A Late Summer Commentary on Alberta Electricity Prices

Wednesday morning August 28th in Calgary, we have renewed water restrictions which brings an end to most outdoor yard work, so provides a little time to look at the power markets and fortunately the excitement continues. This past weekend (Friday evening to early Monday – Figure 1) the average AESO hourly price was just $11/MWh or 1.1cent per kWh. This brought the average price for August down to 3.7cents per kWh, a significant decline from August 2023 at 17 cents per kWh. We all remember August of 2023 when the RRO Providers posted rates over 32 cents per kWh 90% higher than the wholesale price for the month.

So the Ministry of Affordability stepped in and promised to review the RRO and provide some relief for consumers and to initiate changes for the wholesale market to provide relief to the non-RRO consumers. I guess it depends on how one measures success as the posted RRO for August 2024 is just 12.3 cents per kWh compared to 32 cents a year earlier; but this is still more than 3 times higher than the wholesale price for the month to date of 3.7 cents.

Just for the record the average load for month to date August 2024 is 9963MWs about 2.5% higher than the average load for the entire month of August 2023, so the difference is not lower demand. Admittedly, natural gas has been lower priced in August this year at under $1.00/Gj compared to $2.50/Gj last year which may explain some of the decrease. And it is not all wind, the weekend averaged just over 1860MWs per hour (capacity is 5214MWs) on an average load of 9613MWs for the weekend just less than 20% of the generation required. Maybe the Ministry is on to something in that the wholesale market isn’t working and needs major surgery, except why will it take the AESO more than three years to come up with a solution? And why don’t consumers have any structured input into objectives, outcomes and design?

Additionally, the Ministry of Affordability on August 16th 2024, a year after last August’s record high RRO rates and via the MSA released its proposed changes to the RRO (now referred to as RoLR) which calls for fixed two year rates to be set by the RRO Providers. Of interest is that these rates will not be drawn from the wholesale market prices as was past practice, which is unfortunate as the current forward prices for 2025 and 2026 are just over $50/MWh or 5 cents per kWh. Even with a 25% markup this would see 2-year rates just over 6 cents per kWh; better than any retail offering available on the UCA web-site.

But the changes will not provide any price protection for the balance of the market. We are expected to trust the RRO Providers to provide reasonable rates consistent with FEOC (Fair Efficient and Openly Competitive) except they don’t need to procure any volumes from the market . And then trust the AUC to approve these rates as being FEOC consistent every two years. And finally we have to rely on the MSA to periodically review the rates with respect to the RRO Providers ‘profitability’ – saying nothing about fairness to consumers. Where and when are the consumer cost criteria going to be identified?

If these RRO changes are a precursor to the changes coming in the AESO’s wholesale market re-design it is little wonder that the Ministry has chosen to constrain consumer access to this three year process. No resource allocations for studies and interventions, no cost to consumer analysis (as was provided for the big transmission build-out in 2009 – remember the cost would be less than a cup of coffee promise). 80% of the ‘design team members’ have a vested interest in ensuring the new design meets their profitability criteria, and not a cost to consumer criteria.

But enough lament for a Wednesday morning, we should all hope that the 1.1 cent power from the past weekend somehow trickles its way into next months utility bill.