The average cost of electricity per month in Alberta has been climbing higher in the past months. You’ve probably noticed that electricity rates — and, of course, electricity bills — are notably higher when compared to the historic lows from two years ago. At that time, electricity prices were around 2.88 cents per kilowatt-hour (kWh). So, what does explain the Alberta price increases? And is there something we can do to reduce our Alberta electricity bills regardless of the kilowatt-hour cost?
Why are my bills so high? How much does electricity cost in Alberta?
Until October 31, 2019, residential and small business consumers with the regulated rate option (RRO) wouldn’t pay more than 6.8 cents per kWh because of the Alberta electricity price cap. However, the price cap on regulated electricity rates was scrapped by the government this fall as part of the new provincial budget proposed by Premier Jason Kenney. Also, consumers under floating-rate plans, especially large consumers of electricity, have seen considerable spikes in their bills for most of the months in 2019.
If you’re currently under a variable-rate contract in Alberta (be it residential or commercial), there is a lot you can do to mitigate the impact of electricity price increases, whether you live in Edmonton, Calgary, Sherwood Park, Lloydminster, Chestermere, Airdrie, Leduc, Fort Saskatchewan or any other city, town or village in Alberta.
The main reasons why Alberta electricity rates are getting higher
Recession prices aren’t regular prices: The economic downturn caused by low oil prices in 2015 had a significant impact in Alberta. Like in most oil-based economies, the recession reduced economic activity in the province, which lowered many commodity prices, including Alberta electricity rates.
In 2015, electricity rates went below 4 cents for the first time in more than 12 years. Furthermore, in 2017, electricity prices reached a historic low of 2.88 cents/kWh. By that time, plenty of consumers decided to switch to floating-rate plans and take the best out of the low energy prices. Although that seemed a smart move during the recession, as the economy started to recover, so did the electricity prices.
In 2018, Alberta electricity rates reached their highest level since 2014, and have been steadily increasing since then. Such a trend makes it clear that recession prices aren’t regular prices. In other words, the savings strategies (which includes floating rates) used by consumers during the recession won’t work today the same way they used to two years ago.
The outlook — elections, the rate cap and electricity prices: Energy rates can be affected by multiple factors, including politics. The 2019 provincial elections in Alberta brought some changes to Alberta electricity prices. Before the elections, many consumers used to stay with the RRO provider in order to be protected by the 6.8 cents price cap proposed by Rachel Notley’s New Democratic Party (NDP) in 2017.
However, the strategy for finding the best electricity option has changed quite a lot in the province since the new Premier got elected in 2019. Jason Kenney, the United Conservative Party (UCP) leader in Alberta, has revealed a massive plan to scrap the provincial carbon tax, which included budget cuts.
The Alberta carbon tax used to subsidize not only the price cap but also specific energy efficiency programs. Although a federally imposed carbon tax is set to start in early 2020, the Government of Alberta has decided to move on with its decision and remove the price cap on RRO rates. In other words, chances are high that regulated electricity rates (RRO) will increase in the province in the months ahead, meaning that energy consumers will have to pay for it when electricity rates go above the 6.8 cents/kWh threshold. To learn how the price cap removal may affect your energy bills, click here.
It’s hard to predict what Alberta electricity prices are going to look like some months from now. In the face of such a blurry forecast for electricity prices in 2020, the best customers can do is to secure more predictable rates, and avoid risks such as variable-rate plans.
A quick look into the past: What about before the recession? What did the Alberta electricity cost per kWh look like? In order to make a smart decision regarding your utilities, sometimes you need to take a look at historical electricity rates. That will allow you to see how high prices can go after the market is completely recovered from the decline.
Even before the 2014-2017 economic downturn, the average kilowatt-hour cost in Alberta was quite volatile. The average electricity rate in the province from 2003 to 2018 was 7.3 cents/kWh, and it used to go above 10 cents/kWh from time to time. In January 2012, electricity rates in Alberta reached an all-time high (15.06 cents/kWh).
The energy transition: The energy transition from fossil fuels to renewable sources is quickly taking shape in Alberta. By 2030, coal-fired electricity generation will be phased out in the province, being replaced by renewables and natural gas. Although that is positive for the environment, such a change in the electricity grid can still affect electricity prices.
As an example, the recent closure of two major coal power plants is pointed out by many industry experts as one of the reasons for electricity price increases in the first months of 2019. In this case, consumers under floating-rate products tend to be more affected by volatility than customers with fixed-rate deals.
So, what can I do to avoid high electricity bills in Alberta?
Although there have been some efforts to stabilize Alberta electricity prices, it’s still somewhat difficult to predict what electricity bills in the province will look like in the months ahead.
Variable vs. fixed energy rates
In times of price fluctuation (or even worse, increasing prices), consumers should take the best out of fixed rates for electricity in Alberta.
Fixed energy rates will provide you with cost certainty. In times of higher energy bills, customers under fixed-rate plans won’t feel so affected, as their electricity prices per kWh won’t be vulnerable to environmental disasters, politics or other external factors.
Instead of focusing on the cheapest electricity rates at the time you sign a deal, take a look at both historical prices and the forecast. In other words, look at the downside and upside risks related to the contract you’re about to sign. For most energy customers, especially large consumers, fixed rates will bring more predictability to your budget and protect you from sudden market changes. Once you know what to expect from your monthly bills, you reduce the risks of unwelcome financial surprises.
At EnergyRates.ca, you can learn more about the differences between floating and fixed rates, but also compare Alberta electricity providers and their rates, including ENMAX Energy, Direct Energy, Encor by EPCOR and ATCOenergy.
The website allows you to compare utility costs and find out which electricity supplier fits your energy needs. The cost comparison tool lets you find the best and cheapest available providers in Alberta, as well as make a comparison of the current electricity plans in your area. Consumers looking for small business, commercial or industrial gas suppliers can even get a custom rate comparison report.
