Graham Thomson: NDP trying to keep electricity-system overhaul from shocking Albertans
No need to panic.
Here are the only two things you really need to know about the Alberta government’s plan to dramatically change our electricity system.
The lights in your home will still go on when you flip the switch.
The price of electricity will eventually rise but not exorbitantly.
At least that’s the plan.
The government is overhauling the province’s electricity market
— moving from what’s called an “energy-only” model to a “capacity market.”
This is the big policy issue right now in the legislature.
The government is churning out detailed news releases and holding daily technical briefings to inform reporters and opposition politicians how the government’s plan will unfold.
On Tuesday, Premier Rachel Notley held a hokey news conference in a homeowner’s house to explain one aspect of the plan.
On Wednesday, Energy Minister Margaret McCuaig-Boyd held a news conference with industry officials to explain another aspect. Given that she had to defer so many times to industry experts to answer difficult questions, she might want to change her title to Minister of Low Energy.
There’ll be more announcements/reports on Thursday.
This is a complicated issue.
The last time an Alberta government massively transformed our electricity system was 16 years ago when then-Premier Ralph Klein deregulated the power market.
The NDP is not exactly re-regulating the market but it is stepping in where the PCs feared to tread.
First off, the government is putting a cap on the price of electricity
. It won’t be allowed to go above 6.8 cents a kilowatt-hour from June 2017 to June 2021 while the overhaul gradually begins. That’s about double the current rate but not exorbitant given how depressed the price of power is these days.
The government doesn’t expect a huge spike in prices but costs will inevitably rise as coal-fired power plants are phased out and replaced by natural gas and renewable sources of power such as wind and solar.
If the price does spike above 6.8 cents, the government will cover the extra cost by using money collected under its new carbon levy.
Of course, that has the Opposition complaining that consumers will be paying for the new system one way or the other, if not on their monthly power bill then via the carbon tax.
Even if that does happen, it would be more politically palatable than what happened under Klein’s de-regulation when the price of electricity quadrupled in a year.
Klein blamed the spike on a booming economy, unexpected breakdowns at generating stations and the high price of natural gas.
The public, however, blamed him. So, he spent $2 billion on electricity rebates to quell public unrest.
This time around, the NDP government is getting ahead of any potential price spike with its cap.
Notley said her government had no option but to overhaul the system.
“Alberta’s energy-only electricity market is broken,” she said. “It will not bring in the kind of investments that will be needed to power Alberta’s future.”
Under the current energy-only model, power generators are paid only for the electricity they produce, not how much they are capable of producing. The result has been a market dominated by wild swings in the price of electricity.
In a capacity market, power producers are paid to build up, even overbuild, capacity so there is always enough electricity in reserve.
To give you an idea of the relative success of the two models, Texas is the only other jurisdiction in North America to use the energy-only model while 38 states use the capacity market.
Crown corporations run the electricity systems in most other provinces in Canada.
McCuaig-Boyd said the government is creating a system “that is more reliable, delivers stable, affordable prices to Albertans, and is attractive to investors.”
We won’t know if that’s really the case until the new system is in place. It won’t be fully operational until 2024.
So, again, no need to panic.