Electricity cap kicks in as price spikes

Provincial protection means Hatters will pay 6.8 ¢/kWh as actual price eclipses 8¢; new pricing is Alberta’s highest since 2015

A provincial cap on power prices has gone into effect for the first time since it was proposed 18 months ago and went into effect last summer.

It means residential and small business customers in Medicine Hat will only pay 6.8 cents per kilowatt hour of electricity they use in April, though the actual rate-setting mechanism would have the price at 8.21 cents.

The difference will be paid to the local utility out of carbon levy revenue.

It also marks a steep increase in rates set by the private sector, due mainly to the mothballing of two coal-powered plants this week, but local utility administrators say the price is set to drop below the cap-line next month.

“Right now the forecast (is back down) in the four to five cent range for May,” said Jaret Dickie, manager of the city’s utilities business support office.

“We’re expected to hit the cap (price) one more time this year.”

That could happen this summer, when demand, and therefore prices, are traditionally at their highest.

Local customers will only see their amount on bills. The rest of the process is done via a reimbursement plan between the province and the city, agreed to late last year.

While power prices rise, natural gas remains low in April, despite a jump of about 23 cents from last month to $2.082 per gigajoule.

The City of Medicine Hat sets its local power rate at the average offered by large retailers in the province that offer a regulated rate option.

This month, those four rates show a wide margin between the low price — 7.77 cents from Epcor for Edmonton — and the high price of 9.28 cents, from Enmax.

Locally, the price jumps from 4.7 cents in March to the non-adjusted price of 8.21cents. Even with the cap discount, 6.8-cents will be the highest price paid in Medicine Hat since the summer of 2015.

The raw price of power has been low across the province since industrial activity declined in early 2015 due to the downturn in the oilpatch. Now the prices are rising in the spring, when prices are usually moderate or low.

The April price forecast is largely due to TransAlta Sundance coal plants Nos. 3 and 5 coming off line this month. The company has said that could last between one and two years as they wait for better pricing and begin preparing to convert the plants to burn natural gas.

“(Rates in) 2016 and 2017 were abnormally low compared to where they were historically,” said Dickie. “Consumers benefited from that.”

In late 2016, Premier Rachel Notley and Energy Minister McQuaig-Boyd announced the cap as part of a raft of energy market changes they say will help lower emissions while protecting consumers.

Power prices spiked as high as 15 cents in 2011, and were commonly above 10 cents from 2007 to 2014.

Since an average home uses 7,200 kilowatt hours of power per year, a cap would mean commodity cost of electricity would not be higher than about $40 per month.