Edmonton Journal

(NB provincial election planned for spring)

Wednesday 29 November 2000

Province to cap power rates Planned price hikes will be shelved pending review

Ashley Geddes, Provincial Affairs Writer The Edmonton Journal

Edmontonians' power bills will remain virtually unchanged next year, after the provincial government reacted to public outcry by stepping in to freeze planned increases across the province.

This is just the latest problem to beset the government's deregulation of the power industry, which was to bring increased competition and lower prices.

The extraordinary intervention by the government on Tuesday is expected to save the typical Edmonton residential customer $10 to $15 monthly next year. That's because city-owned Epcor has to shelve, a least for one year, its previously approved 17-per-cent surcharge, called a rate rider, slated to take effect Jan. 1. The surcharge was to cover unexpected costs in 2000.

Public anger over price hikes and deepening concern over their impact while the province moves fully into electricity deregulation next year convinced the government to act, Premier Ralph Klein admitted.

"There was tremendous concern relative to electricity rates," he said. "We're receiving calls about the rising rates of electricity."

The government has ordered the Alberta Energy and Utilities Board to suspend all rate riders for one year so they can be subjected to a "fairness review" to ensure they're justified.

Those rate hikes were expected to cost Albertans $500 million next year.

Klein announced Tuesday the government was also suspending further price-hike applications to ensure power customers have their bills "virtually" frozen for one year.

"And we're saying let's put all this on hold and let's do a fairness hearing to find out what is the proper level for electricity rates during the interim, as we get into deregulation," Klein said.

"We want to make sure that whatever is adjudicated is fair and it is just."

The government's announcement has created massive confusion in the industry.

"I'm dumbfounded," said Allan Warrack, a University of Alberta professor and former utilities minister in Peter Lougheed's government. "This appears to be the next stage, and it looks like panic."

Don Lowry, president of Epcor, which is owned by the City of Edmonton, described the government's action as "like flying a plane through turbulence. They're making the rules up as they go."

While some small base-rate increases might still occur next year, Klein said the government's $20-per-month electricity bill rebate, which takes effect in January, should "more than cover" any extra costs.

Jim Wachowich, Edmonton spokesperson for the Consumers' Association of Canada, said he was skeptical about Klein's promise. "The government is setting up a misinformation camp.

"They have people thinking rates will remain pretty static. That's not the case."

He predicted the base rate could double next year, but Klein said if that occurs, the government would consider taking further action to keep prices down.

Klein continued to insist deregulation -- which comes fully into effect Jan. 1 but has been phased in over five years -- will lead eventually to price reductions after an "anomaly" of price hikes caused by a current supply-demand squeeze eases.

But the government became concerned whether a series of recent power company applications for rate increases are "fair and reasonable," Klein said.

Part of the problem is that rate-increase applications before the utility board "really don't determine the whole issue of fairness," Klein said. Instead, they are predicated solely on evidence from power companies "that justifies an increase in price and profitability to their shareholders."

There is also concern in the government that companies from outside the province that provide imported power during peak demand periods are subjecting the power pool system to "some unusual market forces," said Treasurer Steve West.

"We're ensuring that there's no artificial manipulation of the market."

Several sources said there's growing frustration within government circles that the deregulation plan is being blamed for price increases being sought by power companies and being approved by regulators.

In the meantime, companies aren't "stepping up to the plate" and regulators aren't moving quickly enough to ensure adequate supply in a deregulated market, one source said.

Opposition critics said the intervention by the government proves the electricity deregulation plan has been a fiasco.

WHAT WAS SAID:

Alberta power rates will be "held virtually constant for one year." Previously approved surcharges are suspended.

WHY GOV'T ACTED:

"There was tremendous concern relative to electricity rates. We're receiving calls about the rising rates of electricity." -- Premier Ralph Klein.

WHAT IT MEANS:

Throws into doubt the future of the government'sfive-year plan to deregulate the power industry.

(Where's Rick Cowles when you need him?)

-- Rachel Gibson (rgibson@hotmail.com), November 29, 2000

Answers

This can be probably summed up as 'electricity generated using carbon based fuels does not have a stable production cost.' Hydro and nuclear are more stable.

-- Will (righthere@home.now), November 30, 2000.