The Government of Alberta announced on Thursday, April 18, major updates to the provincial electricity market. This includes changing the electricity Regulated Rate Option (RRO) title to the Rate of Last Resort, and calling RRO providers Rate of Last Resort Providers.
According to the Minister of Affordability and Utilities, Nathan Neudorf, the proposed changes would provide more clarity to electricity consumers and encourage them to explore other retail energy options.
The change, however, is not only focused on the title but also on how the rate is structured. This new rate will be set every two years for each provider instead of every month as the RRO currently is. This way, utilities will be able to buy electricity from the wholesale electricity market for the Rate of Last Resort, which will extend the negotiation period from three months to two years. The idea is to make the RRO more predictable and affordable, according to the government.
The new regulation will be introduced and discussed in the spring and summer of 2024. If passed, it will come into effect as of January 1st, 2025.
There are no planned changes to the natural gas regulated rate for now.
The provincial government also plans to introduce additional requirements for RRO providers.
- Within 90 days of providing services, providers will be required to confirm with their customers whether they’re choosing to sign a competitive rate contract or stay on the RRO.
- Providers will be required to share information with their customers on how to access the Utilities Consumer Advocate’s (UCA) resources.
- Providers will be required to remind customers of their energy rate options on their monthly bills.
Albertans under the RRO will still be able to leave for a competitive rate anytime they choose, and the government still encourages Albertans to leave the RRO/Rate of Last Resort.
Unique jurisdictions, like Medicine Hat, for example, will maintain the ability to set their own prices under their own schedule.
In the last quarter of 2023, the total number of residential RRO customers fell by around 66,000, the strongest net reduction in any quarter since 2012. Less than 30% of Albertans are currently under the RRO.
Because of the new default electricity rate schedule, power providers will be able to buy out electricity up to years ahead instead of up to three months. The AESO will continue with the current forecasting system.
In 2023, the average RRO price was 23.89 cents/kWh in the Edmonton region. The rate got as high as 32.957 cents/kWh in February of that year, and reached its lowest in May at 16.829 cents/kWh.
In 2023, the average RRO price was 22.677 cents/kWh in the Calgary region. The rate got as high as 32.349 cents/kWh in February of that year and reached its lowest in May at 16.635 cents/kWh.
After announcing the plan to reduce electricity price volatility in the province, the Minister of Affordability and Utilities, Nathan Neudorf, was asked about distribution and transmission costs. The Government is also researching options for making such charges lower.
What should I do if I’m on the RRO?
If you’re under the Regulated Rate Option (RRO) and don’t plan to leave it, then you don’t need to do anything, as the name transition from RRO to ROLR will be automatic. However, if you’re unsatisfied with your current energy costs, you can take the opportunity to research your options. On websites like EnergyRates.ca, you can compare both floating- and fixed-rate electricity and natural gas plans in your area for your house or business. This comparison can help you check if you could be saving on your bills and potentially switch energy providers.
Standardized Local Access Fees
In addition to the major electricity market changes announced on April 18th, the Government of Alberta is also proposing more regulation on how Local Access Fees are determined in the province via Bill 19, officially titled Utilities Affordability Statutes Amendment Act, 2024.
If passed, this legislation would prohibit the use of variable rates when calculating municipalities’ local access fees. But what does it mean exactly?
Although many Albertans don’t know what a Local Access Fee is, this charge made the news last year after Calgarians found out they were paying just over 250% more than Edmonton residents for LAFs.
In Calgary, the local access fee fluctuates with the price of electricity, including the Regulated Rate Option. When rates increase, so does the fee. When prices drop, the fee does as well.
In 2023, Calgarians paid $240 in local access fees on average, compared to $75 in Edmonton. One reason for the high access fee is the RRO summer 2023 price surge.
In August 2023, the RRO in Calgary reached 31.858¢/kWh, a record high. In September 2023, the Calgary RRO lowered to 26.455¢/kWh.
Many municipalities usually charge 10-15% of transmission and distribution charges for their access fees. Other Alberta municipalities, like Edmonton, calculate the fee based on a fixed rate.
In Calgary, the local access fee is charged 11.11% of the RRO, plus 11.11% of transmission and distribution costs.
The Local Access Fee is the charge paid by a utility company to a municipality for the exclusive right to provide service in the municipality
The local access fee is used to cover the costs municipalities charge to utility companies for the right to exclusively serve its residents and to have utility infrastructure on municipal grounds. Essentially, it works in lieu of a property tax to run power equipment through the city.
The fee is mutually agreed upon between the two parties. The agreement must be approved by the Alberta Utilities Commission. However, the AUC does not set the fee rate.