Alberta’s electrical grid is creaking under the weight of its boom – power prices in Canada’s only deregulated power market have soared as the system is stretched to its limit.
The long-simmering issue was pushed to the forefront this winter when homeowners’ power bills doubled just as the province approved a major new power-line project that could inch monthly bills up even more.
The provincial government is at the centre of a firestorm, facing complaints from consumers who say prices are too high – dozens have sent their monthly bills, some topping $600, to their MLAs – and landowners who don’t want new transmission lines built near their homes.
With an election looming, the province on Thursday announced an independent committee to review the system, the only electrical generation market in the country that is fully deregulated.
Provincial agencies say winter (which has been mild), unplanned power-plant outages and increasing population have driven up prices, and the spikes are due to basic supply and demand. Critics, however, warn the whole ordeal is the latest sign of the failures, volatility and short-sightedness of the system. Edmonton and Calgary have some of the country’s highest power prices.
“This has been fraught with problems throughout,” said Jim Wachowich, an attorney for the Consumers’ Coalition of Alberta who has been involved in the issue since deregulation began. “Elements of deregulation in Alberta have been a public-policy fiasco,” he added.
In 1996, Alberta essentially took the government out of the power generation business and largely left the price to the market. Government held on to some regulatory roles.
But critics say the market is ill-equipped to foresee and address the unprecedented growth in Alberta’s population, industry and overall power demand. It only responds - which, with soaring demand, prices and population, is why power companies are scrambling now to build new plants.
Meanwhile, Albertans set two new records for power use this year and officials wince at the suggestion that brownouts, or reductions in power, could happen, saying they can import power from British Columbia or Saskatchewan if needed. Alberta set a new record demand peak of 10,609 megawatts on Jan. 16, more than the average supply of 10,500 megawatts.
There are also fears that deregulation could allow power companies to bend the rules. The Alberta Utilities Commission, which regulates the utilities sector, natural gas and electricity markets, held a hearing this month on whether a 31-hour “scheduling practice” – or power plant idling – at the power company TransAlta Corp. in November, 2010, was undertaken to drive up prices. TransAlta has agreed to pay roughly $370,000 in fines and foregone income. The AUC’s decision hasn’t been released.
“There’s no question deregulation has been a failure,” Alberta NDP Leader Brian Mason said.
Alberta power consumers, meanwhile, can sign long-term power contracts or opt to pay market prices based on the previous month’s wholesale power prices.
Market prices for homeowners typically hover around eight cents per kilowatt-hour, but spiked to 15 cents during January for anyone not on a contract. Drayton Valley resident Heather Arseneault’s power bill totalled $977.11 for December and January. “How can we live like this? Not all families work in the oil patch,” she wrote in a letter to an MLA, in which she included a copy of her bill.
Alberta’s electrical grid is a mix of private and quasi-public agencies – power companies own the plants and power lines, but a provincial agency, the Alberta Electric System Operator, regulates distribution. Consumers also pay the full cost of new lines, even though companies own them.
Alberta’s power supply – the deregulated part of the system, mostly coal-generated – has been neglected. The AESO says the province’s population has jumped 43 per cent over two decades while its power use has gone up 80 per cent, largely due to industrial demand.
The province needs more power. And the government says it needs better north-south high-voltage power lines, and last month approved two new ones between Edmonton and Calgary. The province first noted a need for the lines a decade ago; since then, it has added 700,000 residents and seen its energy sector boom.
Landowners don’t want the next lines in their backyards, and some fear future exports of power although Alberta has no excess.
Premier Alison Redford and her energy minister, Ted Morton, campaigned against the lines as recently as last summer during their party’s leadership race. Ms. Redford struck an independent committee led by former University of Alberta board of governors chairman Brian Heidecker, which found that the lines “are required to meet the needs of Albertans.”
“In terms of growth and demand, we probably need it today. We definitely need it by 2015, 2016,” Mr. Morton said, later adding: “The risk of being two years too late on this is much, much higher than being two years early.”
The cost (at least $3-billion) will be spread over 40 years, but paid for entirely by consumers, who until a decade ago split such costs with power companies.
A Hydro-Québec study showed Calgary and Edmonton had Canada’s highest average residential power rates in 2011. Preparing for an election, Ms. Redford has now frozen some of the additional charges on power bills while pledging power prices will drop back down to 8 cents by next month. Her opponents say it’s a short-term fix.
“The point is to get it down, not freeze it at its peak,” Mr. Mason said. “And so while power prices may go down next month, everyone knows they’re going to go back up again.”