How the electricity price cap removal will affect Alberta utility bills (Photo by Helloquence on Unsplash)

Many Albertans have been reading the news about higher regulated electricity rates in December, after the price cap on energy rates was scrapped by the province. Even though this was announced by the Government of Alberta in late October, as part of the new budget, people only started to hear more about it on November 30. That was when the regulated energy providers announced their new power rates; this time, without a cap on prices. 

The program was created by the NDP government in 2017 to cap energy rates for residential and small business consumers. Regulated rate (RRO) consumers wouldn’t pay more than 6.8 cents per kWh, meaning that any costs above that threshold were paid by the province. The main goal behind the cap was to protect consumers from rate spikes and, consequently, financial uncertainty. 

In order to predict how your energy bills (and your wallet) could be impacted by this change, we need to take a look at historical prices, future market trends and what prices would’ve been this past year without the cap. 

How the 6.8 cents/kWh price cap worked

Regulated electricity rates in Alberta change every month. Although the prices need to be approved by the Alberta Utilities Commission (AUC), they can be affected by multiple factors, including politics, natural disasters, economic reasons and more. 

In the past 10 years, electricity rates in Alberta went as high as 15.06 cents/kWh and as low as 2.88 cents/kWh. The cap provided protection for Albertans as the government subsidized any prices above 6.8 cents/kWh. 

The effects of the electricity price cap in Calgary in 2019

According to the Utilities Consumer Advocate (UCA), regulated electricity rates in the Calgary area (ENMAX) went above the 6.8 cents/kWh during most months of 2019, except for March, April, May and June. 

• January: 7.727 cents/kWh
• February: 7.009 cents/kWh
• March: 5.914 cents/kWh
• April: 6.067 cents/kWh
• May: 6.390 cents/kWh
• June: 6.391 cents/kWh 
• July: 8.434 cents/kWh
• August: 8.805 cents/kWh
• September: 7.590 cents/kWh
• October: 6.736 cents/kWh* 
• November: 7.399 cents/kWh
• December: 7.320 cents/kWh 

*According to the UCA, prices still reached the price cap in October, although they were officially 6.736 cents/kWh. 

This means the average price would’ve been approximately 7.15 cents/kWh, which makes quite a difference in energy bill terms, considering that the average household in Canada consumes around 1,000 kWh per month. After an entire year of high electricity rates, this difference looks even larger. 

The effects of the electricity price cap in Edmonton in 2019

In the Edmonton region (EPCOR), the difference between what consumers paid and what they would’ve paid without the cap is even more noticeable. According to the UCA, regulated prices went above the 6.8 cents threshold in all months except for March. 

Without the cap, the average price per kWh in the Edmonton area in 2019 would’ve been 7.84 cents/kWh. 

• January: 7.733 cents/kWh
• February: 7.189 cents/kWh
• March: 5.991 cents/kWh
• April: 6.981 cents/kWh
• May: 6.990 cents/kWh
• June: 7.231 cents/kWh
• July: 9.578 cents/kWh
• August: 10.191 cents/kWh
• September: 8.2 cents/kWh
• October: 7.342 cents/kWh
• November: 8.63 cents/kWh
• December: 8.069 cents/kWh 

Are my electricity bills going to increase in the months ahead?

Now that the price cap is gone, many households and small businesses are concerned about facing higher utility costs in the months ahead. 

Power prices reached historically low averages in 2017, but the average rate in Alberta was 7.3 cents/kWh for the 2002-2018 period, which is considerably above the price cap, especially in cents/kWh terms.

The future of electricity prices is still unclear. Consumers will have to wait and see whether rates will go up or down. We can expect to see RRO prices fluctuate slightly more now that they are free to go above the 6.8 cents/kWh threshold, as it happened in December and for most of the time in 2019.