February 26, 2024

Alberta Electricity Rates & Prices

Many homes and businesses in Alberta depend on electricity for heating, hot water, cooking and so on. But do you know how rates are determined or the difference between a competitive retailer and the regulated rate option?

Alberta Electricity Rates & Prices

Many homes and businesses in Alberta depend on electricity for heating, hot water, cooking and so on. But do you know how rates are determined or the difference between a competitive retailer and the regulated rate option?

Alberta Electricity Rates & Prices

Home and business owners in Alberta often have questions about their electricity bills. How are electricity prices set? Who sets electricity prices? How can you find the best electricity prices for your home or business?

You’ll find everything you need to know about how electricity rates and prices are determined in Alberta below.

How Are Energy Rates Determined?

Let’s start by looking at how the electricity rates you’re paying are calculated.

Electricity is measured by kilowatt per hour (kWh) and you’re charged a kWh price that’s multiplied by the amount of electricity you use.

As a guideline, one kWh is the amount of energy that 1,000 watts consume in an hour.

A 100-watt light bulb, for example, uses one kWh every 10 hours. If you’re paying 4c/kWh, that light bulb is costing you 4 cents for every 10 hours that it’s on.

The average home in Alberta uses 7,200 kWh of electricity a year, although monthly consumption varies depending on the season. However, two households with the same level of consumption can still have vastly different bills.

How can that be?

Competitive retail rates vs regulated rates

Households and businesses in Alberta have had access to retailer-provided electricity since 2001 when the process of deregulation, which began in 1996, started gaining steam.

Now, there are essentially two ways to be billed for the electricity you use in Alberta:

1. Regulated rates

The Regulated Rate Option (RRO)  is the default option for anyone who hasn’t chosen a retailer. Designed to serve as a safety net for people who don’t qualify for a competitive option, the RRO rate fluctuates every month. Regulated Rates are approved by the Alberta Utilities Commission and vary by service area.  RRO customers are exposed to all pricing fluctuations, affected by market conditions, the current economy and more.  

In 2017, a Regulated Rate Cap of 6.8 ¢/kWh was introduced, but it was removed in 2019. The cost to subsidize the cap was enormous. Even though competitive options were available well below the capped rate were readily available, subsidizing the rate cap cost Albertans nearly $100 million to discount the rate.

2. Competitive retail rates

These are based on the current prices offered by retailer energy providers and give you more flexibility in choosing an energy plan. Most retailers give you the option to choose between paying a guaranteed rate (sometimes called a fixed rate), a variable rate (sometimes called a floating rate) with a built-in retail markup price added.

Did you know?

ATCOenergy is the only retailer in the province to also offer the ATCO Advantage Rate plan, letting you unlock a wholesale rate with no additional retail markup.

What's the RRO?

Electricity is traded as a commodity.  By default, Albertans have the choice to receive regulated retailer rates approved by the Alberta Utilities Commission or choose a competitive retailer, like ATCOenergy.

The Alberta Utilities Commission (AUC) is an independent, non-governmental commission.

The Regulated Rate Option (RRO) is the “supplier of last resort” and is primarily designed as a safety net for those who don’t qualify for a competitive option. If someone is unable to meet the credit requirements to enroll or remain with a supplier, this option makes sure they’re still able to receive a power supply.

Regulated RRO providers are required to file a monthly application to the AUC to determine their electricity rate in compliance with the approved energy price-setting plan. This is determined based on price projections for the month ahead.  

In simple terms, monthly RRO rates are determined in advance, and your electricity bill may fluctuate from one month to another.

Today, many customers prefer the freedom and flexibility offered by competitive retailers. As an energy customer, you have access to promotions, a choice between guaranteed, variable and wholesale rates along with the choice of selecting green energy options.

If you don’t sign up with a competitive electricity retailer, you’ll automatically get electricity from the default regulated company in your region, but there are better options out there.

Competitive retail rates

With competitive retail rate options, you have the freedom and ability to shop around in a deregulated market. Some of the choices offered by competitive retailers are extremely attractive.  

