Learn about the rates that are on your utility bill, what they mean and how they are determined.
It is important to us that you understand the items on your bill. This section lists the terms used on your utility bill and outlines how rates are set.
A retailer provides billing and customer service to consumers and purchases electricity and natural gas to meet the needs of its customers. In Alberta, consumers can choose a competitive retail service provider, where they sign a contract agreeing to a set price structure for the commodity and other retailer charges. If a competitive retailer is not chosen, consumers with active services will automatically bill with the "default" retailer, which is regulated by the Alberta Utilities Commission. With default retailers/suppliers, the commodity charge will fluctuate monthly based on prices derived from the supply and demand of the commodity in Alberta's electricity or gas market.
The Utilities Consumer Advocate has information on its website on default retailers and available competitive retailers, and rate comparisons.
Commodity or energy charges
This is the charge for the actual amount of electricity or natural gas used in the billing period. It is a pass-through of costs associated with procuring the electricity or natural gas from the open competitive marketplace.
Current commodity rates
This charge recovers the retailer's costs associated with providing billing and customer service to its customers. This charge is not dependant on the amount of energy consumed. It is generally either a flat rate per day in the billing period or a flat rate per month.
Distribution companies own the distribution systems that deliver electricity and natural gas directly to customer homes within their designated service areas. Service areas, in most cases, are determined through an agreement with a municipality. While consumers can choose their retailer, they cannot choose their distributor. The distribution service provider in your area is identified on your bill, or you can review this electric distribution service provider map and gas distribution company map to give you an idea of the service areas in Alberta.
Distribution or delivery charges
Distributors are responsible for things such as connecting and disconnecting customers, building new services, operating and maintaining the distribution systems and information systems, and providing meter-reading services. The costs incurred by the distributor to provide these services are recovered through the distribution or delivery charges on the retailer's bill. Distribution charges are fully regulated by the AUC through performance-based regulation.
Generally distribution charges are based on a combination of the number of days in the billing cycle (fixed charge) and the amount of energy consumed (variable charge). The fixed charge reflects the cost of ensuring the distribution infrastructure is in place to deliver the energy commodity. Fixed charges – and the expenses they are based on - arise whether energy is consumed or not. They reflect the costs of ensuring electricity or natural gas can be consumed at the site. The variable charge is dependent on consumption and increases as usage rises. This reflects that greater use produces higher costs of operations, and greater wear and tear on the system.
For electricity transmission in Alberta, the Alberta Electric System Operator (AESO) is the province's independent system operator, or ISO, and it oversee Alberta's system. Transmission facility owners build, operate and maintain the grid, and recover their costs by charging for access to it through their tariffs. Transmission facility owners file applications with the AUC for approval of their transmission tariffs. Once a tariff is approved after scrutiny by the AUC in an evidence-based, quasi-judicial proceeding, the AESO pays the full amount of the transmission facility owner's tariff in equal monthly instalments to the transmission facility owner. The AESO then designs a single provincial tariff, called the ISO tariff, to recover the costs it incurs in planning, maintaining and operating Alberta's electricity transmission system. The provincial tariff covers the AESO's payments to transmission facility owners, costs associated with transmission losses, system support services (such as operating reserves) and administrative costs. The ISO tariff is reviewed and approved by the AUC in a public proceeding.
The ISO tariff is then charged to electric distribution companies. The distribution company will determine how to recover the ISO tariff from their customer base through a cost-of-service model. This basically means there are different rates for different rate classes, depending on each rate class' consumption and use of the system. For example, a large commercial customer would have a higher contribution to the distribution company's transmission cost recovery than a residential customer.
Natural gas pipeline transmission costs are recovered directly from producers, industrial customers and distribution utilities. Distribution utilities then pass these costs on directly to their customer in their distribution rates.
Rate riders can be either a credit (refund) or debit (charge). It is a charge or credit approved by the Alberta Utilities Commission temporarily added to utility bills to enable utilities to recover or refund actual costs that were not included standard rates. Rate riders currently in effect can be seen on the electricity rates page and natural gas rates page.
Municipal franchise fee or local access fee
Municipalities charge the utility a franchise fee for the exclusive right to deliver utilities in the municipality. The municipality is largely responsible for establishing the level of the fee through an agreement with the distribution utility. The agreement may also grant the right for the utility to use the municipality's property for construction, operation and extension of the public utility. The municipality may also choose to charge the utility linear taxes for the right to use the municipality's property for these purposes.
Distribution companies are able to recover these costs from their ratepayers as it is considered a cost of doing business. This fee is billed to customers and collected by the retail service provider. The total of the franchise fee and linear taxes is what is billed for the franchise fee or local access fee.
Balancing Pool allocation (electricity only)
This can be either be a credit or a charge on the bill and is based on consumption of electricity. Under provisions set out in the Electric Utilities Act, the Balancing Pool has an obligation to ensure that any net amount in the Balancing Pool accounts that is greater or less than zero is included in the Alberta Electric System Operator's (AESO) tariff. Therefore, each year the Balancing Pool is required to forecast its revenues and expenses to determine any excess or shortfall of funds. Based on this forecast, the Balancing Pool determines an annualized amount that will be paid or "allocated" to electricity consumers (in the case of an excess of funds) or collected from or "charged" to electricity consumers (in the case of a shortfall of funds) over the year in accordance with the Balancing Pool Regulation.
Provincial carbon levy (natural gas only)
The carbon levy was implemented by the government of Alberta on January 1, 2017. The rate is $1.011 per gigajoule, which will rise to $1.517 per gigajoule on January 1, 2018. The carbon levy is a key feature of Alberta's Climate Leadership Plan and is applied to all fuels that emit greenhouse gas emissions when combusted. Learn more about the carbon levy and the government's Climate Leadership Plan at climate.alberta.ca or call 1-888-279-2422.