How 'economic withholding' is impacting Albertans' power bills and why even the premier is watching

Alberta's electricity market can be a complicated subject, but consumers generally understand that prices for electricity have soared.

Experts say one of the main reasons is something called "economic withholding." 

In Alberta, electricity generators are allowed to hold back all or some of their electricity supply, then offer it to the Alberta Electric System Operator (AESO) at a higher price. It's an intentional — and legitimate — practice that boosts wholesale prices and profits. The province's Utilities Consumer Advocate provides full details here.

The roughly 550,000 customers on the regulated rate option (RRO) who haven't signed a fixed-rate contract with a competitive retailer are subject to those wildly fluctuating prices.

A cap earlier this year held prices at 13.5 cents per kilowatt hour. Since the cap was removed in April, prices have soared.

Enmax, Epcor and Direct Energy Regulated Services are now offering a RRO price of 32 cents per kilowatt hour.

While economic withholding is allowed in Alberta, the province's Market Surveillance Administrator (MSA) says the practice could trigger an investigation if the agency were to ever believe the big power generators, which include TransAlta, Enmax, Capital Power and Heartland, were colluding to increase wholesale prices — which affects consumers who are on the RRO.

"While the MSA cannot comment on specific investigations, economic withholding is not prohibited by the legislation or market rules and therefore has never been investigated as a potential contravention," wrote the CEO of the MSA in an email to CBC News.

The MSA also refers to the practice as market power or offer behaviour. The most recent snapshot of the practice is detailed in a recent quarterly report.

An Alberta economist who has researched the practice says the impact on prices is clear.

"I wholeheartedly agree that I think that the big driver of recent price increases is economic withholding," said David Brown, an economist at the University of Alberta who has studied the impact economic withholding has on consumer prices.

Love it or hate it, Brown says it's a part of Alberta's free-market system which is designed to encourage large-scale investment in electricity generation and allow those firms to recoup some of their costs.

"The idea is we're going to allow firms to earn some degree of short-run profits via economic withholding to cover these large fixed costs of investment."  

TransAlta, Enmax, Capital Power and Heartland declined interview requests.