The provincial Liberals have a plan they say will save Albertans billions of dollars in electricity costs over the next decade, leader David Swann announced Wednesday.
Adjusting how the Regulated Rate Option — how a majority of Albertans pay for electricity — is calculated to be based on the actual cost of power could save Albertans as much as $700 million by 2020 and up to $3 billion by 2030, Swann told reporters.
"Since 2006, experts have calculated Albertans have overpaid by more than one billion dollars under the current approach," he said.
"Our recommendation is to amend the regulation to use the actual cost of electricity, rather than the forward pricing method. This cost saving will more than offset the cost of the power purchase arrangement, a liability that must be repaid by residential, small business, commercial and industrial operations."
The RROs are when providers average out prices over periods of time so consumers don't see spikes in their bills. The Liberals say that's led to overcharging. If the RROs are based on actual prices, that could eliminate over-charging, but electricity rates could be much more volatile from one month to another.
The provincial government passed the Electric Utilities Amendment Act during the recent fall session, which allows unlimited borrowing to cover the cost of Power Purchase Agreements returned to the Balancing Pool.
Power Purchase Agreements were established as part of the electricity deregulation move in the mid-1990s, aimed at creating competition in the marketplace.
If the provincial government changes the rules around electricity pricing, however, they — and taxpayers — could be on the hook for lost revenue suffered by power companies.
Swann says the liability is estimated between $2.5 billion and $3.5 billion and if paid off through borrowing, the cost to consumers could increase from $350 million to $500 million.
"Market mechanisms are important to keep prices low," he said. "They're important for business and business is important for our province and anything that interferes with fair market competitiveness is not going to serve Albertans."
Rob Spragins, a former Utilities Consumer Advocate for the province, says the forward price for electricity has consistently been higher than the actual wholesale price.
"This is where that one billion dollar number comes from," he said.
"As we all know, the costs in Alberta for electricity are increasing. We've got distribution and transmission costs going up, we've got the new carbon levy effective Jan. 1, we've got possible increases in prices due to the new capacity market which will be introduced in three or four years. We've got the cost of renewable energy projects, some of those are still higher than the cost of conventional generation. And finally, one of the things we've got is the PPA liability."