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.