Retail Price Support Systems Electricity Restructuring in Alberta

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Retail Price Support SystemsElectricity
Restructuring in Alberta
Alberta Energy Electricity Business Unit

• Presentation to The University of Alberta School
  of Business Natural Resources and Energy Program
  AND Edmonton Chamber of Commerce
• Thursday, May 3, 2001

Grant Weismiller, Director Deregulation, Customer
and Retail Programs Electricity Business
Unit Alberta Energy 5th Floor, 9945-108
Street Edmonton, Alberta T5K 2G6
Phone [phone] Fax (780)
427-8065 E-mail grant.weismiller_at_gov.ab.ca
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How Does Restructuring Affect Albertas Electric
System?
Power Supply
Continued Delivery
Customer Choice
Customer
Transmission and Distribution
Consumers have the power to choose among the
varying offers from different retailers.
This remains the same. You will continue to get
your power, through the same power lines as
before.
Generation
You can soon choose a retailer to sell you power.
More types and locations of generation projects.
Competition among suppliers.
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Retail Price Support System
1. What are the Retail Price Support
Systems? 2. Why does Alberta need Retail Price
Support Systems? 3. Where do the funds come
from? 4. Will these systems (funds) be needed on
an ongoing basis?
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What are the Retail Price Support Systems?

• Balancing Pool rebates
• All customers
• Market transition credit (MTC)
• Default customers
• Regulated Rate Option (RRO)
• Customers below a defined consumption level

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Balancing Pool Funding Sources

• Power Purchase Arrangements (PPAs) are a
  mechanism to diversify the market and introduce
  competition in generation - sold in two auctions
• August (20 year contracts) - 1.1 billion net
• December (MAP) (1 year) - 1 billion net revenue
• Future auctions will be required
• Existing owners protected -- No forced
  Divestiture
• Other inflows / outflows associated with 20 year
  life of the Balancing Pool

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Balancing Pool Electricity Auction Rebate
Residential Electricity Auction Rebate
Balancing Pool Rebate

• 40 per month
• 2001 only

• All customers that are classified as residential
  and farm by their distribution utility.

Non-residential Electricity Auction Rebate

• 3.6 cents per kilowatt hour (or 36 megawatt
  hour) for each kilowatt hour consumed in 2001
• 2001 only

• All customers except residential. This includes
  farm, commercial and industrial.

Note Farm customers receive both the
residential and non-residential rebates because
most farms consume more electricity than the
average residential customer.
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Market Transition Credit

• Only to businesses that went to Default supply on
  January 1, 2001.
• Default consumption gt 250,000 kWh/year no
  contract for electricity.
• Pool Price determines value of credit (for all
  consumption January 1 through June 30, 2001).
• Maximum credit of 4 cents per kilowatt hour.
• Businesses that contract for power and go off
  default continue to receive Market Transition
  Credits for full 6 months, regardless of
  contracted price.
• In addition to the commercial Electricity Auction
  (Balancing Pool) Rebate of 3.6 cents.
• Funded by the General Revenue Fund.

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Market Transition Credit
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Regulated Rate Option (RRO)

• Home, farm and many small industrial and
  commercial consumers are eligible. This includes
  more than 95 of Albertas electricity consumers.
• Industrial and commercial consumers with an
  annual consumption of less than 250,000 (kWh) are
  also eligible.
• The RRO is designed to give small consumers time
  to become familiar with the marketplace.
• The provincial price of power under the RRO is
  set at 11 cents per kilowatt hour (kWh) for 2001
  - pending EUB scrutiny.

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• Situation Today

Will Retail Price Support Systems be needed on an
ongoing basis?
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Independent View of the 2001 Alberta Electricity
Market

• Things have gone far, far better here than in
  most jurisdictions. There are a few challenges
  left, but we shouldn't underestimate the
  achievements to date.''
• Seabron Adamson from Frontier Economics
• from presentation at the 7th Annual Conference of
  the Independent Power Producers Society of
  Alberta Banff, Alberta March 2001

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Staying the Course

• No one said deregulation of the electric
  industry would be easy. . .
• The decision (to deregulate) was sound. Free
  markets work better than regulated ones
• The worst thing to do is lose your nerve...and
  settle for a half-regulated scenario.

Calgary Herald editorial, March 28, 1999
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Competitive Wholesale Electricity Markets

• Situational Analysis
• Albertas market became more competitive on
  January 1, 2001.
• Market prices demonstrate market framework is
  working.
• Market confidence and certainty is key.
• Rebates are a preferred alternative to price caps
  and market-distorting measures.

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Power Pool Price Statistics

• Summary of 2001 Pool Prices

Weighted Average Pool Price (/MWh)

• January 132.14
• February 118.17
• March 98.50
• April 116.81

Fourth Quarter 2000 223.31
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Consumers are Responding to Price1999-2001 AIES
Demand (Jan-Feb-Mar)
Intra Alberta Load
5,000,000
4,875,000
4,750,000
4,625,000
4,500,000
4,375,000
4,250,000
4,125,000
4,000,000
3,875,000
3,750,000
3,625,000
3,500,000
Jan1999
Jan2000
Jan2001
Feb1999
Feb2000
Feb2001
Mar1999
Mar2000
Mar2001
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Customer Choice Where Are We Today?

• Situation for customers vary depending on their
  opportunities and decisions in 2000.
• Customers have choice of supplier as of January
  1, 2001.
• Most customers have time to look at deals
• 5 years for residential consumers
• 3 years for commercial consumers
• large industrial consumers already signing deals
• Consumers are being shielded from price
  volatility with rebate programs in 2001.

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Vision

• Consumers are benefiting.
• The marketplace is competitive and healthy.
• Industry support systems are streamlined and
  effective.

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Developers are Responding to Certainty
Situational Assessment

• Power producers continue showing confidence in
  Albertas new market.
• Almost 5,000 MW of new generation has been
  announced and is targeted to be in place by 2006.
• An annual peak demand growth rate of 3 250 MW
  per year of new generation.
• A project facilitator program has been approved.
  The EUB and AENV streamlined their approval
  processes.
• Over 600 MW of new generation is expected to come
  on-line during 2001.

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New Generation On-Line 2001
Capacity available to system is estimated at 590
MW plus 300 MW proposed interconnection
capability in the 1st Quarter of 2002.
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Electricity Supply and Demand in Alberta 1990-2005
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Retail Price Support System
1. What are the Retail Price Support
Systems? 2. Why does Alberta need Retail Price
Support Systems? 3. Where do the funds come
from? 4. Will these systems (funds) be needed on
an ongoing basis?
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For More Information
Electronic Sources
www.energy.gov.ab.ca/electricwww.customerchoice.
gov.ab.cawww.powerpool.ab.ca (Power
Pool) www.eal.ab.ca (Transmission
Administrator) Contact Linda Huffman (780)
422-9185 email linda.huffman_at_gov.ab.ca
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