Electricity. It’s something we use every day. It’s something we can’t live without.
THE WAY TO LOW-COST POWER FOR ALBERTA
Do you “choose” to buy electricity for your home?
If you’re like most Albertans, it’s not a matter of choice.
It’s a matter of necessity.
For many years, Albertans enjoyed some of the lowest power rates in North America.
For many years, we didn’t even need to think about electricity - unless the power went out and we were counting the minutes or hours until service was restored.
Unfortunately, those days are gone.
DEREGULATION HAS FAILED
The efficient, reliable, affordable system that once served us so well was dismantled by the Alberta government with no rhyme or reason.
The government traded in a perfectly functional, customer-friendly system - for a complex, confusing, and worst of all - expensive - mistake.
And Albertans are paying the price.
The government has spent billions of our hard-earned tax dollars trying to fix this costly mistake - called deregulation.
But the mess just gets worse.
DO YOU WANT TO SHOP AROUND FOR POWER?
As if high confusing bills aren’t enough, Albertans will be forced to shop around for electricity service, starting in 2006 when the Regulated Rate Option expires.
How do you feel about the prospect of facing door-to-door salespeople selling contracts for electricity?
Isn’t there a better way to do things?
Why can’t we have cheap, reliable power like we used to?
The answer is - yes - there is a better way. Yes, we can have cheap, reliable power like we used to.
LOW-COST POWER FOR ALBERTA
Electricity is an essential service - not a commodity that’s subject to radical price swings.
The Alberta Liberal Opposition, in consultation with electricity experts, has designed a superior new system for electricity service in Alberta.
Under our Low-Cost Power for Alberta plan:
- You will save money.
- Power bills will be easier to understand.
- You won’t be forced to shop around for the best deal.
- You’ll get one low rate, with no contracts to sign and no complicated calculations to make.
- You will be able to budget more easily each month because the rate will be stable.
- You can count on a steady supply of low-cost power for years to come.
DEREGULATION HAS NOT WORKED FOR ALBERTA
The Tories promised that the changes would bring lower power bills - but we’ve seen just the opposite.
It’s no wonder other jurisdictions have rejected energy deregulation.
California’s disastrous experiment with deregulation, which also started with promises of cheaper power, ended in early 2003 after eight years of economic misery for consumers.
In announcing this decision, a California Public Utilities Commissioner said deregulation was “a disaster for ratepayers, utilities and their employees.”
He called deregulation “the most expensive public policy mistake in the history of California.”
Can Alberta be far behind?
THE LOW-COST POWER FOR ALBERTA PLAN—HOW IT WORKS
The Low-Cost Power for Alberta plan is based on a centralized, streamlined system that minimizes capital and operating costs.
Alberta is already well-equipped to adopt such a system.
All we need is political will.
Our plan is based on the following principles:
- Electricity is an essential service-not a commodity subject to radical price swings.
- Instantaneous balance of supply and demand throughout the delivery system is a physical requirement of electricity.
- The lowest possible cost occurs when the amortized capital costs and variable operating costs are minimized.
- Capital costs are minimized when generation and transmission are added to provide just enough capacity to maintain an acceptable level of reliability.
- Operating costs are minimized when generators are dispatched in ascending order of marginal cost.
UNTANGLING THE DEREGULATION MESS—SEVEN STEPS TO LOW-COST POWER SYSTEM
1. DISPATCH GENERATION AT MARGINAL-COST
In Alberta, electricity is dispatched based on the “bid” price of power in the Power Pool. All generators are paid the bid price, even if they previously “bid in” at a lower price.
This system is open to price manipulation and leads to higher prices.
Bringing generators online on a marginal-cost basis is much more cost-effective.
Our plan would see generators with the lowest cost used first. The higher-cost generators would come on line only as more demand is placed on the system.
And the cost savings would be passed on to Albertans.
2. FIXED-RATE COMPENSATION
Electricity generators are currently paid according to the daily Power Pool Price. Because this price is set through a bidding process, it is unstable and often much higher than the actual cost of producing electricity.
Compensating generators with a fixed rate based on fuel costs, depreciation, operation and maintenance, and a fair return on investment would give Albertans affordable electricity and generators fair compensation.
Investors would also be more likely to build new generation because the risk has been removed with a guaranteed return on investment.
3. ONE LOW RATE
Under the current system, the Regulated Rate Option will end in 2006 and consumers will have to shop around for the best rate.
Our plan would see the Power Pool set one low rate for all customers.
Commercial, industrial, farm and REA customers with a metering device could buy directly from the Power Pool.
4. ONE POWER COMPANY
Under our plan, residential customers would be billed by the same company that maintains the wires and reads the meter.
The one low rate would be offered by all wire-service providers so Albertans would only have to deal with one company for meter readings, bill payments, and power outages.
5. STREAMLINE THE SYSTEM
- Eliminate the Balancing Pool and roll its functions into the Power Pool.
- Eliminate the Transmission Administrator and replace with a Transmission Department created as part of the Power Pool to deal with ongoing electricity wire issues.
- Eliminate the Market Surveillance Administration. (The need to monitor for manipulation will disappear.)
6. INCORPORATE LONG-TERM PLANNING
Add a Planning Council under the direction of the Power Pool to:
- forecast future energy requirements and ensure they are met
- establish the reliability criteria for generation and transmission
- design options for meeting long-term capacity and energy requirements
- identify the lowest cost option for new generation
7. CUT OUT THE MIDDLEMAN
The Power Purchase Arrangements (PPAs) transferred the rights to use the generating plants that existed before 1995 to new “ownership” for 20 years. In 2000 industry paid $2.1-billion for the rights.
PPA holders currently supply electricity to the pool at spot prices, which are much higher than the marginal cost of producing the electricity.
Our plan would see the Power Pool take over the PPA holders’ obligation to pay the fixed and variable costs to the plant owners, eliminating the middleman.
It doesn’t make economic sense to have PPAs. They drive up costs. They don’t make the market more competitive. And they don’t result in lower costs.
Our plan un-bungles the mess created by deregulation.