We have recommended to Nathan Neudorf, Minister of Affordability and Utilities, as well as to Chris Hunt, Alberta’s Utilities Consumer Advocate (UCA) that retailers and regulated providers in the province should be required to provide transparency on rates and possibly publish a total effective rate so that consumers can compare apples and apples when shopping around for an energy provider instead of being served a numbers soup. Sounds reasonable, wouldn’t you say?
Perhaps you’ve looked at the UCA website and used their cost comparison tool. If you have, be warned: The site doesn’t always give you a true comparison. It is flawed, and there is a long list of things that need fixing. Nevertheless, until it is updated, we recommend that you look at the fine print and understand some of the background behind the market players.
The ATCO Group is an impressive Canadian diversified group of companies and truly a success story on the international stage. It has investments and operations in Canada, Puerto Rico, Australia, and South America. It is a household name and a prominent supplier of utility services here in Alberta. It is also involved in workforce housing, the real estate market, and Neltume Ports in Chile. ATCO promotes itself as a local company, but how local are they?
This blog focuses on ATCO energy, the company’s electricity retail arm, and the cost of ATCO’s delivery services to thousands of Albertans. Costs, charges, and terms can be confusing so we’ve broken it down for you. But if you’re an ATCO energy customer, are you being served a numbers soup?
Deals, Sales, and Trades
You may have seen ATCO energy’s latest bundled offer, which is lower than most other rates in the market. ATCO is a respected company, but have you ever wondered how they can afford to promote such a low rate? Let’s dig in.
The company is “cash rich” and run by very astute business people. Its shareholders have been fortunate. Looking back, they sold their retail business to Direct Energy in a deal worth $90 million. The Direct Energy brand and its customers were subsequently sold to NRG, an American utility. ATCO I-Tek, their IT division, was sold for approximately $210 million to Wipro, an Indian company, under a series of service agreements to provide ATCO with complete IT services.
Then, ATCO sold its generation assets for $835 million to Heartland, which were later sold to TransAlta. Over a billion dollars traded hands, diluting ATCO’s local stature, which was truly an Alberta iconic utility in the past. It wasn’t until 2016 that ATCO re-entered the retail market. But today, they are not as “local” as they once were.
Controversy Abounds
So where are we now? You may have seen ATCO’s name pop up in the news recently, so let’s break it down.
The industry is complicated and often left to corporate lawyers to argue and justify their rates. Most consumers do not see the job our provincial regulator has taken to protect consumers. Here is one example:
As part of the outsourcing agreement with Wipro, ATCO signed a 10-year, $1.2-billion service contract with the company from India. After a four-year investigation by our province’s utility regulator, addressing the increase in charges that ATCO passed onto consumers related to the contract with Wipro, the AUC concluded that the approach taken in setting rates was not “just and reasonable.” The AUC concluded that the ATCO rates were not structured in a prudent way, and the costs being invoiced to consumers were too high. Customers were being overcharged. The AUC ordered ATCO to reduce their rates.
In 2022, the company was fined $31 million by the Alberta Utilities Commission (AUC) for overcharging ratepayers for costs it shouldn’t have incurred. Then, in 2023, the AUC ordered ATCO to refund $16 million to consumers due to the increased rates charged to ratepayers due to the Jasper National Park case. At the start of July this year, ATCO agreed to pay another $3 million in fines “for misleading the province’s utilities watchdog about its costs in two separate projects.”
Most recently, ATCO is seeking to delay a hearing on excess profits. This falls under an AUC proceeding called Performance-based Regulation. In short, distribution companies are incentivized to increase their efficiencies and earn a reasonable rate of return (Return on Equity, or ROE). Thus, the AUC has determined that customers “paid more than what was reasonably required for the provision of safe and reliable utility service.”
Those charges won’t show up on your bill as energy retail charges but rather as Distribution, Transmission, and Rider charges. It’s unlikely that the average homeowner could tell whether they are being overcharged or not, which is why these decisions by the AUC are significant.
Ultra-Low-Cost…Retailer?
How many consumers really look at their monthly invoice and understand it? Did you know that ATCO charges a daily fee instead of a flat monthly admin fee? They say on their site, “No monthly admin fee,” but charge a daily fee of 36 cents/day. In a 31-day month, that’s $11.16 per month per service. When compared to NewGen Energy’s monthly admin fee of $7.10/month for electricity and $7.10/month for natural gas, it’s clear that there’s some cost recovery happening there. At least they’re not charging a daily fee on top of a monthly fee like some other retailers.
If you’re looking for a variable or wholesale rate plan, retail prices can be attractive, but that daily fee goes up to 63 cents per day or as high as $19.53/month! Looking at the UCA website, this is just one example of hidden fees that are not displayed. With gas prices being so low, it’s in everyone’s best interest to be on a variable natural gas plan, but not if it’ll cost you nearly $20 in admin fees each month!
Some utility retailers, including ATCO, are starting to follow a marketing strategy similar to that of ultra-low-cost carrier airlines: a low price on the surface with extra fees added on top.
Consumers often complain about extra charges, but they find it hard to understand the terminology. Here are a couple of examples. As most people know, the actual metered read is used to calculate the monthly consumption; but then, in a move unique to ATCO, they arbitrarily add an extra few kWh to real consumption to compensate them for LL and UFE (Line Loss and Unaccounted For Energy). Did you know those charges were there? Plus, another line item called an Energy Market Trading Charge appears under the heading Delivery charges, which has absolutely nothing to do with delivery or government charges.
It’s no wonder consumers complain about the extra fees. A number of other retailers engage in similar misleading practices by adding charges not accurately disclosed on the UCA website. We hope that the UCA will gain better control over business practices like this.
Who Really Benefits?
The other major problem for consumers is the expensive variable delivery fees charged by ATCO as a Wires Service Provider. If you live in Red Deer County, you’ll pay twice the fees for delivery compared to a household located in Red Deer itself. When comparing a city like Lloydminster (serviced by ATCO) to Red Deer, the difference is 275% higher. Are the fees justified?
We’re told that Minister Neudorf has these issues on his radar as he attempts to address affordability consumer complaints. There is lots of work to do. We wonder if he will get pushback, and it may possibly come from an unlikely person.
Did you know that shortly after leaving the Premier’s Office, Jason Kenney became a Director with ATCO? (Jason Kenney is a consultant and director on several boards, of which ATCO is one.)
Many of the issues we’ve highlighted over the years have been to the benefit of our elected governments and would have had effects that would have positively impacted Albertans. Whether they do anything with that information is up to them, but it’s worth noting that under Kenney’s leadership, Regulated Rate Option (RRO) prices were allowed to continue ticking upwards. From 2019 to 2022, while Kenney was Premier, RRO prices nearly doubled from an average of 7.49 cents/kWh in 2019 to 14.79 cents/kWh in 2022. The RRO rollercoaster would later continue to a peak of roughly 32 cents/kWh in August 2023 until Minister Neudorf stepped in to do something about it.
Now, as a Director of ATCO, Kenney is part of the team charged with governance of ATCO. Will that translate into better service and rates for ATCO customers? Only time will tell.
It is encouraging that Premier Smith has been very specific in her instructions to the Minister in charge: “Clean up this mess.” Just remember, when you are offered a special deal, look for hidden fees and keep your hand on your wallet. Or better yet, sign up with NewGen Energy. With us, what you see is what you get.