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A retailer provides retail services, such as billing and customer service, to consumers. Retailers also obtain electricity and natural gas to meet the needs of their customers through competitive marketplaces.
Albertans may choose to continue receiving their energy from a default retailer (also referred to as the regulated rate provider), that is regulated by the Alberta Utilities Commission, , or they may choose to obtain their energy from a competitive retailer, where they sign a contract agreeing to a set price structure for the commodity with a competitive retailer of their choice. The Alberta Utilities Commission only reviews the rates charged by regulated rate providers and does not regulate the rates of competitive retailers nor have any jurisdiction over the service provided by competitive retailers.
Each distribution company is required to provide default retail service to customers who have not chosen a competitive retailer. Customers do not choose their default retailer; the default retailer is specific to the distribution company’s service area in which they are located. Default retailers will purchase energy and provide billing services to customers that do not sign a contract with a competitive retailer. Default retailers’ rates and terms and conditions of service are fully regulated by the Alberta Utilities Commission.
Distribution companies, also known as wire owners for electricity, own the distribution systems that transport natural gas, electricity and water directly to customer homes. They are responsible for performing all of the necessary work on their system, such as connecting and disconnecting customers, operating and maintaining the distribution systems, building further distribution systems when required, replacing infrastructure when it is past its service life and providing meter reading services.
The costs incurred by the distribution company to provide these services are recovered through their delivery charges, which are billed by the retailer on customer bills. Delivery charges and services remain fully regulated by the AUC.
Distribution companies are considered natural monopolies. The provision of utility service is highly capital intensive in nature as there are high fixed costs associated with the facilities required to get natural gas, electricity and water to end use customers. It is not feasible from either an economic or environmental perspective to build and operate duplicate facilities such as electric transmission and distribution lines or natural gas pipelines that are owned and operated by different utility companies in the same area.
Utilities provide essential public services and are considered to be natural monopolies in the provision of those services. As a result, they are subject to regulation and the Alberta Utilities Commission is considered to act as a surrogate to competition. This regulation ensures that services are provided at a fair price and that service is maintained in accordance with specified standards.
Many customers have noticed the actual energy cost on their utility bills makes up a much smaller percentage of their total when compared to the distribution portion. One of the reasons for this is simply that energy costs are running at levels at or near historic lows and have been for more than two years as of early 2018. Unfortunately, regardless of how low the actual energy charges are, the costs to deliver electricity or natural gas to your home remain constant, or increase as the province-wide transmission system expands and as distribution companies are compelled to replace the ageing assets and expand and reinforce their distribution systems because of the population growth in Alberta. At the same time, distribution infrastructure costs have risen in recent years. In other words, even when your energy consumption is low, the utility still experiences substantial costs associated with making services available to customers. More information can be found in From resource to your home.
How much it costs a distribution company to build, operate and maintain their distribution system depends on how big the system is, is the system’s age, the service area and how many customers are sharing the costs.
A distribution system that serves rural areas will typically cost more to serve than a system that serves urban areas because the distribution company has to build, operate and maintain more poles, wires, and facilities to serve its customers. The number of customers on a distribution system will also impact the cost-per-customer. With more people splitting the costs, it will cost each person less.
Rate riders are a special credit or charge on a customer’s bill in addition to the tariff distribution rates approved by the Alberta Utilities Commission.
Section 45 of the Municipal Government Act grants municipalities the right to enter into a franchise agreement with a chosen utility. Included in the agreement are provisions for the utility to collect linear taxes and often a franchise fee or local access fee on behalf of the municipality. The municipality determines the level of fees.
The linear tax is charged to the utility for the right to use the municipality’s property for the construction, operation and extension of the utility. The franchise fee or local access fee is the charge paid by the utility to the municipality for the exclusive right to provide service in the municipality. Franchise fees and municipal taxes are considered to be a cost of doing business in the municipality, and therefore, these costs are recovered from customers by the retailer.
Linear taxes and franchise fees/local access fees are usually combined together on consumer bills in one line item. They are calculated as a percentage of the distribution company’s delivery tariff.