You can choose an electricity provider and plan that works specifically for your own energy use in your home or business.

At ATCOenergy, we offer energy plans tailored to homes and businesses. These plans come with lots of choice and flexibility, and you're free to switch, cancel or change plans anytime

For homeowners, guaranteed and wholesale market electricity rates give you freedom and control over your electricity plan choices.

Businesses can choose between guaranteed and variable rates, and have access to local business energy experts.  

Guaranteed Rate (or Fixed Rate)

A guaranteed rate is a stable rate option that gives you predictability for the term of your plan. When the market fluctuates, your price per kWh remains constant.

For every kWh of electricity you use, the guaranteed price is an all-in rate that your consumption will be based on. Because your consumption will vary from month to month, your energy charge will vary, but the price you pay for each kWh won’t.

The guaranteed rate is ideal for customers looking to minimize volatility in their energy charges from month to month.

Variable Rate (or Floating Rate)

A Variable Rate is a more flexible rate option in which you are not bound to a set price.

The price of electricity on the market fluctuates throughout the day and appears on your bill as a weighted monthly average. The variable rate option follows these market prices, and a retail markup is added on to every kWh consumed.

Fluctuations to variable rate prices can be influenced by weather, spikes in demand or disruptions to generation. However, the variable price is an option for customers who are willing to take risks and are comfortable with the unpredictable nature of the market.

Wholesale Market Electricity Rate

In 2020, ATCOenergy introduced another option: the Wholesale Market Rate.

Similar to a variable rate, this option fluctuates with market prices. However, instead of the retail markup typically added to variable rates, the ATCO Advantage Plan lets residential customers pay Alberta's wholesale energy price. Instead of a markup on every kWh consumed, a flat daily fee gives you access to the same wholesale prices a retailer pays.

The Wholesale Market Rate option is suited to customers that are willing to experience occasional, typically seasonal spikes, in exchange for lower rates over time.

Why is the RRO less than ideal?

Since the RRO is the default option, it gives you less control over your plan. The RRO doesn’t come with the perks, flexibility, or rate choices of a retail plan.  

The RRO rate is set monthly and that’s what you pay. If there’s anything we’ve learned recently, it’s that volatility isn’t much fun. Market prices have shifted drastically in recent months, meaning major events could drastically impact rates without warning.

Take control of your bill. There's no time to wait. Switch today.

What is the Difference Between Competitive Retailers and Regulated Rate Option (RRO)?

As you already know, competitive retailers offer deregulated rate options including a variable (floating) rate and a guaranteed (fixed) rate, while the RRO is a regulated option.

The RRO rate can rise or fall from month to month, depending on prevailing market conditions.

Guaranteed vs. Variable vs. Wholesale Rates

Think of interest rates for mortgages when buying a house.

Some people prefer the safety of knowing how much their payments will be each month for years ahead while others prefer to pay a flexible, variable rate based on market conditions.

Those who prefer a variable rate will select from a range of options offered by a broker or directly with the bank. Many of these same mortgage providers will also offer a fixed rate option.

Buying a home is such a major investment that even minor fluctuations in interest rates can impact the monthly layout on the mortgage – thousands and thousands of dollars over the course of a few years.

As a general rule, when the interest rates start to fall, variable rates are more attractive and when they start to rise, fixed rates become more attractive.

Just like your mortgage, guaranteed rates stay the same no matter how high or how low market rates go.

Variable rates, on the other hand, follow market prices along with built-in markup for every bit of electricity used.

Wholesale rates also follow market prices, but without the built-in markup. A flat daily fee replaces some of the uncertainty associated with typical variable rate plans.

When assessing which is best for your home, it helps to analyze not only current energy rates but also the historical averages and electricity rate trends in Alberta.

What are the other costs besides electricity (kWh) usage on your bill?

To receive electricity to your premises, you need a distributor and a retailer.

