Frog in Hot Water: A Cautionary Tale

Alberta premier turns up the heat on energy regulations, unaware of the boiling frog effect.

Dear Premier,

The Rate of Last Resort (ROLR), formerly the Regulated Rate Option (RRO), is not serving Albertans. Like a frog in a pot of boiling water, these consumers may not know the harm it’s doing to their wallets.

We applaud you for encouraging consumers to get off the ROLR. Those that do will save money on their electricity bills. In fact, any consumer paying more than 6.5 cents/kWh can cut the cost of utilities by switching and taking advantage of some of the lowest rates available in the province.

You may remember the Regulated Rate Option (RRO) spiking to 32 cents/kWh in August 2023. Since then, the wholesale price charged by generators has fallen dramatically. Retail rates charged to consumers are also down and now stable at a fixed ROLR rate for two years at 12 cents/kWh.

Incredibly, a few hundred thousand Alberta consumers still pay 12 cents/kWh while competitive retailers offer rates up to 40 to 50% lower. If consumers were to switch to a competitive rate, they could save hundreds of dollars per year. Although some may not have the credit rating to make the switch, there are many who can.

During March, retail rates offered by Big Rock Power were under 5 cents/kWh for those on floating variable rates. Others only paid a 6.5 cent/kWh promotional rate or selected 1-year or 3-year guaranteed rates in the 8 cents/kWh range.

With American tariffs now a reality, Alberta’s agriculture community will be hit hardest. Thousands of farmers are paying more than 12 cents/kWh to their Rural Electrification Associations (REAs). Thousands more are buying electricity from an American utility licensed and sanctioned by the AUC to offer consumers the 12 cents/kWh ROLR. They could save upwards of $1,000 on their utility bills if they just took 15 minutes and switched over to lower rates offered by dozens of local Alberta independent retailers.

Your attempts to stabilize ROLR pricing are steps in the right direction. However, with all due respect, the regulation is flawed; the ROLR can only solve the volatility problem, it will not solve the affordability crisis.

Consumers on disability or low-income pensions who do not have good credit ratings cannot get off the ROLR; those struggling with the high cost of inflation will continue to pay the highest rates in the province.

For your consideration: We recommend the government create a sub-set of the ROLR and give vulnerable consumers a government-backed rate of 6 cents/kWh instead of forcing them to pay 12 cents/kWh. We have provided a framework proposal for consideration called the Transition Rate Option (TRO), which was delivered to the Ministry of Affordability and Utilities.

The Utilities Consumer Advocate’s ROLR awareness campaign is one way of stopping the frog from boiling. But an intentionally designed program for vulnerable Albertans would take the frog out of the pot altogether.