Danielle Smith urges Albertans to ditch ‘broken’ regulated rate electricity

Premier Danielle Smith is blaming sky-high electricity bills on the “broken” regulated rate option, telling the third of Albertans currently on it that it’s time to find a fixed rate.

The RRO is a floating rate that changes monthly. It’s currently at around 28 cents per kiliowatt hour, compared to fixed rates starting at 12 cents.

“We have to find a way to get that group of individuals on to a longer-term contract to be able to bring their prices down,” said Smith on Thursday. “Let me just underscore: anybody who is on a regulated rate option, and if you cannot handle the volatility, the rates are going up, they have to go on to some kind of fixed rate contract.

“The regulated rate option is misnamed. It is not regulated, and it is not a protection for consumers.

“And there are a lot of people getting really hurt by that, because they think it is protected because it is a regulated rate, and it is the most volatile rate.”

But what looks like a bad deal now wasn’t always the case, according to economist Joel Macdonald, the founder of energyrates.ca.

“The regulated rate is based off of the spot prices, and the spot prices is very volatile and over short periods of time,” he said.

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Macdonald says RRO was a good deal just over five years ago, when the wholesale energy prices dropped.

Those providing the default rate, created when Alberta de-regulated power more than 25 years ago, are regulated. Prices need approval from the Alberta Utilities Commission (AUC).

“So they have to say this is the price we pay for electricity, this is our operating cost, this is the margin we want to charge, can you please approve,” said Macdonald.

But the unregulated wholesale price used to set the rate fluctuates; it’s expected to stay high this summer.

Demand is expected to remain elevated in part due to the growing number of residential air condition units, and strong oil prices bringing an increase to manufacturing in Alberta. It also comes as the province’s grid is still adapting to the phase-out of coal.

“It is broken. The fact that it is going up to 30c/kwh shows it is not working,” said Smith.

Macdonald stresses high RRO rates put strain on some of the most vulnerable. It’s often the only option for low-income Albertans or anyone without credit.

“This is one of the biggest concerns about the RRO,” he said. “It is a provider of last resort.”

WATCH: Albertans shocked by high electric bills

Also adding to current costs is a rate cap the UCP government put on the RRO this winter that was actually more of a “cost deferral.” Those still on RRO need to pay back the difference over the next 21 months.

“So we do have some concerns if there are 100,000 people on the RRO and it’s three cents they are paying back, and if half those people leave, which is a very real possibility based on the media coverage and the reality of the situation, well if there are now 50,000 people, they are going to pay six cents per kilowatt hour,” said Macdonald.

The premier has tasked the affordability minister to fix RRO in his mandate letter.