Both technically and legally, these companies must be separated. Even though the same parent company can provide both (e.g., ATCOenergy and ATCO Gas), there is a “firewall” between regulated and deregulated services. This is to protect the customer by making sure all distributors treat Albertans equally, no matter who they choose as their retailer.

However, you will receive one bill from the retailer that also includes fees and charges from your distributor.

While your electricity usage in kWh and your rate determine part of your electricity bill, it is not the major component on most bills.

The usage costs largely compensate the retailer, but other charges are flow-through charges remitted to the companies that generate and deliver the energy to your home.

These charges mainly cover the installation, operation, and maintenance of the infrastructure used to transmit and deliver energy to your home.

So, other charges apart from the actual electricity usage appearing on your bill may include:

  • Transmission charges (quarterly transmission riders that may be credits or charges)
  • Distribution/delivery charges
  • Local access fees
  • Balancing pool riders  
  • Transmission access rider

Various other charges, such as a Rural Electrification Association (REA) charge, may appear on your bill if you choose the RRO option.

Understanding distribution and transmission charges

You already know that the more electricity you use, the higher your bill. But the AUC estimates that only 19-35 percent of the average bill is energy usage.

As well as the cost of usage, your bill comprises the additional components detailed above. The major items involve the costs of generating and transporting electricity across the province.

So, the distribution charge will make up between 24 and 52 percent of the total average bill and the transmission charge will comprise 13-23 percent of the total.

Distribution charges cover the costs incurred by the distribution company that delivers electricity from the transmission system to your home using poles, wires, etc.

Costs cover three main elements of the distribution system:

  • Building the system
  • Operating the system
  • Maintaining the system

Your bill includes a fixed fee, based on the number of days in the billing period, plus a variable component that is based on your energy usage.

Think of the fixed component as the “price of entry” that everybody pays to the grid. If you receive electricity from it and your power flows through it, whether you use it or not, you need to pay it.

So, if you go on holiday and only use a tiny amount of electricity in a particular month, you’ll still have a distribution charge included on your monthly bill. Because you used less electricity for the billing period, though, the variable charges would be lower.

The transmission charge covers the costs of planning Alberta’s transmission grid and transporting electricity via the grid from where it is generated to the distribution system.

These charges vary according to usage for homeowners and, for businesses in Alberta, the transmission charge becomes a little more complex.

Note that your payments include maintenance and upgrades of the grid. The transmission component of your bill may increase as this helps to protect the continuous and efficient supply of electricity to your premises wherever you are in Alberta.

How can you compare electricity rates in Alberta?

The Utilities Consumer Advocate website is a good resource for Albertans who want to find out more about the electricity rates, and it includes a cost comparison tool. The website www.energyrates.ca also provides a comprehensive comparison tool. You’ll notice that retail rates are highly competitive, and rates often differ by only a fraction of a cent. So you’ll also want to consider things like administration fees, customer service and whether or not it’s a local company investing in Alberta’s communities.

What are your options with ATCOenergy?

ATCOenergy provides guaranteed rate and market rate plans for electricity customers.

The guaranteed rate is provided via plans that range from one to three years in length. You’re typically rewarded with a lower rate for signing up for the longer plans, even though you’re not locked in and can change your mind any time.

A guaranteed rate helps you predict your bills over the next 12, 24, or 36 months due to the stable rate offered.

The ATCO Advantage Plan is a market rate plan that provides more flexibility.

This option allows you to tap into wholesale pricing with no retail markups or monthly administration fees—just a flat, predictable daily fee.

There may be spikes over time, especially during the winter. However, with this option, when rates are low, your bill will be lower and during the course of the year, wholesale rates tend to be the better value.

Bear in mind that whether you opt for a longer guaranteed term or the ATCO Advantage Rate, you're never locked in to your plan. It’s flexible and you are not bound by long-term commitments so you can switch anytime.

Our rates and term lengths are our guarantees to you, but you're free to change your plan anytime.

Not sure what to choose? We can help

We’ll walk you through the options to build your perfect plan.