Peeling Back the Layers of Alberta’s Regulated Utility Market

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We would first like to congratulate the Premier of the province and Alberta Indigenous Opportunities Corporation (AIOC) for the unveiling of the new Cascade Power Project. This was in the news yesterday and is a positive step forward in increasing the province’s supply of cleaner electricity. It will also generate much-needed local employment opportunities for First Nations and Albertans alike.

There is another employment related energy issue that needs the attention of the Department of Energy and the Alberta Utilities Commission. We want to encourage our Premier to take a look at some of the electric utilities that are providing our government’s regulated rate (called the RRO) to consumers in Alberta.

The province deregulated the market two decades ago, and over the last number of years, some of those who had been gifted the franchise of selling electricity and natural gas under the government’s RRO program and profiting from it have slowly been moving jobs out of the province. It is time to bring the jobs back to Alberta. It’s time to restructure the government’s regulated rate option program.

Dear Mr. Premier, please put this on your radar.

When you go shopping, look at the labels on your purchases and you will probably find that a lot of products come from China, Mexico, Guatemala, India, or the United States. But if you take the time, you can find the products you want to buy are “Made in Canada.”

In our current economic situation, every little thing we buy or do affects someone else – even their jobs. “Buy local” is not just a catchy slogan, it’s a way of living, and the heartbeat of our economy.

There’s no doubt about it, it takes a little more effort to figure out where goods come from instead of simply buying based on fancy labels, slick marketing programs, or a heavily-advertised brand name. When you start digging into where the things you buy come from, you may just find that you are saving someone’s job. The job you save may be your own, your neighbour’s, your child’s, or even your grandchildren’s.

But what does this have to do with NewGen Energy and the electricity that you buy for use in your home? Unfortunately, Alberta’s Regulated Utilities do not have to put a consumer label on the product they are selling to you. If the opposite were true, here’s what ours would say:

“NewGen selling electricity and natural gas to residential consumers and businesses, is a local and privately family-owned company with roots in Calgary dating back to 2011.”

Alberta’s utility market can oftentimes be confusing and difficult to decipher. Like an onion, there are many different layers that need to be peeled back to truly understand who’s who, and what is going on.

Let’s Start to Peel the Onion

Warning: Just as with an onion, as we peel back the layers, what you find might make your eyes water or even sting.

If utility companies in Alberta had to label the products they sell, here’s what you might find out if you took a look at one of the RRO providers: Direct Energy.

Direct Energy is being sold to NRG Energy, an American company headquartered in Princeton, New Jersey. On July 24, 2020, NRG entered into a purchase agreement focused on diversifying its business by acquiring Direct Energy, including all their government regulated electricity and natural gas customers in Alberta.

In short Mr. Premier, the government’s RRO business with Direct Energy is being bought, sold, and traded.

Naturally, the acquisition is still subject to approval by the shareholders of Direct Energy, as well as customary closing conditions, consents, and regulatory approvals, including the Canadian Competition Act. But given Direct Energy’s history, these are mere formalities.

Mr. Premier, do you want one of our province’s major government regulated rate utility retailers to be run by an American company? This should be on your radar.

Direct Energy has a long history of this kind of business. They have already moved their customer care call centre from Alberta to Manila in the Philippines, then to Guatemala, and its billing processing to Texas. They also sold off their Alberta natural gas holdings to a joint partnership including Mercuria (HQ Geneva), Can-China Global Resource Fund (in part, funded by China Exim Bank), and MIE Holdings Corporation (HQ Hong Kong).

As part of its attempt to cut costs, Direct Energy outsourced its technical information technology requirements to HCL of India. By the end of the year, Alberta will have a new provider of energy once the sale closes and NRG Energy of the United States takes control.

Even with all the outsourcing that the management of Direct Energy undertook, their administration fees charged to consumers have not gone down.

Let’s Peel Back Another Layer of the Onion

If you are a homeowner and currently enrolled on the Regulated Rate Option (RRO) provided by Direct Energy, take a look at your utility bill for September. You are paying 7.3 ¢/kWh, up 15% from the previous month. Some government approved RRO prices charged by other retail utilities are even higher.

As one of many competitive Energy Marketers in Alberta, NewGen Energy’s guaranteed rates are lower than the RRO. Additionally, the 30-day average for our floating variable rate, which is indexed to the real cost of generation, was 5.93 cents/kWhr. The difference between our current price and Direct Energy’s RRO is an astonishing 19.6%.

If you are a customer of Direct Energy, not only are you paying more, the profits earned do not stay in Alberta. They are consolidated on the financial statement of their parent company Centrica in the UK, which in turn is selling off their North American holdings to NRG in order to raise cash to fund their planned European and African expansion programs.

Many of the people Direct Energy used to employ here in Alberta have been laid off. When the sale is concluded, will more Albertans get their pink slips? Mr. Premier, why is our government allowing the regulated rate business to be sold off to an American company? With the latest move by Direct – what does the future hold for their customers?

Are your eyes starting to sting yet?

The Heart of the Issue

Initially, the RRO was intended to be the default option for customers who chose not to, or were not eligible to purchase a contract from a competitive energy retailer for their electricity and natural gas.

There was a fear in the early days of deregulation that the contracts being offered had costly cancellation penalties, and the RRO was conceived as a protected rate and a safe haven for consumers. This is NOT the case today. NewGen Energy offers competitive rates with no cancellation penalties.

More and more jobs are being sent out of Canada in the name of cost-cutting and increasing profit margins. Direct Energy is the poster child of outsourcing. From the viewpoint of a large corporation, it is easy to understand the profit motive and logic of Direct’s strategy. However, if you believe in the importance of supporting small, local, family-run businesses in Alberta, it is time to switch retailers.

Mr. Premier, it may be time for the Department of Energy to be tasked with the challenge of tightening up outsourcing/deregulation guidelines and allow independent Alberta-based companies access to sell the government approved RRO services to customers.

The private sector and competitive companies like NewGen have proven that we can consistently offer lower rates, no-penalty contracts, and a high level of customer care and services to customers when compared to some of the big regulated utilities.

Alternatively, if the private sector approach seems farfetched to the regulators, perhaps allowing another, Alberta-owned RRO utility, such as EPCOR, to expand and service Direct Energy’s RRO customers is more reasonable. They already have the infrastructure to handle the RRO services, it only makes sense to have them continue providing that to Direct Energy’s customers. Keep the jobs here in Alberta!

Supporting Local Businesses

NewGen is selling electricity at competitive prices. The profits are not shipped out of the country, jobs are local, and we are investing back into our local community.

It’s time to send a message to Direct Energy’s new American owners. Our government should be encouraging Albertans to switch over to an Alberta-based company. Switch over to a company that didn’t ship jobs offshore. While you’re at it, save money on your utilities.

Check out our Electricity Pricing by following this link. You’ll find that they are more than competitive.

We are expanding our business. NewGen has partnered with Q Wave to offer affordable, commitment free, high-speed Internet plans. Consider bundling Internet services with your electricity and/or natural gas account and get FREE energy administration fees for 6 months.

There is no longer a need for the government to continue to offer franchised protection that they have given to our province’s regulated utilities, especially when they have shipped jobs out of the country. It is time to bring the jobs back home and show support for local businesses.

Please put this on your radar and do not ignore this problem any longer.