Energy economist challenges fluctuating energy prices

Wholesale buyers of electricity, generally commercial and light industries, have to deal with hourly price changes

  • Aug. 6, 2014 7:00 p.m.

By Jeffrey Heyden-Kaye


Wholesale buyers of electricity, generally commercial and light industries, have to deal with hourly price changes and one energy economist wants that to change.

David Gray, president of Gray Energy Economics questioned why six coal-fired generating stations, owned by TransCanada, reduced their output one third July 28. Gray stated that prices spiked to 90 cents per kilowatt hour (kWh); this would cost an average person approximately seven dollars to wash and dry one load of laundry.

Changes in the wholesale prices are readily available on the Alberta Electric System Operator’s (AESO) website but in an effort to educate buyers, Gray has designed a smartphone app called The Alberta Power Price App that provides this data in an easy to read format.

When it comes to supply and demand, users generally pay more for a product.

“One hour at one dollar per kWh is $10.5 million,” states Gray.

John Esaiw, director of market analytics and forecasting with AESO says consumers need to look at the average prices over the course of a year rather than one hour of a day to see what the prices look like. He suggests if wholesale customers don’t hedge electricity costs, they will be exposed to fluctuations in the market.

“It’s absolutely a function of supply and demand,” said Esaiw.

AESO looks at the long-term impacts rather than daily changes, he added.

He suggests a deregulated market puts the responsibility of power generation in the hands of generators rather than taxpayers. “Ultimately we’re just paying for what we use.”

Gray says for his part that generators take advantage of economic withholding rules defined by the Market Surveillance Administrator (MSA), which monitors the market to ensure that prices are fair and balanced.

What is economic withholding?

Generators are allowed to increase prices during hourly periods when there is a tight supply or increased demand for power. The MSA defined some of these practices in 2011 and gives the generators an opportunity to raise prices to ensure profitability.

Matt Ayres, deputy administrator and chief economist with the MSA says economic withholding allows a company to be profitable during peak times but consumers are still in a competitive market.

“A competitive market is allowing private investors to come in…Because they can make a profit,” he explained.

He says it is difficult to store energy so when customers use very little such as at 2 a.m., then companies sometimes offer power at rates that barely pay for the its distribution.

Gray disagrees with economic withholding rules. “This is absolutely legal and completely disgusting.”

He suggests one way to tackle the high costs is by conserving as much energy as possible during these peak times. With economic withholding, the wholesale market has become volatile and fluctuates on an hourly basis, which makes it difficult for customers to plan their future contracts.

Gray used the analogy of filling up a car at a gas station; at one time fuel may be a low rate and at another the price may be 10 times what was paid on a previous day. Gray says this is what commercial and light industrial businesses face on a daily basis.

“They’ve created the most volatile market than anywhere in the planet,” he stated.

However, with electricity costs customers won’t get their bill until the end of the month. He feels the principles of supply and demand are not a part of the equation.

“The market is designed for competition between suppliers but demand just isn’t invited for the party,” stated Gray.

Demand response – which provides customers with the opportunity to reduce or shift their use on time-based rates – must be part of how Alberta’s energy market operates to benefit consumers, he added.

Some information on economic withholding was garnered from electricity consultant Sheldon Fulton from a document called Alberta Electricity Market Structure Assessment.



Just Posted

Stettler secondhand charity looks for new home

Superfluity lease not being renewed; will move by Sept., 2018

First auction of 2018 has solid numbers: auction market

Stettler Auction Mart sees 700 head move through Jan. 9

Lars Callieou to entertain in Halkirk on Feb. 10

Volunteer appreciation supper held on Friday night

Outrage against hunting ‘pretty animals’

But its ok if they are ‘stupid and ugly’

What to do after online accounts are hacked

Facebook, email and other accounts hold vital information

Erskine Professional Motocross Athlete appears in Edmonton

Chad Bauman performs as part of ‘Ground and Gravity’

John ‘Chick’ Webster, believed to be oldest living former NHL player, dies

Webster died Thursday at his home in Mattawa, Ont., where he had resided since 1969

Bad timing: Shutdown spoils Trump’s one-year festivities

Trump spends day trying to hash out a deal with Senate Minority Leader Chuck Schumer

Provincial park no more

The province transferred Sylvan Lake Provincial Park to the Town yesterday

Protect pets from canine flu

Sylvan Lake veterinarian spoke to the Sylvan Lake News about the canine flu

Las Vegas shooter acted alone, exact motive still undetermined: Sheriff

Stephen Paddock was behind the gunfire that killed 58 people including two Canadians

Botox, bomb shelters, and the blues: one year into Trump presidency

A look into life in Washington since Trump’s inauguration

New County of Stettler reeve, new councillor to go to conference in Maritimes

County of Stettler selling off ATCO trailers from shop site

B.C. out of the running for Amazon’s next headquarters

Toronto is the only Canadian city left in the running despite the province backing Metro Vancouver’s bid for new Amazon headquarters

Most Read

Weekly delivery plus unlimited digital access for $50.40 for 52 issues (must live within 95 kilometers of Stettler) Unlimited Digital Access for one year for $50.40 Prefer to have us call you? Click here and we’ll get back to you within one business day.