- Firms brace for few electricity options

Alberta's small business community should "brace itself" for the possibility of higher electricity costs and a lack of options for purchasing power once the province's long-standing regulated electricity rate is removed, say industry groups.

Beginning Jan. 1, thousands of firms -- including corner stores, dry cleaners, small offices and industrial companies -- will buy their electricity in an open market, a move the province says will offer commercial users more flexibility and lower prices under deregulation.

However, the Canadian Federation of Independent Business is leery of the plan, arguing that under deregulation, which took effect Jan. 1, 2001, the Alberta government has failed to provide the competitive market needed to ensure companies have sufficient choice.

"I would describe the whole thing as a big mess," says Dan Kelly, the CFIB's Alberta vice-president.

"The reality is, there are very few companies prepared to offer power to small businesses," says Kelly, who represents 9,000 business owners in the province. "It's ridiculous to suggest otherwise."

Under the new plan, small-and medium-sized firms that consume less than 250,000 kilowatt-hours of electricity a year are required to sign a fixed contract with an electricity supplier, or buy power on a fluctuating rate.

The so-called regulated rate option -- introduced in 2000 to shield small businesses from unstable market prices -- will cease to exist for business owners and operators but remain in place temporarily for residential clients.

In recent days, both the province and the power industry have mailed a brochure to more than 100,000 Alberta businesses explaining the changes in a bid to minimize confusion.

"We're trying to give the independent business person the same sort of electrical leverage as a big company," says Minister of Energy Murray Smith. "They can use the Power Pool, which is representative of purchases and sales in Alberta, and they can also take advantage of contracts," he says.

One of the reasons behind the province's move to deregulation was an attempt to bolster Alberta's electricity supply by encouraging investment in power plants to avoid the threat of blackouts.

Since then, Alberta's power supply has grown by more than 30 per cent.

"If you're a restaurateur or grocery store owner without electricity for four or five days, you have lost all of your refrigerated stock. Power reliability is critical," Smith says.

A quarter of all small-to-medium sized commercial power users in Alberta have already opted to sign electricity contracts, he says.

But according to Kelly, the majority of CFIB members are "incredibly unprepared" to deal with a new deregulated environment -- one, he claims, that lacks a choice of retail suppliers.

In a blow to competition in Alberta's electricity and natural gas market, Epcor Utilities Inc. announced in August it will no longer offer utility contracts to homes, farms and smaller commercial customers -- a move that leaves such business owners with one less provider.

The Edmonton-based company -- a chief competitor of Calgary's municipally owned utility Enmax -- said the residential and small-business side of Alberta's deregulated electricity market failed to provide strong enough potential for profits or growth.

Epcor will continue selling power contracts to large industrial electricity consumers, such as factories, shopping malls and office towers.

Only 95,000 Albertans bought electricity contracts with Epcor, a fraction of the 600,000 Epcor customers who asked to remain on government-regulated rates. Those existing contracts will be honoured until they expire.

Direct Energy, a subsidiary of British-based Centrica PLC, is poised to enter the utility market, but has not begun selling contracts.

Another new entrant, IQ2 Power, has a licence to supply electricity to all customer segments but the company says it typically sells in bulk to larger industry associations, such as the Alberta Cattle Feeders.

"We don't door knock," says company vice-president Tom Dechert. "Our strategy is to go to the market on behalf of aggregated groups because it makes the numbers interesting for us."

That leaves Enmax as Alberta's only large retail power provider offering contracts to the majority of small firms, said Kelly.

"We may have moved to a deregulated environment, but we certainly don't have competition by any stretch of the imagination."

Chris Spearman, chairman of the Industrial Association of Southern Alberta (IASA), fears fluctuating energy prices could force some companies to delay expansion plans, or worse, shut down.

"It's going to limit people's willingness to take a risk," he says. "Energy bills are a regular operating cost of doing business, and if you expand, those costs are going to go up."

John Davies, an outspoken critic of deregulation and a member of the IASA, says electricity costs have skyrocketed 60 per cent at his family-run company.

"It's important for small businesses to understand their options, and if they sign a contract, know what it means," says Davies, vice-president of Lethbridge Ironworks. "Read the fine print, and understand the obligations."

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Electricity Currents

Source: The Canadian Federation of Independent Business, March 2003

- One-quarter of Alberta small businesses say electricity costs are a "major expense"

- Less than one-third of business owners believe they have enough information to manage their electricity bills

- Forty-four per cent of small businesses -- particularly in rural areas -- are dissatisfied with their current electricity arrangement

- Dissatisfaction is highest in the manufacturing, construction, agriculture and retail sectors