Calgary·Opinion

Alberta needs a greener grid but access fees could swamp us if we don't fix the system

In Alberta, the electricity market system is vulnerable to utilities overcharging. If that’s not dealt with now, the cost of achieving net zero could be much more painful.

Pressure to overbuild and overcharge is baked in, says electricity expert

A central power line in rural Canada. (CBC / Radio-Canada)

There's no escaping it. Calgary's commitment to net zero is going to require more electrical infrastructure — more high-voltage transmission lines and better connections throughout neighbourhoods.

So if you think the add-on fees on your utility are high now, just wait.

Access fees for the provincial grid and local power lines doubled in the past 10 years and now make up, on average, half of a residential bill.

Those costs will keep growing, in part, because of the need to decarbonize. But also because here, in Alberta, the electricity market system is vulnerable to overcharging by utilities. Those inflated costs are passed on to ratepayers.

And if that's not dealt with now, the cost of achieving net zero could be much more painful. 

But first, let's look at how we got here.

Alberta's power market is unique in Canada but is similar to "unbundled" competitive markets in other parts of the world, including the U.S. and Europe.

Starting in the 1990s, Alberta unbundled or split the former electricity monopolies into the component parts of the power system — electricity generation, or power plants; transmission, or high-voltage power lines; distribution lines and poles in the cities connecting power to homes and businesses; and retail, or billing services. 

The intention behind this was to create competitive markets for generation and retail services and to use regulation to keep transmission and distribution rates fair for both utilities and customers. But the pressure to expand and overbuild is baked right into the system.

An aerial view of power lines in Edmonton in April 2022. (David Bajer/CBC)

Transmission and distribution are still owned by companies with monopolies in different areas of the province, and so, to prevent them from engaging in monopoly behaviour, their rates are reviewed and approved by the Alberta Utilities Commission.

The commission is supposed to allow companies to charge back only the capital projects and other assets the system really needs.

But companies face pressure from their shareholders to get higher rates, and the simplest way for a company to push rates up is to add more infrastructure because the value of a monopoly's assets is the backbone of its rate — it earns a profit based on what it owns.

Relying on a whistleblower

Plus, as the recent overcharging scandal involving an ATCO transmission line to Jasper shows, transmission companies can deliberately inflate costs. In the ATCO case, it granted a single-source contract to a subcontractor, knowing the company was overcharging by 30 per cent, because this contract was part of a promise to secure lucrative work for one of ATCO's affiliates. 

That 30 per cent overcharge would have been passed on to ratepayers had a whistleblower inside ATCO's own accounting department not alerted the commission before the costs could be added. 

How many other deals or examples of fudging of numbers slip through because no one risks their career standing up to say stop?

According to the International Energy Agency, government actions to rapidly boost clean energy and reduce fossil fuel use can create millions of jobs. (Jeff McIntosh/The Canadian Press)

The incentives to overbuild and overcharge are a problem that needs to be addressed now, because more lines will almost certainly have to be built over the next decade. Both wind and solar require considerable space, so new farms tend to be built in rural areas where transmission infrastructure is absent. New lines will be needed to connect the facilities.

Estimates vary, but transmission lines can cost up to $3 million per kilometre. That adds up, and you will see the cost on your bill in the fees.

A deeper need for change

Alberta will require significant distribution upgrades within cities, too, to handle more rooftop solar and other demand-side generation, to accommodate increased power draws from electric heating systems, major appliances, heating and cooling (especially with extreme weather on the rise) and electric vehicles without causing rolling blackouts and brownouts.

The province needs more wind and solar power and a better, smarter transmission and distribution system. But these things will likely involve high upfront costs, and too many Albertans are already buckling under the weight of existing bills, especially when it comes on top of inflation. We see that in the number of families seeking emergency help or having their power limited.

We need a plan for how to manage those costs, and we need it soon. This could mean revisiting the rate formulas for transmission/distribution and scaling back retail fees, or it could mean asking for federal funding and help from the Canada Infrastructure Bank to finance future upgrades. 

Whatever the solution, Calgary's commitment to net zero means waiting to act will only let the bills continue to climb while ratepayers' pain deepens.

ABOUT THE AUTHOR

Kristen van de Biezenbos

Freelance contributor

Kristen van de Biezenbos is an associate professor of energy law in the University of Calgary's faculty of law and the Haskayne School of Business. She has written, blogged and spoken extensively on energy law, including electricity systems, in both the U.S. and Canada.

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