A Review of Alberta's Default Rate for Electricity

Abstract

This paper is an analysis of the costs and benefits of the government’s chosen rate design for the Regulated Rate Option (RRO) post-2006. The historical performance of the monthly forward market price setting used by Alberta’s three major RRO providers is evaluated by way of counter-factual analysis; specifically, its costs and benefits relative to monthly Pool price flow-through price setting are estimated over the course of the “New” RRO. This analysis indicates that the government’s chosen rate design resulted in a relative cost of approximately $1 billion, with no relative benefits.