Electricity deregulation sparks debate

By Rob South

With deregulation of Alberta’s electricity industry quickly approaching, many people are concerned about rising prices. In Calgary, electricity prices already rose 25 per cent on Sept. 1.

"The most important thing to grasp is you have to separate rising prices from the deregulation process," said Mark Ereman, Director of Communications for Alberta Resource Development. "The prices would be rising if deregulation occurred or not."
Opposition parties worry the government is pursuing deregulation for reasons of ideology not practicality.

"This provincial government has the fundamental belief that regulation equals bad, market driven is good," said Alberta Liberal Energy Critic Lance White. "Prices will go up, the question will be how much the market will bear."

Alberta Resource Development Minister Mike Cardinal believes competition in the electricity market in 2001 will ensure prices are as low as possible.

"[Competition] gives Alberta consumers the chance to shop around for the best and most efficient services at the lowest price," said Cardinal. "If one company starts to charge more than another for the same service, it will lose customers–just like in any other business."

On Aug. 24, the provincial government accepted $1.1 billion in bids from five companies for the right to sell electricity generated by various power generators around the province. The province plans to give the $1.1 billion from the power auction to taxpayers through two $150 rebate cheques to be mailed in November and January.

The provincial Liberals are criticizing this move because the value of the rights auctioned was estimated at $4 billion.

"Rather than doing the right thing for consumers and declaring the auction a complete failure, [the government] decided to fleece ratepayers out of their inheritance, an inheritance that ratepayers in Alberta are rightfully owed for paying off the mortgages on these power plants over the years," said White.

Cardinal disagrees that the auction price was too low; he believes the auction determined the market price of the power generation.

"If the auction had generated an unrealistic amount like $4 billion, Albertans would have had to pay more in electricity rates to allow the bidders to recover their investment," said Cardinal.
Alberta New Democrat Leader Raj Pannu is concerned about power suppliers having an oligopoly over consumers because electricity is a necessity.

"Consumer choice is restored only if they are given the ability to counteract the producers’ power over them," said Pannu.

According to Ereman, the deregulation of Alberta’s electricity market is designed to have a series of checks and balances to ensure oligopolistic behaviour does not occur. One such check will be a market surveillance administrator to whom consumers can take complaints.

The effects of deregulation on people with fixed incomes, such as students and seniors, also concerns Pannu.

"The power prices will become unpredictable and most likely see a rapid rise," said Pannu. "That kind of limited financial situation makes you want to live in an environment where prices are predictable."

Pannu believes the current rise in power prices is partially due to the record low reserves for natural gas in the province. Current Alberta gas reserves will cover eight years of use; Pannu thinks the government should legislate reserves to cover 15 years of use.

"Low gas reserves are a direct contributor to the sky-rocketing rise in the price of gas," said Pannu.

Resource Development says the low gas reserves are a result of a change in business practices. Estimates by Resource Development place Alberta’s total natural gas resources at 130 trillion cubic feet. The province consumes about 5 trillion cubic feet of natural gas a year.

According to Alberta Resource Development, natural gas generates approximately 20 per cent of the province’s power supply; most of the remaining 80 per cent comes from coal.