Submitted By Mike Deising,
Alberta Electric System Operator
Over the last few weeks, much has been made of Alberta’s electricity system. The main driver for public discussion is price – as it should be. Albertans expect to see value for their money when it comes to electricity and they want to know they are getting a fair deal.
As the province’s independent agency responsible for facilitating the wholesale electricity market, operating the power grid and planning the transmission system, the Alberta Electric System Operator has an important role to play. We operate solely in the public interest and are on the frontlines of ensuring power makes it to your home, your child’s school, your work and to every single household, business and commercial building in the province.
In North America, provinces and states have basically gone down one of two paths for developing their electricity generation requirements. Path one is a government-run system, which is usually managed through a Crown corporation like in British Columbia or Quebec; path two is a market-based, competitive system like in Alberta, Texas or many of the other states. These market-based systems typically function with regulated processes for building transmission, as is the case here in Alberta.
The question being raised recently is whether this system is providing value and working for Albertans. Probably the most comprehensive and accurate study we’ve seen on electricity prices in Canada was done a few years ago by London Economics. That report worked in detail to do a fair comparison between Canada’s government-run systems and the market-based systems. The report found that when you factor in all prices associated with electricity – what residents pay, what governments pay, what debt is incurred and what additional fees are levied, Alberta sits in the middle of the pack.
There are differences between market-based systems like Alberta’s and government-run systems. In Alberta you have full transparency to the all-in cost for power. There are no hidden costs, taxes, or fees buried in the system somewhere.
Another main difference is that price can fluctuate in Alberta. Sometimes the price goes up and sometimes it goes down. In other systems it usually just goes up. Since 2011, average monthly charges for electricity in Alberta through the regulated rate have come down by roughly 20 per cent, and the 2014 price is close to what it was in 2006. While these costs are going down, the cost for transmission is going up because more transmission lines are needed to move power to keep pace with our population and economic growth. Right now, the average Albertan pays about $20 per month for transmission. That is up about $7 from 2011.
Now, whether you have a government-run, centrally planned system or a market-based system, price will inevitably go up over time just like in all other goods, services and commodities. The price of gas, a new home, parking, property taxes and yes, the price for electricity can go up over time. In fact, earlier this year B.C. announced its prices were going up 28 per cent over the next five years and Ontario said its prices were going up more than 40 per cent. In Alberta, the market and competition will determine what the electricity price ends up at in five years and at the end of the day it will be up to Albertans to determine if they feel they are getting value from the system.