Alberta reviewing future of regulated rate option for electricity

The future of Alberta's regulated rate option (RRO) for electricity is in question as it undergoes a provincial review — a move one economist says isn't surprising given how high rates have climbed in recent months, though he questions what the alternative might be. 

"If you get rid of the RRO … what is the default and how do you ensure that it's reasonable?" said Blake Shaffer, an assistant professor in the University of Calgary's economics department. 

In Alberta, the RRO is the default electricity option for consumers who don't want to sign a contract with a competitive retailer. It's also used by those who can't sign a contract because of certain barriers, such as a poor credit score or a lack of cash to pay an up-front deposit, said Shaffer. 

Rather than being locked into a fixed rate for a set period, customers on the RRO pay a monthly rate that's tied directly to the market price of electricity. 

That can mean customers see significant price swings on their monthly bills. In recent months, those prices have hit record highs. 

In December, regulated rates surpassed 20 cents per kilowatt hour and surged even higher this year, though customers on the RRO have recently been paying no more than 13.5 cents per kilowatt hour after the province brought in a temporary price cap. (Any costs over and above that cap have been deferred, and will have to be repaid eventually.)

In a statement, the provincial government told CBC News it's now reviewing the RRO "as part of our ongoing work to explore ways to improve affordability and rate stability for Albertans."

"As part of this review, we will be working with industry and others to examine various options, including around the future of the RRO, to ensure the needs of Albertans are being met," said Andrea Farmer, a spokesperson for the Ministry of Affordability and Utilities.

She added that no final decisions on the RRO have yet been made. 

The province didn't specify what options are being considered, or what an alternative to the RRO could look like. 

The NDP's energy and natural gas critic, Kathleen Ganley, said in a statement the RRO plays an important role in making sure everyone has access to power, no matter their financial circumstances.

"Any changes to the RRO would require continued regulatory oversight of prices and the ability for Albertans with low credit to access affordable electricity," she said. 

Speaking at a recent conference, the head of Enmax Power agreed the RRO needs to be "seriously" looked at. 

"I don't think that there was ever the intention that we would have customers on the RRO as long as we have," said Jana Mosley, president of Enmax Power, during a panel discussion hosted by the Independent Power Producers Society of Alberta.