Canadian Manufacturing

Alberta facing Ontario-style energy rate hikes, warns TransAlta CEO

Dawn Farrell blames the aggressive program to retire coal generation and subsidize rapid renewable energy growth

CALGARY—Change is coming to Alberta’s electricity sector, but industry watchers are divided on how it will affect rates for consumers already hit hard by the enduring global oil price slump.

Pointing to Ontario, TransAlta chief executive Dawn Farrell recently raised the spectre of rate hikes while pushing for the Calgary-based utility’s proposed plan to transition away from coal-fired power plants.

There is a “real risk to consumers, including Alberta businesses, of price spikes and volatility” as the province moves away from coal-fired generation and adds more renewable energy, she wrote in an opinion piece that ran in two Alberta newspapers.

In Ontario, she pointed out, electricity prices have climbed roughly 50 per cent over the past five years compared to 10 per cent in Alberta in the same period.

That’s “largely due to an aggressive program to retire coal generation and subsidize rapid renewable energy growth,” she wrote.

But Ben Thibault, director of the Pembina Institute’s electricity program, says Alberta shouldn’t see Ontario-style spikes because renewable power costs have come down significantly since Ontario started transitioning, and there are also more options when it comes to supplies.

“There’s some qualitative reasons that I think we’re in different circumstances,” Thibault said.

Alberta’s privatized power market will also help allocate investments to the best generating options, he said.

“We have a market in place in Alberta that will find the cheapest alternative generating sources, so I think this transition can be done in a way that is a more measured approach,” said Thibault.

Whether Ontario’s price spikes have been caused entirely by its transition away from coal-fired power plants is also subject to debate.

Tom Adams, an independent energy consultant, has been highly critical of Ontario’s transition and blames the rate hikes on the coal phase-out.

“Almost everything points back to the ‘off coal’ decision of 2003,” said Adams.

He added that early cost estimates on the transition away from coal were wildly inaccurate, including one put forth by the Ontario Clean Air Alliance that pegged the cost to transition at $1.86 a month, or about the cost of “a cup of coffee and a doughnut.”

“This proved to be so ridiculously understated that it would be comical if it hadn’t become such a grave issue (in Ontario),” said Adams. “Electricity prices are soaring in Ontario; they are going to continue increasing for the next several years, according to official forecasts.”

The Ontario Energy Board has hiked prices twice this year, adding about 4.6 per cent to the average household bill in April and another 3.4 per cent in October.

But it blamed the costs from nuclear and hydro-electric power plants for 40 to 50 per cent of the rate increase. Renewable energy made up about a third of the rate increase.

Thibault said Ontario has suffered for setting fixed rates for renewable energy that were far too high, but he said lessons have been learned and Ontario has since tweaked its methods.

Alberta’s NDP government is set to unveil its power transition plan before the Paris climate change conference starting Nov. 30.

In September, Premier Rachel Notley committed to phasing out coal use in the province as quickly as is reasonable “without imposing unnecessary price shocks on consumers.”

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