Choosing an Energy Supplier
Albertans have been able to choose who supplies their electricity and gas since 2001. But how can you decide whether your electricity or gas supplier is right for you? Our guide will give you some ideas of things to think about when choosing your energy supplier.
A Brief Explanation of Alberta's Energy Markets
In Alberta, the electricity and gas markets have deregulated at the generation/production stage and at the retail stage of the energy delivery system. What this means is that Albertans can choose a supplier that will purchase energy on their behalf, and sell it to them at a competitive price. Due to the economies of scale involved, electricity and natural gas delivery systems (transmission and distribution) remain natural monopolies and their services are regulated. Energy retailers are responsible for billing and customer support, and are usuallly the first point of contact for the consumer.
Before Alberta electricity and natural gas markets were deregulated, the historic vertically-integrated utilities were responsible for most (if not all) stages of the energy system. They were required to separate (and in some cases chose to sell off) their activities when Alberta's energy markets opened to competition. As part of the transition towards market competition, electricity and gas distribution companies were given the right to sell energy at regulated rates to customers who did not choose to purchase an energy contract. This default rate program has been extended and is now known as the Regulated Rate Option (RRO) for electricity, or the Gas Flow Through Rate (GFTR) or the Gas Cost Recovery Rate (GCRR).
What the Regulated Rates Offer
Approximately 60% of consumers in Alberta continue to purchase energy at the regulated rate. Regulated rate providers offer:
- The convenience of a rate that reflects market prices, which is advantageous when market prices for are low
- Less paperwork: as customers do not have to sign a contract for purchasing regulated rate energy, sticking with the regulated rate provider means less paperwork and no need to make decisions about things like contract type, length, and renewal
- Security: knowing that these prices are approved by an independent third party (the AUC), offers peace of mind that rates are reasonable and fair
- Familiarity: the regulated rate providers are often also the local distribution company, and have a history (often a long one at that) of providing service in the area.
What Competitive Price Companies Offer
On the other hand, competitive price companies offer
- A wide range of choice for rates, payment options, and energy sources
- Some energy retailers offer special rates for certain groups of customers, such as discounts for seniors or charities
- Possibility for savings, with lower overhead costs and different energy procurement policies
- Convenience: different terms and conditions of service that may be more convenient for you (many competitive price companies do not require a security deposit, for example). Some competitive price companies offer dual fuel programs, which allows you to see all of your energy costs on one bill
- The possibility to support local businesses: many smaller boutique competitive energy companies are founded and operated by Albertans
Why Should I Choose A Competitive Price Company for My Energy?
While the RRO might be considered the "safest" or "easiest" option for purchasing your electricity supply, there are some strong reasons for choosing to purchase your energy from a competitive price company. The variety of choice that competitive price companies offer means that you are very likely to find one that corresponds closely with your needs and/or preferences. Whether its for saving money, for easier budgeting, to support green energy, or to support local businesses, purchasing your energy supply from a competitive price company offers many advantages.
Also, remember that when looking at energy rates, "regulated" is not necessarily synonymous with "cheapest". Regulated rate providers are allowed risk margin and a rate on return that is deemed "reasonable" by the AUC. They also tend to be larger companies with operating costs. Many competitive price companies in Alberta are smaller and may be able to operate with less overhead. Furthermore, while competitive price companies are free to set their own profit margins, they also must be competitive with regulated rate companies in order to survive. They may be able to offer lower administration fees because of this.
Tips for Comparing Energy Contracts and Prices
So you've decided that you would like to switch your energy supplier. What are the sorts of things that you should you take into account when making your decision?
The number one feature that most people are interested in when choosing their energy supplier is how it will affect their bill. Competitive companies generally offer two types of energy pricing contracts: both fixed and variable-prices for electricity and natural gas.
- Fixed Prices: on a fixed price contract you pay the same rate for energy throughout the term of your contract. Fixed price contracts offer protection against energy price volatility, but in order to be sure that you are saving money, we recommend choosing a fixed term contract of at least 24 months Find out more about fixed price contracts.
