The recession has come to an end—but that may not mean individuals and companies are lined up for an easy recovery. Analysts have forecasted that power prices and customer surcharges will rise throughout the year.
Have you noticed the difference on your power bill already?
The price increase isn’t unrelated to the recession. In fact, it is because of falling industrial demand and low natural gas prices, both factors that were directly related to the latest recession, that Albertans have been experiencing lower energy rates over the past three years. Of course, other factors are involved as well, including the introduction and further increase of the carbon tax and the phaseout of coal-fired power plants (which affects close to 1,500 MW of capacity), but it isn’t a coincidence that we are expecting to see electricity prices increase as the oil and gas economy begins to recover.
How much of an increase is to be expected?
Considering 2017 electricity prices averaged in at less than half of pre-recession prices, the potential is significant. Average Alberta pool electricity prices (per megawatt-hour) dropped from $80.19 in 2013 to $49.42 at the start of the recession in 2014. In 2016, prices had bottomed out at $18.28 before beginning to climb in 2017 to $22.19. However, while the change between 2016 and 2017 could have indicated a slow rate of increase, this year has already seen as significant jump, with prices trading in the mid-$30 range in January. A report by electricity consultants EDC Associates has even suggested that we can expect to see prices hit an average of $51.49 per MW-h this year.
In other words, consumers will be seeing electricity prices as much as double this year, although that price increase, as some argue, is simply bringing energy prices back to a normal level—one that could be contributing to a more stable economy.
On the other hand, the electricity prices aren’t the only thing contributing to consumers’ higher monthly bills.
Transmission expenses and the consumer surcharge from the Alberta Balancing Pool, which automatically passes along any profits (like carbon rebates) or losses (like the government loan it required last year to cover a number of money-losing Power Purchase Arrangements from 2016) to ratepayers, are on the rise, too.
That loan needs to be paid back by 2030, which means monthly consumer charges for 2018 will be set at $3.10 per MW-h—although that rate may decrease based on future power prices and expected losses.
The moral of the story is that consumers will notice a difference as a result of these increases—and some are suggesting that today’s increases could be just a shadow of what’s to come in 2020. However, there are ways to combat these price increases. Keep an eye on your provider’s energy rates. There may be other providers who continue to offer lower rates beyond the increases. You may also be able to lock yourself into a lower energy rate now that will protect you from rate increases heading towards 2020. Take a look at the rate plan opportunities you have available to you. Also remember that one of the best ways to protect yourself from higher energy prices is to find ways to conserve your energy use overall.
