Dear Premier Smith, Nov 30, 2023

Dear Premier Smith

We reference your Mandate Letter dated July 19th, 2023, to the Honourable Nathan Neudorf, Minister of Affordability and Utilities. We also acknowledge your October 30th commitment in the throne speech to work collaboratively with industry and consumers on a package of substantive reforms to ensure that our electricity market is free from market manipulation and that consumers have access to affordable energy rates.

Minister Neudorf is tasked with reviewing the electricity pricing system, stabilizing and lowering the cost of utilities, exploring the potential phase-out of the Regulated Rate Option (RRO), and promoting customer choice.

We trust that the Minister is working in concert with the Alberta Electric System Operator (AESO) as they undertake the “Market Pathways” review, a far-reaching initiative to stabilize a troubled market.

Here are some additional suggestions for Minister Neudorf to consider:

1. When addressing the energy price-setting market design, in an attempt to stabilize the volatility in the market, it is equally essential to develop a Demand-Side Management strategy. Consider the benefits of TOU metering, which would open the door to the innovation of off-peak retail pricing models as a financial incentive.to help shift and balance the load.
2. We know one of your goals is to reduce Distribution and Transmission (D&T) charges. Consider moving from a rate structure based on cost per day to one more aligned to consumption-based rates. A consumer using 1 GJ of natural gas during a month should not have to pay D&T charges similar to a consumer using 50 GJ.

The design of the power market structure dates back 25 years. Given the many changes over the last decade, it is out of step with the reality of today’s market, which is marked by the closure of coal plants, the cancellation of Power Purchase Arrangements (PPAs), and the introduction of significant renewable generation.

As one possible solution, we recommend that the Minister and AESO seriously evaluate the concept of a “Day Ahead Market” to stabilize the volatility of Power Pool prices. At the same time, whatever changes are implemented, our government must be careful not to destroy the “Forward Market,” or the unintended consequences could easily erode the benefits consumers enjoy today under customer choice.

“Customer Choice” is a core principle in the design of the deregulated market. Please remember that a healthy, competitive market drives innovation, new products, and services. Government changes to policy and rules and ignoring outdated regulations that do not reflect today’s market conditions are a growing business risk that can no longer be ignored.

The competitive playing field is not level. One of the regulations still in effect, dating back to the birth of deregulation, gives ENMAX, EPCOR, FortisAlberta and ATCO the right to demand an interest-free prudential security payment equal to 150% of the average consumer’s utility bill just for the right to offer consumers retail services in the Wires Service Provider’s respective distribution territories. This requirement is both anti-competitive and unjustified. Additional security is also paid to AESO to ensure that wholesale prices and increased margins charged by generators are never at risk.

Why should a small independent Community Energy Marketer be required to post security to protect the profit margin and cover all rate riders charged by the Distribution and Transmission companies? Why must small retailers ensure that Local Access Fees paid to municipalities are protected? Why are retailers required to post security to cover the carbon tax? These are just a few of the problems that date back to 2000 when the market was deregulated, wherein the incumbents wanted to be protected from new retailers entering the market.

As a small independent retailer, we carry 100% of the cost to protect the incumbents. We recommend you add the topic of “Security Risk” to Minister Neudorf’s review of Alberta’s deregulated market.

There are many unanswered questions. To that end, we are launching Affordable Energy Rates, a website outlining the market’s history alongside questions intended to focus on pro-consumer discussions.

This service will complement the Utilities Consumer Advocate’s rate comparison website. Our website will feature guest articles from those engaged in our industry to provide context. We hope it will spark questions that haven’t been asked by those unfamiliar with the complexities of deregulation. If you ask the right questions, the answers to the problem will be obvious. We will attempt to focus the discussion and highlight opportunities to help consumers fight inflation and find truly affordable retail rates.

Thank you for listening.

Respectfully yours,

Madeline Low and Nick Clark
Founders of the UTILITYnet Group of Companies
Utility Network & Partners Inc.