'Things will be better': Why relief from high electricity prices is on the horizon for Calgarians
CBC
It's been a brutal year for electricity bills — especially for Calgarians paying the fluctuating regulated rate option (RRO) — but autumn has already brought some relief and more looks to be on the horizon.
After peaking at nearly 32 cents per kilowatt hour in August, the RRO edged down to 26 cents in September and then fell again in October to 19 cents.
Still, that's a far cry from 2020, when the RRO averaged 6.4 cents.
Blake Shaffer, a University of Calgary economist who specializes in electricity markets, says the price surge since 2020 has largely come due to a lack of competition in the generating market.
Because a small number of companies control a large amount of the generating capacity, they are able to exert their market power through a practice known as economic withholding, which effectively pushes up the wholesale price of electricity.
Shaffer says companies were more able to exert their market power after Alberta's 20-year power purchasing agreements — which had been introduced in the 1990s as a way to counter the lack of competition at that time — came to an end on Dec. 31, 2020.
Another, smaller factor adding to the current RRO price is a hangover effect from the temporary rate cap that was put in place for January, February and March of this year.
The UCP government capped the RRO at 13.5 cents for those three months, in what was billed as an affordability measure. But any costs above the temporary cap were effectively deferred, and the deficit is now being made up by tacking it on to the RRO.
This payback period is in effect until December 2024, and is estimated to add about 2.5 cents to the RRO, above what it would otherwise be.
Shaffer says the worst of the price spike appears to be behind us.
Based on forward prices, he says the RRO is expected to continue to decline later this year and continue dropping into 2024 and 2025.
"Things will be better," Shaffer said.
"After about January, the forward prices are looking like they're back around 10 cents or even less — so back to the world where we had been, pre-2020."
He says two major factors are expected to drive prices down.
