By Nick Clark
The Minister's message was clear. It's a complex problem which starts by adopting a broad-based carbon tax strategy to raise the money needed for future re-investment. The new tax kicks in January 1, 2017. This is going to happen regardless of what anyone says from the other side of the fence with opposing and polarized political views. There also is the belief that, if provinces don't set a minimum carbon tax, the federal government will. At the same time, Minister Phillips was honest, in that the Government doesn't yet have all the answers and much is left to be worked out.
Intuitively, we all know that many of the problems we face are real. Be it the growing unemployment in our province or the NDP's fear of the potential negative fall-out from losing our social licence on the world stage. As well, we need to deal with local environmental issues and related health costs linked to the carbon and methane gases in the air.
The reality is the path of doing nothing is not the answer. The summit was akin to a fireside chat and a Kum ba yah ("Come by Here") spiritual movement of 500 people coming together in support of "The Plan". But, what's the plan?
It is easy to paint the picture of the magnitude of the potential environmental problems. But what was missing from everyone's presentations at the climate summit, including the Minister's address, was the action plan on how the new-found carbon tax dollars are going to be spent. There are a lot of good ideas floating around showing what others in the world are doing. But, our province still lacks a definitive strategy to share how it intends to spend the billions that will be taken out of our economy under this new tax regime.
On January 1, the Carbon Tax goes into effect and, with money in the bank, undoubtedly the NDP will find a long line of companies lining up at the doorstep of AESO wanting to build solar and wind generation projects (depending on the amount of the subsidy). Giving out subsidies is the easy part of the equation.
Wind and and Solar are sexy. Yet, shouldn't we also be investing in gas-fired generation first since we have an abundance of gas in Alberta?
There are other mega problems the Government still needs to address. For example, what's the strategy to cut methane emissions? This is a major issue that we have yet to see any data on. At the same time, the NDP most likely will continue to fight with the generators over the Power Purchase Agreements (PPAs) issue and, while this is going on, what should be feared is the Balancing Pool (BP) eventually will run out of money given the collapse of the Power Pool's energy prices in Alberta. The BP issue is a multi-multi million dollar problem that will hit the Government in a month or so. When the Balancing Pool's bank account (aka Government Agency) goes into the red, who is going to bail them out?
Let's remove ourselves from the political rhetoric. As a consumer in Alberta, we cannot solve these problems, but the reality is you will be hit with increased costs on your natural gas bill. You will pay more to fill up your car on January 1st.
As explained in the first blog in this 4-part series, the new tax on natural gas amounts, on average for residential consumers, to an extra $300 over the next couple of years. Business owners are going to be hit even harder with increased costs of $1,500. If the Balancing Pool runs out of cash, you may be called upon to pay a new rider on your electricity bill to finance the mess. Rest assured the cost of energy is going up.
How do you fight back? While the tax on natural gas is definitely going up, consumers in Alberta can save money on their electricity bill if they just shop around and jump-off the Government’s Regulated Rate Option (RRO). One can possibly offset the other. An estimated 60% of Albertans still are stuck on the RRO charged by Enmax, Epcor, Direct Energy, their local municipal utility or their REA (Rural Electrification Association) provider.
Buy Smart: You might be able to save enough on electricity to offset the cost increase on gas.
Here's another good idea. The Energy Efficiency strategies the Government is proposing deserve your support. These strategies, once the government publishes it plan, will show Albertans how to possibly reduce the energy they consume to help lower the cost of their household energy budget. Town-hall meetings are currently being held around the province.
The important part of the equation: under deregulation, the cost of energy plummeted over the last couple of years. While bad news for the BP, this is great news for consumers. Historically, the cost of energy was in the mid $65/MW range BUT today it is below $20. Hunt for a rate that is linked or indexed to the actual cost of energy or lock into lower guaranteed fixed energy rates. There are lots of great options available.
What does this mean to consumers?
Here are just a couple examples. We know of a farmer in Lac La Biche area paying 8.75 cents per kWh for energy last month on his regulated rate provided by his local REA. He used about 1100 kWh and spent $67 more last month on his utility bill compared to another farmer down in Hanna who paid only 2.65 cents per kWh. This is a whopping +230% more being charged by the REA for energy compared to the rates offered by E.NRG (one of Alberta’s independent Energy Marketers). Ask a farmer in Lac La Biche what he would do with an extra $800 a year if he had the option of buying electricity for less.
The price of energy paid by Albertans largely is linked to the price paid to the generators for the energy they ship onto the grid. Spot Power started the concept of indexing the retail price to the cost of generation plus 1 cent per kWh when it launched its Alberta business in 2009.
When the wholesale market drops, so does the price paid by consumers.
Across the province, savings for residential consumers, this year, average about 30% on the energy portion of their utility bill when compared to the regulated rates charged by ENMAX, Epcor or Direct Energy. (Click here for a complete list of independent Energy Providers offering the concept of indexed prices.)
Another example of what this means to consumers arrived in my email on the weekend. A resident of Stettler AB was paying a fixed term rate of 7.99 cents per kWh from Just Energy and he was trying to reduce his monthly expenses. The quoted price from Peace Power could have saved this fellow $38 a month based on last month's invoice alone. Unfortunately, he is locked into penalty charges by Just Energy, if he tries to leave.
The best kept secret in Alberta is how deregulation gave consumers a choice. Shop around and you may find lower energy rates. By signing up with a new retailer, under Alberta's Customer Choice option, your delivery service will not be interrupted by switching energy providers. It is easy and most Energy Marketers in Alberta will not lock you into a contract with penalties to change or cancel at a later date.
Most important, many people likely will save enough to offset the tax increase on the cost of natural gas. If you do, you could possibly end up with a net zero impact on your monthly budget. This should make our Energy and Environment Ministers smile.
Here's another tip if you fear the change in regulations by the Government will cause the wholesale cost to go up: lock into a fixed rate. This will help protect you from the potential of volatility in electricity prices and the carbon tax in the future. There are lots of options to lock in at rates in the 5 to 6 cent range to give you the comfort of a stable price to the end of 2018 and 2020. Buy Smart: consumers can protect themselves from the carbon tax on electricity by buying today at guaranteed electricity prices that don't include the new tax. Fix it and forget it. A simple and safe strategy to consider.
Last, don't forget the importance of focusing on the ultimate objective of what the Premier is trying to do. Climate Change issues are important and should not be dismissed.
“Thinking Green” is integral to fighting the problems related to Climate Change. Consumers who switch retail rate plans to lower their cost of energy might also want to consider investing what they can save into supporting the quest to Green the Grid. Did you know that the average residential consumer can green 15% of the energy they consume for as little as 5 cents per day? Going Green isn't expensive.
Good News. Not everything is doom and gloom. Since we launched Green Alberta Energy, at the same time that Alberta announced the Climate Change Strategy, we have sold and retired enough ECOLOGO certified Green Energy RECs equivalent to 15.5 million kWh of electricity. It is a fantastic start. This program gives consumers the option of helping to green the grid without being forced to. Another reason we hope will help our premier realize that there is an increasing number of people supporting the Climate Change quest and willing to make a financial commitment in helping to "Green the Grid".
Albertans are making good decisions and supporting the importance of Climate Change initiatives without being taxed. This, more than anything, should be a positive message that might bring a smile back onto the face of our Premier.
Finally, we asked Minister Joe Ceci to consider giving a tax credit to Albertans who voluntarily green their energy with RECs. He never responded. A good idea that fell on deft ears. More on this in Friday's blog.
Friday, September 23, 2016 Part Four - Bucking the Trend