Alberta Rates Could Rise 50%

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Calgary, AB. -- Electricity prices in Alberta could jump as much as 50% this summer because of plant outages and constrained power supply in the Pacific Northwest, analysts said Tuesday.

Optimum Energy Management Inc. predicts electricity prices will average C$125 per megawatt hour to C$150/MWh from June to October, compared to a C$100-C$114/MWh average seen since January.

"Demand will be up in the summer because of irrigation and air conditioning loads," said Dale Hildebrand, vice president regulatory affairs. "And because some of the larger baseload plants are down for maintenance, marginal high-cost units are running longer and pushing the price up." Alberta has already seen the effect of 800 to 1,000 megawatts of power going off line because of maintenance in the past month, with peak hour bids shooting up to C$800/MWh.

The increase was startling because electricity prices in Albert have fallen since opening the power market to competition in January, mostly due to a warmer winter and additional generation coming on board.

The provincial balancing pool, which controls 2,000 megawatts of previously regulated but unsold capacity, has also helped keep prices in the C$98-C$110/MWh range by running a 550-MW peaker plant at full power during tight supply times.

But across the Rockies, low reservoir levels threaten to limit hydroelectric generation in the Pacific Northwest and drive prices for existing power even higher.

"We see a lot more risk to the upside," Dennis Lawrence, with FirstEnergy Capital Corp. in Calgary, said. "There is definitely that potential, if a hot, dry summer comes along, for significantly higher prices."

FirstEnergy, an investment dealership dealing with Canadian energy issues, is revising its electricity price scenario for the remainder of the year from a relatively stable outlook to one slightly more volatile.

In April, the company forecast electricity prices would average C$98.85 per megawatt hour during the spring, C$100.85/MWh for the summer and C$104.85/MWh for October to December.

Lawrence said the revision would range from C$10-C$20 less to C$50 above the original forecast, but warned: "It's not in the middle of the range of outcome - there's more probability of it being higher."

Most industries have already hedged their power purchases since deregulation, but smaller businesses that are just weathering the storm now could be in more trouble entering the summer, Optimum Energy's Hildebrand said.

And residential consumers that have been shielded from high electricity prices through a year-long rate freeze are just going to wind up paying the piper another day, he said.

"The government is deferring the pain right now, but the utilities are going to be applying to them to recover the difference between the cost of that power and what the consumer paid at the end of the year."

Utilities will be seeking to recover C$650 million in lost 2000 revenues later this year through rate hikes applicable in the future.