Effective January 1, 2001, the retail electricity market in Alberta will be open for competition.This means that companies licensed by the provincial government will be able to approach customers and negotiate contracts to supply them with electricity under rates which are dictated by market forces, rather than regulated by the Alberta Energy and Utilities Board.
While any electricity customer in Alberta will have the option of choosing a retail supplier and negotiating rates, residential customers, as well as small businesses and commercial operations (i.e. those using less than 250,000 kilowatt hours of electricity per year), will be offered a "Regulated Rate Option" or RRO. Essentially, they can elect to receive their electricity from their current supplier or their designated retailer, at a rate that will continue to be regulated by the Alberta Energy and Utilities Board.
Small businesses and commercial enterprises can take the RRO for up to three years beginning Jan. 1, 2001, before choosing an electricity supplier.
Residential customers have up to five years to choose their supplier. The RRO gives these customers, if they need it, time to adjust to a competitive market for electricity and make an informed choice about their electricity supplier.
Delivering electricity to a customer involves four steps: generating the electricity; transmitting the electricity to the provincial grid system; distributing the electricity to the final destination or consumer; and the selling, customer service, billing and related administration associated with taking the power from its source to its end user.
To ensure the integrity of the provincial grid system and that all customers continue to have access to electric power, the provincial government is NOT deregulating either the transmission or distribution systems. This means that government will continue to regulate these aspects of the electric system and ensure that power flows where it is needed, anywhere in Alberta, and that customers can expect the same reliability of service as they receive today.
The elements of the system that have been or are being deregulated are new power generation developed after January 1, 1996, and the retail sale of electricity to the final customer.
By deregulating generation, any company that generates electricity is encouraged to strive for efficiency in order to "sell" their output. This also encourages the development of new or alternative generating technologies which may be more cost-efficient in some cases and/or more environmentally -friendly in others (i.e. alternative sources such as combined Ðcycle, hydro, wind power, solar power, or new sources such as fuel cells, etc.).
By deregulating the retail sale of electricity, companies marketing power will be encouraged to seek efficiencies and develop the best rates for electricity, as well as new service packages that customers need or want.
To ensure that new retail sellers of electricity had an equal and fair opportunity to access Alberta's existing power generation facilities, the Government of Alberta and the industry -- including EPCOR -- came up with a unique type of arrangement known as "Power Purchase Arrangements", or PPAs. These are essentially contracts that stipulate how electricity retailers must compensate the owners of the generating stations for the electricity produced. In August, the rights to these PPAs were auctioned by the Government to qualified bidders, including EPCOR -- which won the rights to nearly 1,400 megawatts of electricity through the PPA process.
New electricity generating facilities that have been built after January 1, 1996 or may be built in the future are not subject to the PPAs -- their output can be bought or sold according to competitive forces in the market place. In the long term, this will encourage the construction of efficient generation facilities and adoption of the latest technologies available.
While an open, competitive marketplace in the long run is the best guarantee of low prices and customer satisfaction (i.e. the marketplace will reject those companies or retailers who do not meet customer expectations), the Government of Alberta is conscious of consumer concern about deregulation in the short term. A "watchdog" mechanism has been developed, to allow government to monitor the activities of electricity retailers to ensure fair and ethical business practices are being employed.
The year 2000 is critical in the evolution of a deregulated, competitive market for electricity in Alberta. Many elements of deregulation are yet to be finalized or implemented. Still, the target date of Jan. 1, 2001, has remained firm and both government and industry are working hard to address concerns and develop the infrastructure needed to make a competitive market a "reality".
For more information, visit the EPCOR website at www.epcor-group.com.
$760 million electricity auction rebate announced for Alberta's commercial and municipal power consumers
Alberta's non-residential electricity consumers will receive an electricity auction rebate in 2001 worth $760 million, Alberta's Resource Development Minister Mike Cardinal has announced.
Qualified recipients of this portion of the province's electricity auction rebate include everything from senior's lodges, apartment buildings and farms, to municipalities, industry, and commercial and small businesses. Just as with the rebate announced earlier for residential consumers, the rebate will be applied automatically to every customer.
"Our consultations with Albertans from various stakeholder groups overwhelmingly told us that the electricity auction rebate should be given back over one year," said Cardinal. "We have responded to that recommendation. The money will be returned quickly and simply over a twelve-month period as a credit on customers' electricity bills."
The amount of each consumer's rebate will be based on their monthly consumption of electric energy as measured in kilowatt-hours, and retailers will be required to show the credit on consumers' bills.
"Alberta's non-residential consumers account for roughly 75 per cent of the power billed in Alberta, and their share of the total auction proceeds reflects this," said Cardinal. "But there are huge differences among them in terms of their usage Ð basing the rebate on each consumer's usage is a practical way to ensure they each receive their fair share."
