Electricity Deregulation

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Electricity Deregulation

• by John Davies
• Alberta Council on Aging
• Annual General Meeting
• May 28, 2001
• Calgary, Alberta

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Why Me ?

• Large electricity user (Lethbridge Iron Works Co.
  Ltd.)
• IASA (Industrial Association of Southern
  Alberta)
• IPCCAA (Industrial Power Consumers and
  Cogenerators Association of Alberta)
• Member of 6 committees today

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AlbertaElectricity Prices
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Alberta Electricity Consumption
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IASA MembersElectricity Costs
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Electricity CostsWithout Rebate
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Regulation vs. Deregulation

• Estimated costs under regulation(source Drazen
  Consulting)
• Year to date 11.5 /kWh

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Impact onBusiness

• Uncertainty
• Lack of choice (no competition)
• High electricity costs
• Costs to cope with deregulation
• Not competitive

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Lethbridge Iron Works

• Changed to night shift
• Unable to find a suitable contract
• Uncertainty
• Costs up 57 (with rebates, conservation and
  night shift!)
• Ability to compete jeopardized

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Impact onHouseholders

• Currently shielded (protected) to a certain
  degree
• Pay the piper next year ?
• Outrageous retail charges and MCAF
• Increased costs everywhere
• Car wash
• Retail
• Food

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Utility Bills Are Just One Way People Pay for
Energy Crisis

• Los Angeles Times article May 7th
• dry-cleaner
• Restaurant
• hair salon
• Gym
• Hotels (3.00 surcharge)
• San Diego Zoo (1.50 surcharge)
• Milk (producers applied for increase)
• Estimated inflationary costs of 300 per
  household (750 including direct costs of
  electricity and gas)

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Impact on theAlberta Advantage

• Reduced wages benefits, increased layoffs
• Curtailed expansion plans in Alberta
• Transfer of wealth, NOT creation of wealth
  sucking sound
• Halt to diversification

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The Future ?

• Deferral Accounts (2000 2001) of more than 700
  million
• No retail competition (2 dominant players in a
  very small market)
• Increased profits for an increased number of
  players
• Consumers are the big losers

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Quotation 1no road map

• There is no road map for this process - but we
  are committed to making the transition to a
  competitive market a smooth one. And one that
  happens in the best interests of all Albertans
  (Minister Cardinal, October 11, 2000)

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Quotation 2new supply

• Uncertainty associated with the original Electric
  Utilities Act, as to the ultimate deregulated
  industry structure and the staged-in approach to
  deregulation in Alberta caused to some degree
  reluctance to invest in new supply (Market
  Surveillance Administrator, October 13, 2000)

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Quotation 3pay more

• If the auction had generated an unrealistic
  amount like 4 billion, Albertans would have had
  to pay more in electricity rates to allow the
  bidders to recover their investment (Mike
  Cardinal, August 24, 2000)

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Quotation 4competitive electricity prices

• Introduce industry structure and regulatory
  reforms that preserve and enhance the Alberta
  advantage of competitive electricity prices
  (Government of Alberta publication Moving to
  Competition - A Guide to Albertas New Electric
  Industry Structure)

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Thank You !

• For more information, visit
  www.iasa.ca
• Questions ?