Regulated Electricity Rates in Alberta

What is the Regulated Rate Option (RRO)?

When the retail electricity market deregulated in 2001, a default rate for electricity supplied by utilities was introduced along with retail competition as a way of adjusting consumers to a competitive electricity market. This is now known as the Regulated Rate Option (RRO). This regulated rate is determined by the Alberta Utilities Commission (AUC), municipal councils, Rural Electrification Associations (REA), or other local regulatory bodies, and is the rate charged by your local utility for your energy supply. The RRO provider and rate is different depending on where you live, but there is only one regulated provider for your geographical area. It is currently based on a short-term (one month) projection of electricity prices, and as a result, can change quite dramatically. It was due to expire in 2014, but was recently extended to 2018.

Did you know?
The regulated rate option does not mean that the rate is controlled by the government. Rather, the term 'regulated' means that the rate mandated to exist. The RRO is based on forward market prices, and the AUC reviews and approves of a rate that is considered to allow utilities to account for their costs and earn a fair return on their investments)

Who can purchase electricity at the RRO prices?

The RRO available to customers who consume less than 25 MWh of electricity per year. This is equivalent to 25 000 kWh, which more than covers what the average Albertan residential customer consumes in a year. All residents as well as some small businesses and farms are eligible to purchase electricity at the RRO rate. Ineligible customers must either pay an unregulated rate from their local distributor, or sign a contract for their electricity.

The average household in Alberta consumes approximately 7 200 kWh electricity per year

RRO Providers in Alberta

The AUC regulates the rates offered by regulated rate providers, which in most cases is the local distribution company. Some areas are serviced by REA or their local municipal council, and may not have a regulated rate provider for their area. Contact your local wires services provider for more information.

How is the RRO Calculated?

RRO prices are intended to cover the costs of purchasing electricity supply and of providing the electricity supply service (billing and other administrative costs). The AUC approves of the RRO rates set by Enmax, Epcor, and Direct Energy Regulated Services. These RRO providers must submit an electricity price setting plan (EPSP) that describes how electricity will be procured and how the price to the consumer will be established. This procurement plan must have been approved by the AUC, and must have been established through negotiation with consumer representatives. These consumer representatives are usually industry associations, consumer groups or the Utilities Consumer Advocate (UCA).

RRO rates are based on estimates of future prices and consumption volumes. The AUC requires RRO providers to use prices for electricity during a window of 45 to five days before the consumption month. RRO prices are therefore based on estimated, and not actual electricity supply prices. Unlike is the case for transmission and distribution price setting plans, RRO providers cannot recover any differences between estimated and actual costs after their costs have been approved by the AUC. Because the RRO is based on estimated, and not actual, electricity prices and consumption, it also includes a risk margin. This risk margin is known as an "adder". These are approved by the AUC.

The 2005 Regulated Rate Option Regulation states that Energy Price Setting Plans "must, with a reasonable degree of transparency, use a fair, efficient and openly competitive acquisition process to ensure that the resulting prices for the supply of electric energy are just, reasonable and electricity market based". RRO prices must be submitted to the AUC no later than five days before the beginning of the new month, and are posted on the first day of each month, once the AUC has verified their accuracy and completeness. Prices are fixed for the month, but vary between months. RRO providers use forecasted prices within the following 45 days to estimate their projected costs of buying their required energy. They will then purchase their energy during this time frame, using the procurement mechanism that they indicated in their EPSP. Regulated rate providers use slightly different purchasing mechanisms; EPCOR has been purchasing electricity to match its load forecasts on Natural Gas Exchange auctions, whereas ENMAX and DERS have been purchasing electricity on forward markets based on the recommendation of an independent advisor. In spite of different procurement methods, RRO prices amongst the three regulated rate providers have been quite similar.

Is the RRO the best option for my electricity supply?

That the RRO is intended to closely reflect market prices for electricity has both advantages and disadvantages. On the one hand there is a clear interest in paying market prices when they are low. However, as it is adjusted on a monthly basis, the RRO does not protect you from market volatility, and therefore the costs of your energy supply can be unpredictable. It also does not protect you from dramatic price spikes, like the one that occurred during the winter of 2011-12, or more recently in May 2014, when prices rose by approximately 4¢/kWh in a month. High volatility and the risk of price spikes make it difficult for monthly budgeting, and may be difficult to manage for some households.

Competitive retailers can offer a greater variety of product and payment options, including fixed price contracts, floating price contracts, and the option to combine electricity and natural gas on one bill. Some competitive retailers also offer green energy options, which may be more desirable to you. Alberta's current energy mix is heavily dependent on fossil fuels, and RRO providers do not (and are not obligated to) follow any particular standards for purchasing green energy. 

Furthermore, keep in mind that "regulated" does not automatically mean "cheapest". While regulated rate providers' rates and terms of service are approved by the AUC, this does not necessarily mean that they are the cheapest on the market. Regulated rate companies are allowed a certain risk margin and a rate of return that is considered "reasonable". Smaller competitive companies may be able to offer electricity at lower overhead costs, and may therefore offer lower administration fees. They are also not bound by the same obligations for purchasing their electricity, which may work out to lower rates. Find out more about comparing energy suppliers.

Learn more about the cost of electricity in Alberta
Learn about fixed rates for electricity in Alberta