The commercial and industrial electricity auction rebate follows the residential consumer rebate announced on September 6th. Starting January 1, 2001, all residential electricity customers in Alberta will receive a $20 a month rebate on their power bill for one year. The residential rebate covers residential power customers and farm homes and will return about $240 million to Albertans.
The rebates add up to about $1 billion of the $1.1 billion raised through the successful power auction which the government held in August, as part of its move to restructure the province's electric industry. The remaining auction proceeds will be placed in the Balancing Pool, which will be shared by all Alberta power consumers through 2020.
Alberta's Electric Market Surveillance Administrator Tables Report
Alberta's electric Market Surveillance Administrator (MSA), Howard Ward tabled his report for the Power Pool of Alberta Council. While the MSA monitors the provincial electricity market on an ongoing basis, this report was in response to government and industry representative concerns, and the high market prices posted during the summer of 2000.
The report emphasized that there is no particular activity that would warrant sanctions being recommended against generators operating in Alberta.
The MSA examined electric market price volatility during the summer months and considered price drivers such as energy supply and demand, electricity prices in other markets, natural gas prices, market structure factors and market participant behaviours. The report expressed considerable concern in relation to the impact imported power has on the Alberta electricity market price. The MSA indicated further information will be obtained and further analysis will be conducted on the overall electricity market.
The report determined that a series of factors combined to drive market prices over the past summer. The report cites these factors as market fundamentals, market structure and behavioural factors. Market fundamentals included the weather and precipitation, hydro generation and its characteristics, the operating reserves carried on the system, supply growth relative to demand growth and the technical limitations on the provincial interconnections.
Market structure factors included a lack of demand side-participation and forwards market, and the regulatory structure relating to open transmission access to British Columbia. Behavioural factors identified in the report were market power and exercising market power and the effects of regulatory incentives.
The report makes nine recommendations (see attached table for details) and identifies four entities, including the Department of Resource Development, the MSA itself, the Power Pool of Alberta and the Transmission Administrator for taking action steps on the recommendations. The recommendations range from reviewing the outage rates of generating units and the associated maintenance procedures and opening up direct sales eligibility to exploring new interconnection opportunities.
"We don't intend for this report to be a comprehensive evaluation of the high Power Pool spot market prices for this past summer. Rather, the objective of this report is to identify price drivers, areas that require more detailed review or perhaps warrant an investigation and, identify an action plan through the listed recommendations," Howard Ward explained.
A more detailed review of progress on the listed recommendations will be carried out and regular status reports will be provided.
In accepting the MSA's report, Power Pool Council Chairman, Maury Parsons welcomed the recommendations. "The actions we will take, based on the MSA's recommendations will facilitate our continued operation of a fair, open, competitive and efficient market as we enter full deregulation.
We have a tradition of working with our market participants and stakeholders to initiate rules that enhance the effectiveness of the market," Parsons noted.
A complete copy of the Market Surveillance Administrator's report may be found at www.powerpool.ab.ca.
Market Surveillance
The Electric Utilities Amendment Act established an independent Power Pool Council. The Council acts in the public interest and ensures the market for electricity operates openly, fairly and efficiently. The Council regularly seeks input from industry stakeholders in carrying out its mandate.
Howard Ward was appointed in 1998 as the Market Surveillance Administrator (MSA). The MSA is a member of the Power Pool Council who monitors market activity, investigates complaints, and makes recommendations to the Council such as changes to rules and procedures. The MSA ensures that market operations are efficient and equitable, that market participants comply with relevant rules and regulations and that the rules governing Alberta's electric industry will work to discourage anti-competitive practices. The powers and responsibilities of the MSA are set out in the Electric Utilities Act and the Market Surveillance Regulation. Should anti-competitive behaviour be identified resulting from a Power Pool Council hearing, fines or other sanctions as set out in the regulations may be imposed.
Market activity may be investigated either at the initiative of the MSA or in response to a complaint filed or issue raised by another party. Anyone may file a complaint or refer a matter to the MSA.
Power Pool Council
The Power Pool Council acts in the public's interest to ensure Alberta's market for electricity operates openly, fairly and efficiently. Experienced, independent members were selected to Chair the council and oversee key standing committees that include finance and audit, operations, and human resources. These committees provide a mechanism for the council to hear the views of stakeholders as an important input in influencing the evolution and operation of Alberta's electricity market. The Council establishes the rules by which the Power Pool operates and appoints the Pool Administrator and System Controller.
Power Pool of Alberta
The Power Pool of Alberta is governed by the Power Pool Council. The organization performs four key functions. It operates the market for the exchange of electricity (like a stock market), operates Alberta's interconnected power system, operates the balancing pool as a fund which returns the benefits of the regulated generation to consumers and carries out surveillance of the electricity market. ET