An Open Letter to the New Minister of Energy: What to unplug first?

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Alberta’s electricity industry has faced a number of changes over the last four years.

As part of the Climate Leadership Program, the Carbon Tax was introduced and the move towards 30% renewable energy generation by 2030 began. Additionally, the transition to a Capacity Market was announced (Bill 13), and a subsidy was placed on the Regulated Rate (Bill 16) to battle increased volatility in the market.

As the province begins its transition to a newly appointed government, there is no doubt some of the policies that have been added to the industry will be unplugged. But, returning to the well functioning market that existed in the past, requires a number of actions.

Last week marked the start of the evaluation and scheduled formal hearings by the Alberta Electric Systems Operator (AESO) into the Capacity Market Rules.

In its party platform, the United Conservative Party (UCP) announced it will review plans for a capacity market. The UCP policy platform stated that the party will “consult on whether Alberta should return to an energy-only market or create a capacity market, reporting back to Albertans within 90 days”.

On Tuesday, Alberta’s 18th Premier, Jason Kenney, and his cabinet were sworn in. Sonya Savage was announced as the new Minister of Energy, and she and her government now face a number of difficult decisions. What should be unplugged first? What should remain?

NewGen Energy operates as an Energy Marketer of Utility Network and Partners Inc. (UTILITYnet). In an attempt to lay out the issues that face the industry, and some recommendations to actions that should be made to address these issues, the owners of UTILITYnet have written an open letter to the new Minister of Energy.

While the government considers the Carbon Tax and Energy Efficiency programs – the letter puts forth specific recommendations that will immediately improve the market and help consumers reduce their monthly utility bill:

· Shelve Bill 13 which will introduce a capacity market, whereby some existing core generators, selected through an auction process, are paid to be on standby. Being paid not to produce, but be ready to turn on the switch when needed. The introduction of a capacity market will have significant implications on the overall market structure and will cause consumer prices to rise.

· Kill Bill 16 which pays a subsidy to regulated electricity providers to artificially keep the Regulated Rate Option (RRO) for electricity at 6.8 cents/kWh. $37.5 million in subsidies have already been paid to regulated utilities out of the carbon tax under the umbrella of Bill 16. It is estimated that it could cost Albertans over $700 million during its lifetime.

· Consider the view of the experts in the market and adopt the recommendations of the Retail Market Review Committee

. It is packed full of solid recommendations.

· Level the playing field by opening up the Regulated Rate Option (RRO) to be provided by competitive retailers.

· Keep jobs local by making it conditional that RRO Providers (as the supplier of last resort) bring jobs back to Alberta that they have exported out of the country if they are going to be guaranteed a profit margin on the sale of natural gas and electricity to consumers.

· Encourage new competitive retailers to invest in Alberta. This will require changes to the Electric Utilities Act. In particular cancel Section 8 of the Distribution Tariff, as this adds a needless cost that is passed onto consumers.

We congratulate Minister Savage on her appointment to the new government, and we look forward to supporting and working with her.