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Deregulation leaving people shocked

Posted on December 4, 2013 by Vauxhall Advance

A decade after the deregulation of Alberta’s electrical system, a lot of promises have gone unfulfilled.

That’s according to a former member of the Utilities Consumer Advocate Advisory Council, LeRon Torrie, who sat on the council from 2003-2005, said he received an education in the functioning of the Alberta electrical grid system in the aftermath of deregulation, which was designed to control energy costs by introducing competition and market efficiency into the electrical system.

After years of studying and charting electrical prices on his farm, Torrie said deregulation has worked in one respect, but has failed in a few key areas.

“It’s not a good-news story,” he told delegates at the regional meeting of the Alberta Federation of Agriculture, held late last month.

He added electricity bills have become similar to phone bills, as rising fixed costs have become the major source of concern.

“Likewise, as wire service provider or fixed charges on power bills escalate, those charges will soon overtake the pure energy cost on our pumping bills,” said Torrie, as he referred to numbers he has crunched on his farm regarding operation of his irrigation systems. “We have to rein in cost increases on wire service providers.”

In terms of an average electricity bill on his farm, Torrie added the three components, energy charges, distribution charges and transmission charges include startling information.

He added while there are ways for consumers to protect themselves in terms of energy charges, by locking themselves in to contracts, for example, distribution and transmission charges continue to hit them in the pocketbook.

“There is no way to lock in or protect yourselves from these other two charges,” said Torrie, who added those are approved by the Alberta Utilities Commission (AUC). “There is no competition there.”

Initial tariffs are set on Jan. 1 each year, according to Torrie, tariffs which can be adjusted.

“Quarterly or interim adjustments are routine,” he said, as the AUC is presented with operational and maintenance costs, sector allocation costs and capital costs of new construction, from the big-time players in Alberta’s electrical industry. “The presented costs are difficult to fully scrutinize. Not all presented costs are legitimate.”

Torrie added there simply isn’t time for the AUC to get through all the information presented by energy giants like ATCO.

“They say these are our costs, and it’s up to someone to prove them wrong,” said Torrie.

“I will say, the system invites abuse. Basically, they get whatever they ask for.”

He added that has led to significant increases in distribution and transmission charges, as he presented his 2003-2012 pumping component costs on LeRon Torrie Farms Ltd. irrigation service billings. Energy costs in 2003 rang in at $0.058 kWh, and increased to $0.080 kWh by 2012. Distribution charges were $0.028 in 2003, and jumped to $0.058 in 2012, while total transmission charges went from $0.018 kWh to $0.0747 over that same period.

“Transmission charges since 2010 are out of control,” said Torrie, who added the total wire service provider charges, as a percentage of his energy bill, jumped from 79 per cent in 2003 to 165 per cent in 2012, while energy prices slowly increased over that time.

What that means to a pivot irrigator is simple, according to Torrie, who gave an example of a producer using a 40 horsepower pump motor and standard pivot, operating for 530 hours annually under the EasyMax commercial energy plan and the Fortis distribution and transmission tariffs.

Torrie’s numbers show the average cost per hour for that pivot was $3.16 in 2003, compared to $4.66 in 2009 and $7.01 in 2012.

Torrie blamed province-wide transmission upgrading and reinforcement and the reallocation of cost between sectors as the reasons behind the increases, as he said the irrigation users have been told they have not been paying their fair share over the years.

“Fortis is now applying for increased interim irrigation tariffs of 39 per cent for 2013 to arrive at a 100 per cent cost-to-revenue ratio,” said Torrie, as he added the fear is transmission costs in the double digits could continue to the end of the next decade.

According to Torrie, a review to claim irrigation is not paying its full share for transmission and distribution is needed, along with a demand for efficiency increases from Alberta’s wire service providers and a fully-transparent and open public review of the need for scheduled transmission upgrades.

“It’s going to come down to a political move for us as voters,” said Merv Cradduck, president of this region’s Alberta Federation of Agriculture board. “We’re going to have to kick the buggers out of office that are doing this to us.”

Torrie added while an advocate still exists in Alberta to help consumers with their issues, the work of the Utilities Consumer Advocate Advisory Council was cut short.

“I went to meetings for two years, but the minister did not like our recommendations and we were all fired. There is still an advocate but no council now.”

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