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Insecure Power Supplies in Alberta Boost Private Profits

Business  (tags: energy, non-sustainable, profits, reduced supply, rolling blackouts )

- 2126 days ago -
"Deregulation of Alberta's electricity market has resulted in an incredibly flawed system which actually encourages reduced supply for the sake of increasing profits to power companies."

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Mary Robert (2)
Thursday August 23, 2012, 9:19 pm
Can you spell E-n-r-o-n?

Lynn Squance (235)
Thursday August 23, 2012, 9:29 pm
Four coal fired and 2 gas fired power plants went off-line on the hottest day of the year this year. There were rolling blackouts put in place to accommodate reduced supply. Power to the people? No, but bigger profits to the private company running the electrical grid in Alberta. And coming --- bigger power bills to consumers. Here is a related article.

Alberta's deregulated electricity market may have proved itself a failure
Ricardo Acu�a /

Back in 2002, the front page of the Alberta Energy website boasted "Alberta has deregulated its electric industry to develop a competitive market for power generation and electricity services that will benefit consumers across the province." Ten years later, Alberta's electricity customers are still waiting for those benefits to materialize. This is especially the case after a perfect storm of spiking demand and failed generators resulted in rolling blackouts through Edmonton and Calgary last week, and will also result in some hefty power bills for the same period.

Alberta's Electricity System Operator (AESO) ordered the blackouts after four coal-fired plants and two gas-fired plants went down at approximately the same time on the afternoon of July 9, the hottest day of the year thus far in most parts of Alberta. The plant failures resulted in there being significantly more demand in Alberta than there was supply, so the blackouts were necessary to avoid complete disaster.

Although the blackouts were short-lived, and were more of an inconvenience than a crisis for most people in affected neighbourhoods, they did raise a significant number of questions about Alberta's electricity market.
Wildrose MLA Joe Anglin articulated the thoughts of many Albertans when he suggested that six plants going offline just as demand was peaking seemed "suspicious." He equated it with driving down the highway and getting four flat tires at the same time for completely unrelated reasons. Anglin's suggestion, of course, was that this was no accident and that there may have been price manipulation going on by some of Alberta's electricity companies.

Despite assurances from Energy Minster Ken Hughes and the AESO that there is nothing to suggest market manipulation, Albertans cannot be blamed for being wary. Just last fall TransAlta Corp admitted to manipulating the market by blocking cheaper hydroelectric power from BC for 31 hours, creating an artificial shortage and a spike in prices. That event alone cost Albertans an extra $5.5 million in inflated electricity costs. Many will also recall the degree to which Enron manipulated prices in California for years by purposefully creating shortages. It's hard to imagine that there could have been that degree of collusion among power companies in Alberta, but it is definitely worth an investigation.

The bigger issue is that, even without outright manipulation, deregulation of Alberta's electricity market has resulted in an incredibly flawed system which actually encourages reduced supply for the sake of increasing profits to power companies.

Since Ralph Klein deregulated the market in 2001, electricity prices in the province have been set on a spot supply and demand basis. What this means is that the power companies make the most profit when tight supply and high demand result in increased prices. The result of this dynamic is that there is absolutely no incentive for power companies to increase their generating capacity, as adding more electricity to the system will only serve to reduce prices and, consequently, profits. Because we currently only have about seven percent excess capacity in Alberta today, compared to 18 percent in the early 90s, we are always on the brink of having demand outstrip supply—a situation which is great for the producers, but not so great for consumers. This is why prices have only moved in one direction since regulation.

On July 9, the pool price of electricity spiked from $11 per megawatt hour (MWh) in the morning to $1000 between 3 pm and 6 pm (it would have likely climbed higher, but the government caps prices at the $1000/MWh rate). Because there was no difference in what it cost to produce the electricity in the morning as compared to the afternoon, it becomes clearly evident how supply shortages benefit the power companies and how the system hurts Albertans.

With deregulation, Alberta has gone from having some of the lowest electricity prices in the country to some of the highest, which not only hurts Alberta families, but also damages the competitiveness of Alberta businesses. At the same time, our supply is less secure than ever and there is no interest from the power industry in making it more secure. The only ones who have seen any benefits at all from deregulation are the power companies who have been making record profits for the last 10 years.
Before the election this spring, Premier Redford promised to set up an independent panel, which would see if there is a way to "reduce volatility and costs" of electricity in the province. The reality is that we don't need more studies, review panels, reports or investigations to confirm what everyone in Alberta already knows: electricity deregulation in Alberta has been a complete failure and it's time to reverse it. Hopefully the events of last week will finally convince Ms Redford of this reality.

