Alberta’s wholesale electricity price can occasionally fall to $0 per megawatt-hour, but that does not mean electricity is free for Alberta households. The wholesale pool price is only one part of what ultimately makes up your electricity bill.
Your bill can include the electricity you use, transmission and distribution charges, rate riders, administration fees, local access fees and GST. Many of these costs remain even when wholesale electricity prices are extremely low.
So, how can Alberta electricity prices reach $0 while your bill still has a balance?
What Is the Alberta Electricity Pool Price?
The Alberta Electric System Operator (AESO) manages Alberta’s competitive wholesale electricity market and operates the province’s interconnected electricity system.
Electricity generators offer power into the market, and the resulting pool price represents the wholesale market price of electricity.
The pool price changes as electricity supply and demand change. When plenty of generation is available and demand is relatively low, wholesale prices can fall significantly, sometimes reaching $0.
However, the pool price is not the same as the electricity rate on your residential bill.
The AESO pool price is a wholesale electricity price. Your electricity bill reflects the cost of buying electricity and delivering it to your property.
If the Pool Price Is $0, Is Electricity Free?
No. A $0 Alberta pool price does not mean your household electricity is free.
The pool price represents the wholesale cost of electricity during a particular period. Your home continues using electricity throughout the day and month while wholesale prices change.
Your bill also includes costs associated with getting that electricity from Alberta’s power system to your property.
Think of a $0 pool price as a snapshot of the wholesale market, not the price of your entire monthly electricity supply.
What Makes Up an Alberta Electricity Bill?
Understanding the main components of your bill makes it easier to see why low wholesale prices do not make the entire bill disappear.
Energy Charge
The energy charge is based on the electricity you consume, typically measured in kilowatt-hours (kWh).
With a fixed electricity plan, your energy rate is set according to your plan. With a variable plan, your rate is more closely connected to changes in the electricity market.
Transmission and Distribution
Transmission charges cover the cost of moving electricity across Alberta’s high-voltage transmission system. Distribution charges cover the local infrastructure that carries electricity to your home or business.
These systems still need to operate and be maintained regardless of whether the wholesale electricity price is high, low or temporarily $0.
Rate Riders and Local Fees
Your bill may also include rate riders, which adjust regulated electricity charges, as well as local access or franchise fees depending on your municipality.
These charges can vary by location.
Administration Fees and GST
Electricity retailers may charge an administration fee for managing your retail electricity service. GST is also applied to applicable charges.
Why Doesn’t My Electricity Bill Drop When Wholesale Prices Do?
Your electricity bill does not move in lockstep with the AESO pool price because wholesale electricity is only one part of your total cost.
A very low pool price may only last for a short period, while your bill reflects electricity consumption over an entire billing cycle.
Customers on fixed-rate plans also continue paying their agreed energy rate regardless of short-term wholesale market movements.
Meanwhile, transmission, distribution, administration and other applicable charges continue to form part of the bill.
Do Variable Electricity Customers Benefit From Low Pool Prices?
Variable electricity plans generally provide greater exposure to movements in Alberta’s electricity market.
At Peace Power, our variable electricity plan is based on the spot price plus a retail margin. When market prices are lower, variable-rate customers may benefit. When prices rise, their energy rate can increase as well.
This can appeal to customers who are comfortable with price fluctuations and want greater exposure to market pricing.
However, even very low wholesale prices do not eliminate transmission, distribution and other charges.
What About Fixed Electricity Rates?
A fixed electricity rate generally stays at the agreed rate for the applicable term, regardless of short-term changes in Alberta’s wholesale market.
That works both ways.
If wholesale prices fall below your fixed rate, you continue paying your agreed energy rate. If wholesale prices rise, your fixed energy rate does not automatically rise with them.
A fixed plan is primarily about price stability, while a variable plan provides greater exposure to market movements.
What Part of My Alberta Electricity Bill Can I Control?
You cannot directly choose every charge on your electricity bill, but Alberta’s competitive retail market allows you to choose your electricity retailer and retail energy plan.
When comparing electricity plans, consider:
- The electricity rate in ¢/kWh
- Whether the rate is fixed or variable
- Administration fees
- Contract length
- Cancellation terms
- Your typical electricity consumption
It is important to compare the overall retail offer rather than focusing only on the advertised ¢/kWh rate.
Fixed or Variable Electricity: Which Is Better?
There is no single option that is best for every Alberta household.
A variable electricity plan gives you greater exposure to market prices. When Alberta electricity prices remain low, that can work in your favour, but rates can also increase.
A fixed electricity plan gives you a known energy rate for the applicable term. You may not capture every short-term market low, but your energy rate is more predictable.
The decision comes down to what matters more to you: exposure to changing market prices or greater rate predictability.
Why a $0 Pool Price Isn’t a $0 Power Bill
When Alberta’s pool price reaches $0, it means wholesale electricity became extremely inexpensive during that particular period. It does not mean the total cost of supplying electricity to your home disappeared.
Your electricity bill includes the electricity itself as well as the infrastructure and services required to deliver it.
Understanding that difference makes Alberta electricity pricing easier to navigate and can help you make a more informed decision when choosing an electricity plan.
Compare Alberta Electricity Rates With Peace Power
Peace Power offers fixed and variable electricity plans for Alberta homes and businesses, giving you the option to choose between a predictable energy rate and greater exposure to market pricing.