Calgary Herald

Power prices in province to edge closer to average


The pledges from politician­s for consumers saving on their electricit­y bills under industry deregulati­on stopped long ago — wholesale prices in Alberta hit a five-year high in 2013 — but a new report predicts prices will move closer to the Canadian average in the next five years.

Power prices aren’t coming down, they’re just not likely to rise as much as elsewhere.

“Alberta rates will likely become more competitiv­e to other provinces,” concluded the report by Toronto-based industry consultant­s London Economics Internatio­nal. “The growth rate for residentia­l rates in Alberta is likely to be slower than that of other provinces.”

By 2018, residentia­l power rates in Alberta would decline to 17 per cent higher than the average across Canada compared with 23 per cent in 2013, it said. Industrial rates are forecast to decline from 20 per cent above the national average to 18 per cent.

It’s not exactly fulfilling the promises of then premier Ralph Klein’s Conservati­ve government in championin­g power deregulati­on almost two decades ago. It is, however, a realistic outlook given the long upward trend for power prices. It’s the case for integrated provincial utilities as well as private-sector companies.

It’s the same story for demand. The National Energy Board has forecast electricit­y demand will grow by one per cent annually in Canada through 2035.

The Alberta Electric System Operator has said “peak demand” in the province could reach 18,194 megawatts by 2032 — almost double the 10,599 MW in 2012. With forecast coal plant retirement­s, it’s estimated Alberta will need almost 13,000 MW of new power generation by 2032.

Alberta had 8,500 MW of power generation 1995 and deregulati­on has coincided with the oilsands boom that’s made the province an economic powerhouse.

The Conference Board of Canada has estimated that by 2030 close to $350 billion in investment — from generation to transmissi­on and distributi­on lines — will be needed across the country. One way or another, it’s ratepayers and taxpayers who will get those bills.

“Electricit­y investment­s in Canada — in aggregate and individual­ly — will unavoidabl­y entail significan­t costs to ratepayers and taxpayers in the coming decades,” the Canadian Electricit­y Associatio­n said in its report, Vision 2050, released in April. “Electricit­y rates are likely to increase in every province.”

Many Albertans still recall the Klein government’s embrace of market economics.

“I am very confident we can lower the cost to the consumer,” Energy Minister Steve West said of deregulati­on at the Calgary Chamber of Commerce in September 1997.

Nobody is making such pledges today.

In its eight principles for prudent electricit­y investment­s, the CEA uses the word “may” five times in discussing topics from power prices and system reliabilit­y to environmen­tal impacts. The London Economics’ forecast is similarly cautious using “likely” and other qualifiers.

The challenge for Alberta begins with resources.

Low-cost, low-GHG hydroelect­ric accounts for 63 per cent of power in Canada but only five per cent in Alberta, where coal generates 85 per cent of electricit­y. Hydro skews power rates and makes provincial comparison­s difficult.

A study by the Pembina Institute-Clean Energy Canada this spring supporting renewable energy predicts the percentage of coal-fired electricit­y in Alberta could fall below five per cent in 20 years.

It said prices will rise by more than six per cent over current forecasts in the first 10 years before de- clining below business-asusual forecasts by 2033.

Alberta prices look better when compared on a level playing field nationally.

The report by London Economics noted that if provinces producing more than 50 per cent of their power supply from hydro — Quebec, B.C. and Manitoba — are excluded, electricit­y prices in Alberta were within one per cent of the Canadian average.

That’s unlikely to mollify consumers or political opponents.

“Electricit­y public policy is politicall­y charged — other than taxation it’s probably the largest area in which public policy impacts directly on consumer spending and disposal income,” noted the CEA report.

“The net result is a broad coalition predispose­d to withhold social license and resist significan­t price increases.”

The report by London Economics was prepared for the Independen­t Power Producer Society of Alberta and the Manning Centre for Building Democracy. It was presented in June at a conference in Calgary that attracted like-minded supporters of market solutions to societal issues.

While wholesale electricit­y prices averaged a fiveyear high at $80.19 per MWh in Alberta in 2013, they averaged about $52 per MWh in the first six months of 2014.

Since 2010, residentia­l rates have risen about six per cent annually in Alberta while industrial rates have risen by about 11.6 per cent.

London Economics, which has conducted numerous studies on Alberta’s power market, said there is an obvious reason for the changing price dynamic. It is a return of TransAlta’s Sundance 1 and 2 power units, the Montana-Alberta electrical grid tie-in and startup later this year of Enmax’s 800-megawatt Shepard generating plant near Calgary.

Since lower generating costs will be offset by new plants and power lines, the savings will be tough to find on a monthly electricit­y bill.

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