If the new home owner does not call to set up utility services in their name, the default retailer will pull the land title for the property to determine who should be billed. Often the registration date on land titles can be up to six weeks after the actual date of sale due to delays at Service Alberta. Default retailers base their billing on land titles, however if you contact the retailer to advise of the correct sale date, the billing can often be easily corrected.
If a tenant does not call to set up utility services in their name, the default retailer will pull the land title for the property to determine who is responsible for utility services in accordance with their terms and conditions of service. This is the only method retailers have to determine who is responsible when no other information has been provided to them. To correct the issue, your tenant must contact the retailer to accept responsibility for services, effective the date they moved in. If the tenant is unwilling to accept responsibility, as the property owner you are responsible. Property owners have the option to request services to be disconnected to prompt tenants to call in and get services in their name.
Default retailers also offer vacancy agreements for landlords. This document will tell the retailer to either put billing in the property owner’s name or disconnect services if no one signs up to accept responsibility for utilities. A property owner may still be responsible to pay idle service charges for disconnected services.
If you are a property owner, default retailers are able to pull land titles and put billing into your name without receiving your permission or acceptance of responsibility. Terms and conditions of service for retailers include sections on the property owner’s liability for payment if no other customer is registered for the site. The landlord derives a benefit by having utility services at the rental property to allow the property to be rented. As the landlord receives the benefit, the landlord is liable to pay the continued cost for having these services available for its use and that of its tenants.
This serves to assist default retailers in managing their unbillable revenue amounts. Unbillable revenue arises when there is no customer of record in the utility’s billing system. Default retailers are able to include unbillable revenue amounts in their rates, otherwise all other regulated rate customers would pay for these costs through increased rates. The default retailer is also receiving charges from the distribution company for its fixed costs, that the retailer must pay, and these need to be recovered from the customer.
Budget payment plans are offered by many retailers for customers wanting to have equalized payments throughout the year. Budget plans average your utility costs over a 12 month period so that customers pay they same amount each month. Budget amounts need to be adjusted from time to time to ensure utilities are recouping their costs to provide service. Monthly budget amounts are at the discretion of the retailer and the Alberta Utilities Commission does not have jurisdiction over these amounts. However, increased consumption over or added charges such as the carbon levy are potential reasons for increases to monthly budget amounts.
Utilities are not able to disconnect residential utility services during the following time periods:
Electricity cannot be disconnected from October 15 to April 15.
Natural gas cannot be disconnected from November 1 to April 15.
As well, distribution companies cannot disconnect service at any other time when the temperature is forecast to be below 0 degrees Celsius in the 24-hour period immediately following the proposed disconnection.
Electric utilities often use limiters during the winter if customers are not paying for their services. This is not a full disconnect, but limits the amount of power the customer can use. Typically there is enough power for customers to heat their home and have a few lights on.
If utility infrastructure continues to exist on the property utilities are able to bill for idle service charges. As long as the utility infrastructure exists the distribution company has the right to bill fixed distribution and transmission charges and flow these charges to the default retailer.
To avoid idle service charges customers need to request a salvage of the site, meaning request the utility infrastructure be removed. Consumers should be aware however, if services will be needed in the future and infrastructure replaced, the customer will be responsible for the cost to do so.
Retailers will notify customers when an account is in arrears and will provide an opportunity to resolve any arrears prior to disconnecting services. Your regular statement indicating you are in arrears is considered a form of notice. Notification may also be given via a letter or telephone call indicating that payment has not been received or indicating pending disconnection. If payment arrangements have been made, they are binding, like a contact. If you fail to complete the terms agreed upon, disconnection of service can occur without further notice.
If you think there is an error regarding the amount of metered consumption, you may question your distribution company. They are able to test the meter, however be aware if it is determined the meter is functioning as it should you may be subject to a charge for the meter test. If you are not satisfied with the response from the distributor, they will provide you with further options to have the meter tested.
Distribution companies generally read meters monthly or every second month or at such other intervals that are reasonable and practicable under existing circumstances. When a meter reading is not available for a billing period, distributors are allowed to estimate consumption during that period of time, taking into consideration your historical consumption and seasonality.
Meters that allow distribution companies to obtain meter reads without direct access to the meter are becoming more common in Alberta and have allowed for consistent and accurate meter reads every month for billing.
