Atco Seeks Fluctuating Rate Permission

"We think the timing is very good right now," said Jim Beckett, Atco executive vice-president of regulatory matters. Electricity supply is adequate, prices are low and customers are ready to make choices on electricity.

Atco would be the first Alberta utility to eliminate an annual regulated rate option or RRO. Atco has 160,000 customers east and north of Edmonton.

The RRO system provides security of price over a longer period, Beckett says. But, he adds, "You always pay more by locking in price certainty." Monthly rates would fluctuate in line with wholesale Power Pool prices. That might make it easier for competitors to offer deregulated retail options, such as long-term, fixed-rate contracts, Beckett said.

Atco decided three years ago it would not compete in the deregulated retail marketplace. Instead, it would "focus on pipes and wires and let others find the retail solutions," Beckett said.

Atco's application appeared to receive support in an Aug. 28 letter by Alberta Energy's electricity branch executive director, Larry Charach, who wrote, "We support having the market provide access for residential and small commercial customers to the pool price."

But several institutional groups have withheld approval of Atco's proposal, making public hearings before an EUB panel a near certainty.

Municipalities, for example, need predictable energy bills to produce stable budgets, said Leduc Mayor George Rogers, president of the Alberta Urban Municipalities Association.

The association will intervene in the hearings but has not yet settled on a response.

Edmonton-owned Epcor Inc. will not follow Atco's lead, said Guy Bridgeman, senior vice-president of the Epcor Energy division.

The company will continue to set regulated rates annually, with occasional readjustments. Epcor also offers five- and three-year fixed-rate deregulated contracts, including in the Atco region.

"The RRO was designed as a transition instrument while customers learned about a developing (electricity) market," Bridgeman said. "It was felt it wasn't appropriate to throw customers out on the open spot price market right from day one."

Epcor has 650,000 customers in Edmonton and the surrounding area previously served by TransAlta Utilities.

The average wholesale price this year has been 3.8 cents per kilowatt-hour, compared to 7.1 cents in 2001 and 13.3 cents in 2000.

"The risk of high electricity prices in 2003 is low due to the current supply/demand position of the province," Atco argued in its application. "(Atco) will not enter into any fixed price hedges in 2003 and beyond."

Atco is requesting a decision from the EUB on the new rate system by the end of the year. But EUB spokesman Bob Curran said the board has not yet struck a panel to hold hearings, and the body often takes 90 days to deliberate.