Spiralling transmission costs hit power bills
Alberta could become highest-cost electricity jurisdiction, expert warns
Transmission costs on Alberta power bills are climbing at unsustainable rates with increases that are unprecedented in North America, consumer groups warn.
A coalition of groups representing residential, business and industrial power consumers has warned the Alberta Utility Commission that transmission rates have escalated to the point where they threaten to affect development of electrical generation and the energy market.
“These cost drivers, unless mitigated, could lead to substantial amounts of unneeded surplus capacity, spiralling rate increases and are a threat to the long-term sus- tainability of Alberta’s integrated electric system,” the consumer groups warned the commission in a joint submission filed in January.
The groups say an announced new carbon tax could boost pool prices while new transmission infrastructure required to support the NDP government’s pledge to replace coal-fired power with renewable energy could drive transmission costs even higher than forecast.
“The ratepayer group is concerned that transmission rates in Alberta appear likely to exceed other known rates in North America due to an unprecedented level of cost increases,” said the paper submitted by the Alberta Consumers’ Coalition, the Direct Connect Consumers Association and the Indus- trial Power Consumers Association.
Electricity consultant David Gray said Wednesday that transmission costs, which make up about 15 per cent of North American power bills, are forecast to soon account for 45 per cent of power bills in Alberta.
He said the Alberta Electric System Operator has vastly overestimated the growth of Alberta demand, and as a result has massively overbuilt the electrical transmission system.
While the spotlight has been focused on the deregulated portion of the electricity market for the past decade, costs on the regulated side for transmission, distribution and administration have spiralled out of control, Gray said.
“Where Alberta has drifted way off track is in the distribution and transmission of power,” he noted in a report released this week. “These charges are regulated but have be- come extraordinarily high — even with a firm regulator overseeing the costs.”
Gray, former executive director of the Utilities Consumer Advocate, fears the situation could become worse with recent terminations of power purchase arrangements (PPAs) and other pending costs.
“Coal PPAs pushed back on consumers through the Balancing Pool charges, increases in transmission for projects not yet completed and consumer-based taxes proposed by the government could result in Albertans having the unique distinction (of being) the highestcost electricity jurisdiction in the world,” he said in his report.
AESO said Wednesday that transmission fees have increased only $3 — to $21 — on average residential power bills since two controversial north-south high-voltage transmission lines were constructed in Alberta. Over the same three-year period, distribution fees increased to $44 from $40.
AESO spokeswoman Angela Anderson said transmission costs are expected to rise $6 more to $27 per month in five years, with other fees to total about $61 on an average power bill.
“New transmission projects typically cost residential consumers approximately $1.40 per month more per billion of investment for the life of the transmission project,” she said in an email.
Anderson said it is still too early to tell how the renewable policy will affect transmission costs but it is not expected to significantly affect the AESO transmission cost projections.
Former Balancing Pool executive Gary Reynolds is skeptical. “I think this is a complete fallacy and results from the Alberta government’s attempt to downplay the real costs of transition off coal,” he said.
Reynolds estimated Alberta will require about 3,660 wind turbines generating 1,800 megawatts to meet its goal of having 30 per cent of its power generation coming from renewable energy sources.
“Who could believe that tying in thousands of new wind turbines isn’t going to require substantial new costs for transmission infrastructure? I sure can’t,” he said.
High tension power lines along the southeast Henday. Alberta has massively overbuilt the electrical transmission system, resulting in huge costs, says a report from a ratepayer coalition.