Alberta is anticipating a problem it begat with yet another problem.
Having implemented policies that assure Albertans of rising electricity costs, the provincial government now wants to cap rates of electricity from retailers governed by the Alberta Utilities Commission.
The move is politically expedient and economically foolish.
But it at least shows the New Democratic Party recognizes a political storm when dark clouds swirl and thunder rumbles.
Addressing climate change, the government has taken steps to phase out coal by 2030, make renewable sources 30% of energy used for power generation by that year, and lower methane emissions from oil and gas work by 45% in 2025.
It thus replaces affordable energy with costlier substitutes and raises the cost of producing natural gas, demand for which must rise as consumption grows of intermittent wind and solar energy.
That’s a formula for higher electricity costs for consumers. Government assurances to the contrary are not credible. Europeans have learned this the hard way.
So the NDP is guarding its political perimeter. Because it answered pressure to do something about climate change, it now feels compelled to do something about the looming hike in electricity prices.
But it’s finessing the reason. Instead of acknowledging its preparation for price jumps of its own making, the government blames a convenient demon, price volatility.
“This cap would help mike life more affordable by ensuring Albertans aren’t burdened with price volatility as we transition to a cleaner electricity grid and a more-stable electricity market,” explains Margaret McCuaig-Boyd, minister of energy.
So the government will try to keep rates below 6.8¢/kw-hr for 4 years “through a variety of market and other tools, including the transition to a capacity electricity market.”
In the past 6 years, the price range has been 2.7-15.3¢/kw-hr.
According to economic theory and history, limiting something’s price suppresses its supply.
With electricity, experience shows most consumers prefer changeable price to undependable supply. Most voters, meanwhile, know whom to blame for brownouts.
(From the subscription area of www.ogj.com, posted May 26, 2017; author’s e-mail: [email protected])