Energy rates are set to hit record highs in Calgary on Tuesday, bringing a spike in power bills for some customers.
The Regulated Rate Option (RRO) will hit 31.8 cents per kilowatt-hour for Calgary — the first time the rate has cracked the 30-cent barrier. It’s a jump from 27.5 cents in July, previously the record high. Those on the regulated rate plan will pay between $125 and $150 extra on their energy bill compared with those on a fixed rate.
Meaghon Reid, executive director of Vibrant Communities Calgary (VCC), said this will have the greatest effect on those with the least ability to absorb the higher bills.
“This RRO increase is affecting primarily people who can least afford to shoulder that additional cost,” she said. “We know that energy poverty affects about one-in-five residents in Alberta, and that means that you’re making some fairly significant trade-offs to be able to pay your electricity bills.”
RRO customers have for weeks been encouraged to switch to a lower fixed rate — currently between 12 and 14c/kWh — by government officials and energy companies. There is no cost or penalty for customers to make the switch.
However, Reid says fixed-rate contracts often require a high credit rating that many of those severely affected do not have.
Energy rates have risen dramatically over past two years
The rate hike is on top of a red-hot rental and real estate market that continues to drive up the cost of housing, while other necessities such as food also continue to inch up.
VCC is calling for a policy change to allow people with bad or no credit to access fixed rates. She also is calling on the provincial government to put regulations in place that prevent the volatile swings in rates in Alberta, and more help for people living at or below the poverty line.
The rise in energy rates has been steep. Before July 2021, a kilowatt price above 10 cents on RRO was almost unheard of. In December 2022, the rate broke through 20 cents for the first time.
Joel MacDonald, an economist and founder of energyrates.ca, said he expects rates to remain high for the next six to 12 months.
He cited a few reasons for the current spike. While critics point to the $200-million provincial deferral on RRO through the province’s affordability measures, MacDonald said this is only affecting rates by about three cents per kilowatt-hour.
The bigger culprits are market pressures amid spiking demand in another hot summer, coupled with an energy-only grid system — one of two in North America. This means generation systems are only compensated when they are injecting electricity into the grid. Most grid systems are a capacity system that generate revenue through injecting into the grid and by providing idle capacity.
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This worked in customers’ advantage from 2016 to 2019 when Alberta had some of the lowest energy prices in North America.
“Over a 20-year period, we’re gonna get extreme highs and extreme lows,” said MacDonald. “Right now, in particular, we’re at an extreme high and there’s micro reasons to that.”
Among those reasons is the current transition to renewable energy, which is not as reliable as traditional coal or natural gas, while the provincial industrial carbon pricing system on the source of energy generation is being passed on to customers to a small degree.
RRO was the cheaper option for years
In an emailed statement, Enmax Energy said its July figures show 93 per cent of its customers are on a fixed price plan. It is also experiencing an increase in calls from customers looking at rate options.
Leif Sollid, a spokesman for the Alberta Electric System Operator, said in an email that the wholesale electricity market has increased in price by 59 per cent from last year to $162.46/megawatt-hour. He noted there was some relief on the horizon, with significant new generation scheduled to come online in Alberta within the next year.
“It is anticipated that this additional generation will improve the reserve margin and alleviate pressure on the wholesale electricity price.”
For a long time, RRO was a cheaper option than the fixed rate. MacDonald said about one-third of Albertans are on fixed plans, one-third are on RROs — including 112,000 Calgary households — and another third are on a floating rate plan.
Fixed-rate deals are also at all-time highs — two years ago they were in the six cents per-kilowatt-hour range.
“Unfortunately, they’re the best of the bad options right now,” said MacDonald.
— Correction: Story has been updated to reflect change in carbon tax information