McGill School of Environment - Regulation Reform in the Electricity Industry






Executive Summary

Research Question

Case Sudies





The Group


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Final Report

Price and Demand:
The Ministry of Energy in Alberta provides information on Power Pool prices for the past five years. This data is shown in table 1, which shows average electricity prices rising steadily in the years leading up to deregulation.
Figure 1. Average Yearly Pool Price (Ministry of Energy, 2002)

Examining the years 2000 and 2001 in more detail show prices peaking right before the official implementation of retail deregulation in January of 2001. This is summarized in Table 2. Although still higher than usual in 2001, prices seem to be falling and may stabilize at around 1998 rates.
Figure 2. Average Monthly Pool Price (Ministry of Energy, 2002)

Residential demand for electricity has been rising steadily for the past decade, as Alberta experiences increased economic growth, and more people move to the Province to find employment. Customer usage is summarized in Table 3. Total demand did dip slightly following regulation reform, indicating that industrial and large commercial consumers reduced their consumption of electricity following elevated prices in 2000 and 2001, unlike residential customers.
Figure 3 . Customer Usage (Department of Energy, 2002)

Residential customers represent a large proportion of the number of electricity customers in Alberta; however, as can be seen by the disparity between residential usage and total customer usage, this sector contributes less than 15% of total demand. Industry and commercial sectors use significantly more energy, and thus have more influence as
customers. As a result, many services provided by the energy industry are directed more towards these sectors than towards residential consumers. Examples of such services are energy efficiency programs, which are discussed below.

Energy efficiency programs:
Alberta is a resource rich province, and has traditionally based its economy on fossil fuel extraction and energy production. Concerns about potential energy supply have never been an issue, as the usual stance is simply to produce more. This attitude is reflected in the current push for increased generation as a response to the growing demand for energy in the province. Using energy efficiently, as a means to deal with excess demand, is not a widespread consideration in Alberta. As a result, there is a significant absence of effective energy efficiency programs, especially in the residential sector. There is no comprehensive coordination of energy efficiency initiatives in Alberta (Pape-Salmon, 2001). The programs that do exist are small in scale and not coordinated in their efforts.
Currently, most energy efficiency programs in Alberta are directed towards Industry and large commercial customers. Residential energy efficiency programs have never been a priority for utilities or government (Pape-Salmon, 2001). Most programs for the residential consumer are information based or advisory in nature. In fact, most residential energy improvements are best carries out as part of home renovations, which do not often occur. Consumers are currently limited in their ability to borrow capital to pay for home energy efficiency improvements (Pape-Salmon, 2001).
All the major utilities include energy efficiency tips for residential customers as part of their marketing strategy, however these WebPages and brochures tend to provide broad-based information with little in the way of action plans. Pape-Salmon notes, “There are few incentives for retailers to do more than provide basic efficiency and climate-change information to consumers as part of their marketing services” (pers. com.).
The Alberta provincial government has played a minimal role in providing energy efficiency programs to residential consumers. Like the utilities, it does provide information for residential consumers, but no financial support for homeowners interested in energy efficient renovations (Alberta Environment, 2002).


The current policy among utilities and government in Alberta in regards to consumer electricity conservation seems to be that high prices will improve efficiency. Andrew Pape-Salmon comments on this attitude:
While Albertans are more likely to use electricity more efficiently now that prices have escalated, they are disadvantaged by the lack of utility and government programs to help energy consumers become more efficient (2001).

Pape-Salmon also suggests that the current private electricity market does not provide an appropriate atmosphere for the flourishing of energy efficiency initiatives of any type. Public policy guidance is sorely needed for an effective, cohesive energy efficiency strategy to be set in place in the province (Pape-Salmon, 2001). Federal programs promoted by the national Office of Energy Efficiency will not be effective without concurrent support from the provincial government. Alberta, with its emphasis on economic growth at all costs, would do well to consider that energy efficiency is actually an integral part to any sustainable and competitive economy.

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