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Posted in: Practice & Procedure | Ratemaking | Alberta

May 25, 2018

Alberta Government Makes First Payment to Electrical Utilities Under Price Cap

The government of Alberta paid $8.3 million to the electrical utilities in April under the province’s price cap. On June 1, 2017, the government introduced a cap on electricity rates of a maximum of 6.8 cents per kWh.

As we discussed in a previous post, Alberta electricity customers who have not entered into contracts pay the Regulated Rate Option (RRO), a fluctuating rate based on short-term market prices. In the last ten years, RRO prices have ranged from a high of 15.06 cents per kWh to a low of 2.88 cents per kWh. Under the price cap, RRO customers pay either the market rate or the price cap amount, whichever is lower. If the electricity prices exceed the price cap, the government pays electricity providers the difference. The price cap only applies to the commodity portion of a customer’s bill and not distribution or transmission charges.

April was the first month since the price cap was introduced last year that electricity prices exceeded the cap with utilities charging up to 9.28 cents per kWh. Energy providers were reimbursed more than $8.3 million to make up the difference between these rates and the price cap. These payments are funded through revenues raised through the province’s carbon tax. The price cap is scheduled to be in place until 2021.

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