Open Letter to Albertans: Power Producers Respond to Debate about Electricity Industry

CALGARY, Nov. 28, 2011 /CNW/ - We recognize that Alberta's electricity industry is complicated and the benefits are not widely understood. Concerns about our market are compounded with stories about electricity rates, the integrity of the market, and the controversy around planned transmission.

As Alberta's power producers, we'd like to share our perspective on these issues with Albertans.  The Independent Power Producers Society of Alberta includes all of the province's major power producers.  We believe the open market has benefitted Alberta's power consumers and we'd like to explain why.

Alberta has had a competitive power market since 1996; a market in which developers take the risk of building power plants. Developers compete to serve customers and compete to recover costs.  Because of this open market, Alberta's wholesale prices reflect the downward pressure of competition.

In 2011, power prices have averaged $78 per Megawatt Hour (MWH), just 10% above where they were a decade ago.  In that same decade, Calgary housing prices have increased by more than 126%, and crude oil prices have risen from $26 per barrel in 2001 to last week's $100 per barrel.

Alberta's current wholesale price of power is lower than what it costs to build new greenfield coal or wind plants. A market that averages below the replacement cost of its key generation technologies reflects a demonstrably competitive and healthy market for consumers.

Alberta's open market also enables supply to be added more quickly than in a regulated market, as we let the market signal need, instead of a decision by a regulator.  This has helped Alberta meet the fastest growing demand for power in Canada, by far, over the past decade.  For context, we have added over twice the generation capacity of Saskatchewan since 1996.

Furthermore, we have diversified our fuel mix. Natural gas now accounts for 40% of our total capacity and we boast the second largest concentration of wind farms in Canada.  None of these investments are subsidized by Alberta ratepayers or taxpayers, unlike in all other Canadian provinces. 

We have seen the entry of a host of new players, offering competitive supply and choice, serving customers 8760 hours a year.  Consumers of all sizes now have choice in how to manage their electricity costs.  It is important to appreciate that very few consumers pay spot market prices.  Most, including residential customers, pay some form of forward or contracted prices.

Notwithstanding these benefits, our market faces continuing challenges, as we work to build public confidence, invest in sufficient transmission to support future growth, and replace an aging fleet with new supply under the pressure of the fastest growing power demand in Canada.   We welcome an open debate about our industry, the challenges it faces, and where it needs to go.   We hope this will be a debate informed by what the market has achieved. 

Sincerely,

Evan Bahry, Executive Director



SOURCE IPPSA

For further information:

Evan Bahry
evan.bahry@ippsa.com
(403) 282-8811

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