This post originally appeared on the EnergyRates.ca blog.
Alberta Electricity Rates
The average cost of electricity per month in Alberta has been climbing higher in the past three years. You’ve probably noticed that electricity rates — and, of course, electricity bills — are notably higher when compared to the historic lows from 2017.
At that time, electricity prices were around 2.88 cents per kilowatt-hour (kWh). Fast forward to December 2022 when floating rates reached ¢37.464/kWh, a historic high.
Also, consumers under floating-rate plans, especially large consumers of electricity, have seen considerable spikes in their bills for most of the months in 2020, 2021, 2022, and 2023.
So, what does explain the Alberta price increases? Why are our bills so high? And can we do anything to reduce our Alberta electricity bills regardless of the kilowatt-hour cost?
Market drivers – The main reasons why Alberta electricity rates are getting higher
There are many factors impacting the Alberta energy market. The following are the main drivers of Alberta electricity prices from 2022-2024.
*Please note. Some of these points discuss natural gas prices. To learn more about the Alberta natural gas market, check out this article.
Extreme weather events
Cold snaps and heat waves significantly impact the Alberta energy market. Electricity demand rises during both events. For example, when the weather reaches close to 30 degrees, the electricity pool price rises to its maximum level due to the increased usage of air conditioners.
There are some weather events which reduce market prices. Electricity demand decreases during rainy and windy weather, which leads to a lower pool price. Milder weather during winter months also keeps energy prices low.
Wildfires
Throughout the summer of 2023, wildfires plagued Alberta and the rest of Canada. Over a million hectares of land burned, and thousands of people were forced to flee their homes.
The fires also put a halt to oil and natural gas production. At one point, an estimated 319,000 BOE/D (Barrels of Oil Equivalent Per Day) was shut in, approximately 3.7% of the Canadian total production.
Multiple pipelines were shut down, leading to less exportation of natural gas to the United States. As a result, gas prices surged in Alberta during May 2023. On May 8, spot prices rose about $40-45¢. Production levels improved in June 2023.
Geopolitical factors
The ongoing Russian-Ukraine war has had a significant impact on worldwide energy prices. In response to the invasion, the EU has introduced the RePower EU Plan, which aims to transition the continent from Russian energy imports.
The plan has caused increased demand for North American-produced natural gas. Large volumes of LNG (liquid natural gas) will be imported from North America, with Alberta increasing their natural gas exports to the U.S. to fulfil this agreement. Natural gas prices have risen due to the demand from Europe.
End of the RRO price cap
From January to March 2023, the Alberta government capped the RRO at 13.5 ¢/kWh. All costs above the cap were deferred. The government loaned utility companies approximately $200 million to cover the difference between the actual RRO prices and the 13.5 ¢/kWh price cap. To repay the loan, RRO rates will be raised by 2-4 ¢/kWh each month, roughly $10-$20 per monthly bill, according to the UAC. From April 2023 – December 2024, RRO customers will bear the brunt of the deferral repayments.
The RRO deferral repayment has had a noticeable impact on the electricity market. It accounted for 2.7¢ of the June 2023 18¢/kWh rate. It also contributed to the 26-28¢/kWh rate for July 2023, a record high for the summer. Another factor contributing to the high RRO rate was increased electricity demand due to air conditioner usage
Carbon Levy
The current Carbon Levy price is $65 per tonne of CO2. By 2030, the price is projected to be $170 per tonne of CO2. The increased Carbon Levy price will lead to higher production costs for power plants. To offset losses, plants will likely raise the price of energy they sell into the wholesale electricity and natural gas markets. In response, regulated and competitive retailers would hike their rates, driving up prices further.
Transition to renewable energy generation
Alberta is transitioning to renewable energy generation to meet the provincial government’s 2050 net-zero target. As this transition occurs, electricity demand is reaching record highs. There are several reasons for this. For example, more people are driving electric vehicles, which require significant amounts of energy to recharge.
Another example is steel mills using electric arc furnaces rather than traditional coal fires. Electricity prices are starting to reflect the high demand. Albertans should expect electricity rates to remain high as the transition occurs.
However, renewable generators can ease the pressure on the energy market. For example, average solar generation during daylight hours helped lower pool prices for Q1 2023. Because of the supply from solar generation, pool prices during the middle of the day were lower compared to the middle of the night.
However, renewable generation provides additional supply to the Alberta electrical grid, which helps stabilize the energy market.
Retirement of coal-fired power generation
The Alberta energy sector has recently been moving away from coal-fired electricity generation. Natural gas has become the primary source for electricity generation in the province. As a result, natural gas demand has surged. In 2022, marketable gas production grew by 7%, and the AECO-C natural gas price rose by 51%. The transition from coal has also impacted the electricity market.
The province has been slow to introduce new forms of electricity generation to the grid. This has caused a drop in supply, posing a problem when electricity demand is high.
So, what can I do to avoid high electricity bills in Alberta?
Although there have been some efforts to stabilize Alberta electricity prices, it’s still somewhat difficult to predict what electricity bills in the province will look like in the months ahead.
Variable vs. fixed energy rates
In times of price fluctuation (or even worse, increasing prices), consumers should take the best out of fixed rates for electricity in Alberta.
Fixed energy rates will provide you with cost certainty. In times of higher energy bills, customers under fixed-rate plans won’t feel so affected, as their electricity prices per kWh won’t be vulnerable to environmental disasters, politics or other external factors.
Instead of focusing on the cheapest electricity rates at the time you sign a deal, take a look at both historical prices and the forecast. In other words, look at the downside and upside risks related to the contract you’re about to sign. For most energy customers, especially large consumers, fixed rates will bring more predictability to your budget and protect you from sudden market changes. Once you know what to expect from your monthly bills, you reduce the risks of unwelcome financial surprises.
At EnergyRates.ca, you can learn more about the differences between floating and fixed rates, but also compare Alberta electricity providers and their rates, including ENMAX Energy, Direct Energy, Encor by EPCOR and ATCOenergy.
The website allows you to compare utility costs and determine which electricity supplier fits your energy needs. The cost comparison tool lets you find the best and cheapest available providers in Alberta, as well as make a comparison of the current electricity plans in your area. Consumers looking for small business, commercial or industrial gas suppliers can even get a custom rate comparison report.
How much does electricity cost in Alberta?
It’s not simple to forecast what Alberta’s electricity rates will be for the rest of 2024 and 2025. However, as mentioned above, taking a look at what power prices have been in the province for the past months (the average cost of electricity) can help us understand how Alberta electricity prices (cost per kWh) are changing over time.
The following table shows the average electricity rates in Alberta (cents/kWh) for the regulated rate option (RRO) for consumers with an annual usage of up to 250,000 kWh from two of the main regulated retailers in the province. As you can see below, prices have steadily increased since 2020.
*Consumers under the RRO weren’t charged more than 13.5 cents/kWh from January to March 2023. Costs above this threshold will be repaid over 21 months (April 2023 to December 2024.) For more information, check our page on the Alberta electricity rebate.
Note: These tables are updated every month with the current regulated power prices in Alberta so you can have an in-depth Alberta electricity comparison, which takes into consideration historical electricity rates. These prices don’t include billing and delivery charges.
Go to EnergyRates.ca or fill in the form above to compare energy rates in Alberta (fixed, floating and regulated energy plans) according to your postal code.
