Power Price is Not Market-Based: Joe Anglin
Joe Anglin (Wildrose candidate in Rimbey-Rocky Mountain House-Sundre and a former transmission engineer) had an excellent letter in today’s Sherwood Park News about the problems with Alberta’s electricity market. Here it is:
“How’s that electric bill working for you now?
It’s difficult for most Albertans to decipher the complexities of Alberta’s deregulated electricity system, but it is not difficult to conclude that our so-called market-based electricity system is not working. One only needs to read the bottom line of last month’s electricity bill for confirmation.
Over the last couple of weeks, industry representatives provided testimony to Premier Alison Redford’s Transmission Review Committee hearings. The Alberta Electric Systems Operator (AESO) and other industry representatives praised our market-based system as a shining example of the success of deregulation. I have a question for these representatives: “What market-based system?”
The AESO prices electricity approximately every two hours for Alberta’s wholesale electricity market. Every two hours generators offer to sell their electricity based on market demand. This is how the price is set, and it is called the stacking order. The stacking order is a simple creation of the AESO, and it favours the generators and transmission line companies at the expense of the average consumer.
For example, when the AESO requires 8,000 megawatts (MW) to supply the market for the next two hours, hydroelectric power might offer to provide 4,000 MW of electricity to Alberta’s market for free. Coal generators might offer to sell 3,800 MW for $45 dollars a megawatt. The remaining 200 MW might be provided (bid) to the market by other suppliers for $450 a megawatt. This completes the total 8,000 MW required by the AESO to meet the expected demand.
AESO accepts hydro’s offer first, and then accepts coal’s offer and so on. This is called stacking.
How is this price passed along to the consumer? All the generation suppliers get paid the top rate of $450 a megawatt — regardless of what price they were willing to sell to the market. In this example, as long as demand remains close to the 8,000 MW level for the next two hours, consumers pay the full price.
Alberta’s electricity system is not a market-based system. It is a scam that guarantees the maximum price for the lowest cost electricity.”