Ricardo Acuña is the executive director of the Parkland Institute, a non-partisan, public policy research institute housed at the University of Alberta.

This sounds so much like California in past years when they had to have rolling blackouts because they lacked sufficient power supply. Then too, if I recall correctly, they had to buy power at inflated rates which of course put pressure on consumers wallets.

P A (117)
Friday August 24, 2012, 4:45 am
FOUR coal fired and TWO gas fired power stations failed at the same time - something the supporters of dirty energy have denied could ever happen but were sure would happen with Green Energy.... hmmmm!

Deregulation and competition of energy supply over here has also led to high prices and astonishingly few 'bargains' which we were assured would be everywhere (no, I didn't believe them at the time either and their words are still more ludicrous today). Sounds as is Alberta is having even more problems that we have - and my sympathies to them - vote out these twits and get in someone with a backbone and a conscience!

Susanne R (235)
Friday August 24, 2012, 7:52 am
Deregulation in the states has been a complete failure as well --for everyone except the large corporations that were able to buy "deregulation" through the corrupt politicians they finance. A good example of how deregulation is a complete failure for consumers can be seen in the fact that American seniors flock to Canada to buy their prescriptions drugs. Prescriptions filled in the U.S. cost close to twice as much as they do in Canada. Deregulation is very profitable to Big Pharma --so much so that they're finding ways to make it more and more difficult for seniors to buy their prescriptions in Canada. Wikipedia provides a good explanation:

"One of the most important differences between the two countries is the much higher cost of drugs in the United States. In the U.S., $728 per capita is spent each year on drugs, while in Canada it is $509.[93] At the same time, consumption is higher in Canada, with about 12 prescriptions being filled per person each year in Canada and 10.6 in the United States.[95] The main difference is that patented drug prices in Canada average between 35% and 45% lower than in the United States, though generic prices are higher.[96] The price differential for brand-name drugs between the two countries has led Americans to purchase upward of $1 billion US in drugs per year from Canadian pharmacies.[97]

There are several reasons for the disparity. The Canadian system takes advantage of centralized buying by the provincial governments that have more market heft and buy in bulk, lowering prices. By contrast, the U.S. has explicit laws that prohibit Medicare or Medicaid from negotiating drug prices. In addition, price negotiations by Canadian health insurers are based on evaluations of the clinical effectiveness of prescription drugs,[98] allowing the relative prices of therapeutically-similar drugs to be considered in context. The Canadian Patented Medicine Prices Review Board also has the authority to set a fair and reasonable price on patented products, either comparing it to similar drugs already on the market, or by taking the average price in seven developed nations.[99][100] Prices are also lowered through more limited patent protection in Canada. In the U.S., a drug patent may be extended five years to make up for time lost in development.[101] Some generic drugs are thus available on Canadian shelves sooner.[102]

The pharmaceutical industry is important in both countries, though both are net importers of drugs. Both countries spend about the same amount of their GDP on pharmaceutical research, about 0.1% annually[103]"

Big Pharma in the U.S. defends its over-the-top drug prices by blaming the cost of research, yet they spend the same amount of their GDP as Canada does on research. Why the disparity? It's all covered in the excerpt from Wikipedia, and it doesn't paint a pretty picture for Big Pharma in the U.S. But, then, is GREED ever pretty?

paul m (93)
Friday August 24, 2012, 9:18 am

Should spend some of their profits on cleaning the enviroment...

. (0)
Friday August 24, 2012, 4:01 pm
Yes and they want to privatize hydro in Ontario.

Abu Sajjad (6)
Saturday August 25, 2012, 5:05 am
Please take a minute to watch the short clips. I believe it to be extremely important. I cannot believe I wasn't aware of it. The world needs to know about this.
All our energy needs can be met through 'splitting water' which has been available since 1985. The inventor was just your average American. He was not a scientist, he just had a simple but great idea;
Water is H2O. Split it for Hydrogen and Oxygen. Using hydrolysis, which he accomplished thousands of times more efficiently than ever before, he powered his car with water. Burning hydrogen (created as required) instead of petrol, the exhaust gasses are pure water vapour only.
Sadly, the inventor of this simple technology is dead because of 'food poisoning' or so the official news statements read. I don't wish to speculate - I only wish to promote his idea. This video will turn your world upside down;

Water Fuel-Cell Inventor Murdered by Government

LA to NY on 22 gallons of water!
He was offered a billion dollars in cash for his patents. In 1998 he signed a contract with the Department of Defence to build a 30 million dollar research facility.
He was dead the following day.

FREE ENERGY inventor mysteriously died! Why don't we have water powered cars?


Talya H (10)
Sunday August 26, 2012, 5:20 pm
Thanks for the article!
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