A smart meter is a meter that records consumption and communicates that information back to the distribution company for billing purposes. Some smart meters also allow two-way communication between the meter and the utility. For example, this functionality allows the utility to disconnect and reconnect the power to your home remotely.
Traditionally, a meter reader visits each meter monthly to obtain a read. With smart meters the distributor no longer needs to access your property to read your meter — your usage information will be transmitted to the distributor remotely instead. This allows for more frequent and accurate meter reading, which results in more accurate billing.
Customers do have the option to opt out of having a smart meter installed at their home. However, there are costs associated with opting out so that the distributor is able to recover the additional costs incurred to maintain a special meter and to manually read the meter.
A typical residential customer uses about 135 gigajoules (GJ) of natural gas in a year. Since gas consumption is so dependent on the temperature, the average usage varies greatly by month, as noted below.
A typical residential customer uses about 7,200 kWh of electricity in a year, which is an average of 600 kWh per month.
The Alberta Utilities Commission approves either standard customer contributions or standard company investments for new service, depending on the utility company and type of service. Due to the number and diversity of requests for new service, the AUC does not approve specific individual costs for new services. However, customers do have recourse with the AUC if they feel quotes for service are unreasonable. The AUC’s can investigate individual complaints received by customers on a case-by-case basis.
Distribution companies, or wire owners, invest in the infrastructure to meet the electricity demands of their commercial and farm rate class customers. Notice is required when there is a change to a customer’s demand and at that time the wire owner can determine if additional funds from the customer are required to implement those requested changes. The wire owners’ terms and conditions of service outline the rules and policies related to changing service levels.
Notice will assist wire owners and the Alberta Electric System Operator in carrying out proper transmission and distribution planning and their associated costs and the rates charged to their customers. Customer fees are often required for the wire owner to recover expected revenue and to recover their investment related to the facilities that have already been built and included as part of the rate
To ensure safe and reliable service, power lines and substations, natural gas pipelines and other utility infrastructure need to be regularly upgraded and rebuilt. This concept is similar to financing a new car. By the time the loan is paid off, you will likely need to buy a new car, or at least finance a major overhaul to keep it in reliable working order.
The rates you are charged are not necessarily specific to the lines in your area which may not have changed in 20 or 30 years. The rates are for the distributor’s whole system and the approved rates are used to operate and maintain the entire system. These rates also include costs unrelated to the infrastructure that are incurred by the distribution company, for example, metering and retail billing services, outage management, rates paid to the Alberta Utilities Commission
The federal government implemented a federal fuel charge in Alberta starting January 1, 2020, under the federal Greenhouse Gas Pollution Pricing Act. Utilities are required to pay this charge to the federal government for natural gas that they deliver to consumers. The charge will be calculated based on volume according to pricing schedules determined by the federal government. The pricing for natural gas, converted to gigajoules, is as follows:
Please visit the Government of Canada web page for more information.
The Alberta Utilities Commission has the responsibility to ensure that the delivery of Alberta’s utility services takes place in a manner that is fair, responsible and in the public interest. Included in this mandate is an obligation to determine the fair rate of return for regulated utilities. It is important to have the right incentives for these businesses so they continue to invest in Alberta’s utility services and infrastructure and provide these important services to Albertans. Part of this includes allowing utility owners (shareholders) to have a reasonable opportunity to receive a fair return on their investment, but this must be balanced against ensuring just and reasonable rates for customers.
Also, each year Alberta’s regulated utilities are required to submit financial and operational reports in accordance with the AUC Rule 005, where the utilities report the actual return earned for the reporting year.
Competitive retailers have to be licensed by Service Alberta under the Fair Trading Act and post a $250,000 bond. They also have to follow a strict code of conduct with respect to the marketing of their services to the core market. If you have questions, further information about licensing requirements of licensed retailers and how to file a complaint is available on the Service Alberta website or by calling the consumer services division toll free at 1-877-427-4088.
The government of Alberta also created the Utilities Consumer Advocate, which can assist customers in resolving issues with competitive retailers. Contact the Utilities Consumer Advocate at 310-4822 or firstname.lastname@example.org for more information.
Customers are able to choose between a regulated default retailer or a competitive retailer. Visit the Utilities Consumer Advocate’s website for more information.