The deregulation of Alberta’s electricity market was focused on providing consumer choice and
shifting the risk burden of investment from the public to the private sector. However, Alberta’s
deregulated retail market has been distorted by the existence of the Regulated Rate Option (RRO); an
electricity rate plan based on consistent, flat per-kWh pricing. With two-thirds of Albertans remaining on
the RRO - thanks in part to its use as the default rate plan - inefficiencies permeate throughout the
Province’s electricity market.
Under flat rate pricing schemes, price signals from the market are not delivered to consumers,
and consumers do not adjust consumption even when its marginal cost far outweighs the price they pay.
This exacerbates periods of limited supply and results in higher overall pool prices. The effect on the
profile of daily demand - known as the load curve - is larger “peaks” in demand, where prices are
highest. Eliminating or reducing these peaks could result in lower overall pool prices, enhanced system
reliability, lower emissions, fewer public investments in infrastructure, and fewer abuses of market
power. Even small reductions in load can translate to large reductions in the pool price, as the pool price
increases exponentially in reaction to a linear increase in load.