Alberta plans to rename the province’s default electricity rate and set new requirements for utility providers to inform customers about the option to switch to a competitive contract.
In Alberta’s deregulated electricity market, there are dozens of companies that provide electricity to homes and businesses. But if consumers don’t set up a contract, they’re placed on the regulated rate option, or RRO — a variable rate that changes each month, based on the price of electricity.
Affordability and Utilities Minister Nathan Neudorf announced Thursday that the name of the RRO will be changed to “rate of last resort,” after a recommendation from a working group that examined the RRO.
“This [name], we think, will grab the attention of consumers the most and help inform them of the true nature of the rate,” Neudorf said.
He said the goal is to end the confusion about the term “regulated” for an electricity option that can actually be volatile. Over the past year, the RRO spiked as high as 32 cents per kilowatt hour, adding up to massive utility bills for many Albertans. At the same time, customers on fixed-rate contracts with competitive retailers might have rates lower than 10 cents per kilowatt hour.
“Somewhere between 600,000 and 700,000 Albertans were on the RRO last summer, and they only realized it when they started getting bills that were multiple times higher than what they were expecting,” Neudorf said.
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Electricity market adjustments
The new name is among a series of changes that Neudorf said will take effect at the beginning of 2025.
Power providers whose offerings include the RRO will also be asked to do more to inform Albertans about their options. Companies will have to contact customers within 90 days of starting electricity services on the RRO to confirm they know what rate they’re on, and whether they’re aware they can switch.
Neudorf said the requirement would also apply to customers already on the RRO. Utility companies will also have to remind consumers about their options on monthly bills.
Epcor is the RRO retailer for Edmonton and a significant portion of central and southern Alberta, while Enmax covers the RRO for Calgary and a few other communities in southern and central Alberta. Direct Energy is the RRO retailer for most of northern Alberta and some eastern parts of the province.
The companies will be in talks with the provincial government about the details of the proposed changes before they become official next year.
The government is additionally changing how utilities can purchase power from the wholesale electricity market for the RRO, extending the procurement window from three months to two years in advance.
Neudorf said a longer period of pre-purchasing will reduce the risk of sudden electricity price increases for consumers.
Opposition NDP Leader Rachel Notley told reporters Thursday that the latest reforms fall short of addressing immediate affordability problems.
“There’s nothing in this plan to protect citizens this summer from the kind of massive price spikes we saw last summer,” she said.
“There seems to be, at most, a plan to make a plan.”
Less than 30 per cent of residential electricity customers on RRO
The name of the RRO is essentially a holdover from the early days of Alberta’s deregulated market — and it makes sense to rethink it, said Joel MacDonald, founder of energy price comparison website EnergyRates.ca.
But MacDonald sees longer purchase agreements between utilities and generators as an important move for the RRO.
“They can go to a generator now, say, ‘What fixed rate are you going to give me?’ And then pass that along to their customers,” he said.
“The solution to high volatility is hedge pricing — a long-term contract with an agreed-upon, fair price with a generator.”
Neudorf said despite new efforts to encourage consumers to leave the RRO, that isn’t possible for everyone.
Low-income Albertans might not be able to meet the credit requirements or pay the deposit some utility companies require for a fixed-rate contract, and the RRO can also be the only option for newcomers to the province.
The province says many Albertans moved off the RRO in recent months, and a little less than 30 per cent of residential customers currently use it.
About a third of commercial customers are on the RRO, while 46 per cent of farm customers are on the RRO — that’s partly because in rural areas, there can be fewer options for power providers, leaving only the RRO as the only choice.
The minister said the government is looking at further changes to the electricity market.
