3 reasons why your recent utility bills were expensive, and what the charges mean

Many Albertans experienced a bit of sticker shock when opening their most recent utility bill, and while they may be wondering why, experts say it’s a mixed bag of causes and not an easy answer.

The first being cold weather.

Parts of Alberta were blanketed in a cold snap for most of December and January. According to AESO, on Jan. 3 the province hit an all-time electricity usage of 11,939 MW. Energyrates.ca told CTV News that’s enough energy to power 1,000 houses for a year.

With colder weather comes an increase in use in natural gas and power.

“When you have a market that is supply and demand, you will see prices increase during periods of increased demand,” said Associate Minister of Natural Gas and Electricity Dale Nally. “And that’s what we saw in December.”

The second is supply and demand.

According to Energyrates, Alberta’s energy and natural gas market is the least regulated in the country after switching to deregulation in 1996 with the Electricity Utilities Act. Since then, rates are set by hourly prices. Associate Minister Nally believes the market is working the way it’s supposed to, pointing to the construction of about 40 power plants across the province. This will total more than 4,000 MW of generation capacity, an increase the ministry notes as significant.

“We know that this increased generation will be the path forward for lower electricity prices for Albertans,” said Nally. “Increased competition and more choice will eventually lower prices. So yeah, we’re confident the market is working.”

The phasing out of coal by 2030 is a third reason Minister Nally points to.

According to Energyrates, combining the coal-powered generation produced from 12 of Alberta’s 18 coal-fired power plants produces almost half of Alberta’s electricity.

“Now lots has been said about coal, much of it true, but you cannot deny that coal was plentiful and it was cheap,” said Nally.

It’s a sentiment echoed by Jim Wachowich, a spokesperson for the Consumers Coalition of Alberta. As new systems are being built to replace the old ones, costs will go up.

“We are seeing new costs come in as vintage assets are retired,” said Wachowich. “They were the lower cost components of the system, so we’re seeing higher costs show up on the bill.”

But looking at a utility bill, there is a list of added charges and fees that can make up over half the total bill.

WHAT DO THESE CHARGES MEAN?

Wachowich broke down, in simple terms, what each charge on a utility bill means for CTV News. He warned that it is a complex system with a number of factors at play, and terminology can vary based on provider within the province.

Under Natural Gas consumers will find delivery charge fixed and delivery charge variable, he said. Both of these are paying for the pipes and meters that come to the house. The fixed charge is the same every month, regardless of what you use. The variable charge can fluctuate depending on the amount used.

Under Electricity are the distribution and transmission charges. Both of them are set yearly after extensive review by the Alberta Utilities Commission, who have a public mandate to represent both public interest and companies.

The distribution charge, in its simplest terms, pays for the small wires and pipes in the lower voltage system moving power closer to your home.

On the opposite end is the transmission charge. This pays for the big wires and pipes in the higher voltage system in the province that moves power from various power plants closer to the city.

You may notice these two charges can change from month to month. It’s because both are two-fold.

“There’s a portion of them that are fixed and a portion of them that are based on consumption,” said Riley Georgsen, Director of Communications & External Affairs for the Alberta Utilities Commission. “So if your consumption changes from month to month, you can see those fees increase and decrease with your consumption.”

Rate rider is a regulatory tool that is separate from monthly costs. It can be a charge or credit, helping to close the gap between expected and actual operational costs.

Wachowhich added that most of these costs can be adjusted based on inflation and new assets.

“We’re seeing a lot of new assets being used to serve Alberta customers. There’s been a huge investment in new capital in this industry.”

New investment that will continue, according to Associate Minister Nally, who plans to introduce new legislation in the spring that “will increase competition, enable clean technology like energy storage for renewable generation, and more distributed energy resources.” He added the goal is to keep electricity affordable and reliable.

“We think the open market that we have has worked for Albertans,” said Nally. “The fact that those markets signal more generations to come online is working. That tells us that the system is working and it’s working well.”

Wachowich says he understands the frustration Albertans feel when trying to understand their utility bill.

“For many householders who are customers of utilities, this is a true hardship.”

He says those concerned with the prices should write to elected officials and support consumer advocates in the province.

Associate Minister Nally recommends Albertans take a look at their electricity bill and check what kind of rate they’re paying — fixed or variable.

“I would encourage Albertans that are struggling with a higher cost of electricity, consider a fixed rate. And to reach out to the Utilities Consumer Advocate for more information on that.”

Premier Jason Kenney hinted that relief could be coming. Associate Minister Nally confirmed that it won’t come in the form of a price cap, like the former NDP government implemented in 2017, but that something is on the horizon.

“I don’t want to take any thunder away from Minister Toews, our minister of finance,” he said. “And I would encourage you to wait until the budget in a couple weeks and see what he has in store.”