last few months is unprecedented demand and in fact, we have broken records in the last 12 months, I believe three times in terms of the demand that we saw for electricity,” Nally said.
“As that demand increases, it does drive the price up, and a particularly cold winter definitely added to that.”
University of Alberta business professor Hailing Zang said one of the reasons for the cost increase is that the price of the inputs to make electricity are increasing.
Electricity is produced through commodities, such as natural gas. As the price of gas increases, so does the price of electricity.
“It's because natural gas prices, and other prices like a coal price, it's all increasing, so the production costs using natural resources is going up tremendously on its own,” Zang said.
Nally said the closing of coal plants across the province has also contributed to high electricity prices. While coal does have an environmental impact, Nally said, it is one of the cheapest ways to make electricity.
“As we transition off of coal, it drives the price up,” Nally said.
The province has one of the only deregulated electricity markets in Canada, which causes supply and demand to determine the price on the market, Zang said.
Nally said the previous build out of the electricity grid has also caused an increase in the fees residents pay on their bills.
In a few weeks, the associate minister said the government plans to introduce new legislation that will help modernize the electricity grid.
“It will encourage more generation to come online because we know the path forward for lowering price is through increased competition and more choice and encouraging generation,” Nally said.
The bill will help the province create more supply to meet the demand, Nally said, along with enabling energy storage, which is currently not allowed in the legislation.
“By allowing storage, that helps deal with the intermittency of renewable energy, because we've got a fair amount of renewable energy in this province, but it is the most inefficient form of electricity because of the intermittency. The storage will also help deal with that as well,” Nally said.
“Long term, that will contribute to bringing down prices, but unfortunately it won’t bring prices down tomorrow.”