- Floating Prices: variable prices are based on the wholesale market price for energy plus a small surcharge (usually no more than 1.5 ¢ per kWh). Floating prices are most advantageous when wholesale energy prices are low (learn more about the history of electricity prices and gas prices in Alberta), but do not protect you from price volatility or price spikes. Competitive price companies often use an energy procurement method that is slightly different from the regulated rate providers, and so may be able to offer slightly lower prices than the regulated rates. Find out more about floating price contracts.
When comparing prices, don't forget to look at the administration fees charged by the company. Administration fees are flat costs charged per month (or per day), and usually range from about $6.00 per month to $11.00 per month. Some competitive price companies offer reductions on administration fees for dual fuel contracts. We have put together a comparison of administration fees charged by both regulated rate providers and competitive price companies that you can use to compare.
Terms and Conditions
The Terms and Conditions for the energy contract that you are interested in should be made available to you before you sign a contract (and are important to read before you come to a decision). When looking at the terms and conditions for any contracts, make sure to look out for the following:
Very few energy companies in Alberta charge a fee for setting up a new account, but this is still something to look out for. An activation fee is a one-time charge that covers some of the administrative costs associated with setting up your account.
Early Exit Fees
Some competitive price energy contracts do charge an early exit fee if you opt to end your contract before the end of its term. Others charge no exit fees when you provide enough notice (e.g. 30 days' notice). Regulated rate companies can not charge exit fees when you switch from them to an energy contract, as they are are your default supplier and you are not on a contract with them.
Late Payment Fees and Failed Payment Charges
Energy suppliers have different policies regarding late payment fees, so this is definitely one detail that you want to look out for when comparing energy prices. Some companies charge a one-time late payment charge, whereas others charge a monthly compounding fee. Most energy supply companies will charge late payment fees only to the outstanding amount on the bill, and not on the entire bill (unlike many credit card companies). Energy supply companies will also charge a fee for any failed payment (NSF, bounced cheque), and may start credit actions automatically.
The amount of notice that needs to be provided to make any changes to your energy contract (e.g. moving, ending the contract, changing the name on the contract, etc) varies by supplier, and sometimes by contract type. Make sure how much notice you need to provide your energy supplier and by what means you can contact them (by email, by phone, by mail, etc) should you need to make any changes to your contract. Many energy suppliers do not charge certain fees for changing/ending service when provided with enough notice.
Most regulated rate providers charge a security deposit for service. The government of Alberta has implemented regulation regarding when and how much of a security deposit can be asked for energy supply, and some companies will reduce or waive a security deposit if your credit rating is good enough (find out more about security deposits for energy supply in Alberta). However, not all competitive price companies charge a security deposit for new customers, and many smaller, "boutique" energy retailers offer more attractive rates and interest paid on a security deposit.
Some competitive price companies offer green energy options. The "greenness" of these offers does vary, so if you are interested in purchasing green energy, make sure to do your homework. Learn more about green energy in Alberta.
Customer Reviews and Customer Service
Last, but certainly not least, is how the company is rated by current (and former) customers. Here a word of warning that it is probably best to take many online reviews with a grain of salt, as most people tend to only post reviews when they are either extremely unhappy or very pleased with their service (with more often it being the case of the former than the latter). That being said, unfortunately some competitive price companies have a history of poor customer reviews, including several cases of questionable business practices. Make sure to do at least a brief check of the history of the energy company you are interested in and how customers have reviewed it, before making any decisions about changing your energy supply.
Regulated rate providers and competitive price companies offer differing levels of customer service. While providing customer support is a fundamental part of the role of a retail energy suppliers, larger companies tend to offer longer hours for reaching their customer support phone lines, which may be more convenient for you. Some companies are highly responsive on social media, while others are barely present. Keep in mind, however, that all emergencies should be directed to 9-1-1 or your energy distribution company, who will always have a 24-hour emergency line.