Alberta government rolls ahead with electricity plans: Rate of Last Resort

New legislation taking effect in January aims to protect Alberta's power consumers from significant price fluctuations, according to the provincial government.

The Regulated Rate Option, now renamed the Rate of Last Resort, is designed to encourage consumers to opt for competitive contracts. The government says this will help Albertans better understand their energy options and is part of a broader initiative to raise consumer awareness.

"Utility bills can make or break a tight budget when every penny counts," said Minister Nathan Neudorf. "Our government is giving Albertans the tools they need to save their hard-earned money and make monthly costs more predictable, while also shielding the most vulnerable from sudden price spikes."

The Rate of Last Resort will be adjusted every two years, with a cap on increases of 10% per term.

The Utilities Consumer Advocate, under the Ministry of Affordability and Utilities, will check in with customers every three months to confirm if they want to remain on the default plan or sign up for a competitive contract.

Chris Hunt, a member of the Utilities Consumer Advocate, added, "Our team is here to help Albertans understand the retail energy market and identify the best options for their household, farm, or small business."

Albertans can choose from three options for their electricity and natural gas utilities: the default rate, a variable-rate contract, or a fixed-rate contract. Currently, 26% of Albertans, 29% of commercial customers, and 40% of farm customers purchase electricity through the Rate of Last Resort.

At the Alberta Municipalities 2024 Convention and Trade Show in Red Deer, Premier Danielle Smith addressed last year's electricity spike, which reached 32 cents per kilowatt hour, saying the new measures aim to ease financial pressures for low-income households and small businesses.

Premier Smith noted that some Albertans remain on the Rate of Last Resort due to financial difficulties, poor credit, or living in rural areas with fewer options. However, she believes the new measures will provide stability and prevent dramatic price hikes for those not on contracts.

Energy economist David Gray, a former executive director of the Utilities Consumer Advocate, believes stabilizing prices is a smart move but cautions that it could have unintended consequences. He suggests that making the Rate of Last Resort more stable could make it the "rate of first choice" for many consumers.

"The province is trying to push people off the regulated rate while also making it more stable and appealing," Gray explained. He estimates the two-year stable rate will be around 10 cents per kilowatt hour.

EPCOR, which offers the Rate of Last Resort service in Edmonton and surrounding areas, said it will continue to provide this service alongside its competitive electricity product, Encor by EPCOR. The company has approximately 560,000 customers across Alberta.

"We support customer choice and a competitive electricity market, and we will ensure the new legislation is implemented as efficiently as possible," said an EPCOR spokesperson.