Retrenchment: Alberta Rejects Ending Default Service; Instead Extends Contract Length!

Rejecting recommendations from the Retail Market Review Committee, the Alberta government has elected not only to maintain the Regulated Rate Option (RRO) for electric default service, but has expanded the time over which RRO supplies may be procured.

The Retail Market Review Committee had recommended ending the RRO default service, to be replaced with a true, backstop POLR service. The RRO is currently based 100% on spot wholesale market pricing, with default providers limited to purchasing power 45 days in advance.

"Right now, a majority of Albertans have chosen to stay on the RRO. Recognizing the choice made by Alberta consumers, the government rejected all six recommendations made by the Retail Market Review Committee (RMRC) Report associated with eliminating the RRO," the provincial government said.

"A key recommendation being implemented immediately will reduce month-to-month price volatility for consumers by improving rules around how regulated rate providers purchase electricity," the government said. "Currently, providers can only purchase power 45 days in advance for the regulated rate option. The province will extend that to 120 days to bring more stability and predictability to the marketplace," the government said.

"Extending the purchasing window allows providers to average prices over a longer period of time so the effects of severe weather or short-term plant shut-downs will be smaller," the government said.

The government has rejected all six of the Retail Market Review Committee's recommendations associated with eliminating the regulated rate option. "Almost 65 per cent of Albertans choose the regulated rate option, and we respect that choice," said Ken Hughes, Minister of Alberta Energy. "This government will not force consumers to sign contracts."

In recommending the end of the RRO, the Retail Market Review Committee had said, "Continuing with the current RRO signals that Alberta has not committed to developing a competitive retail market and may retrench, as in the past. This increases the risk for new entrants that must make capital investments."

The RRO has now been extended to 2018.