Deregulation

Alberta has deregulated its electricity industry to develop a competitive market for power generation and electricity services that will benefit consumers across the province.   — Government of Alberta

Doesn't it make you feel good and proud to hear that, but is it true?  Is it true for farmers?

The website of the Alberta Government Department of Energy boasts of what has been done especially for farmers:

Rural Electric:

The Rural Electric Program commenced in 1947. It is a cost-sharing program, which helps defray the high cost of electrical service to farmers.

The Rural Electric Program assists farmers to access a basic, essential service at a reasonable cost and aids in the diversification of our rural economy. It also provides partial equity with other Albertans living in urban areas as well as those living in other western provinces that benefit from lower hook-up costs and power rates sponsored by their provincial governments through Crown corporations. 

— Alberta Government (Full story)

That sure doesn't sound right, or does it?   Consider that Alberta now has the highest electricity costs of all provinces.   However, the Alberta Government's claim is not a recounting of history, of things that were, but of how things ostensibly are right now.  The truth is quite different, and as the Alberta Government knows exactly what the truth is, there is no excuse for not telling it.  There is no excuse for obfuscating and distorting the truth. 
   The Web page of the Department of Energy that makes an attempt at telling the Big Lie has fortunately been seen only by somewhat fewer than 3,000 people.  However, the Alberta Government's story that "the deregulation of utilities is good for Albertans" has been told many times by the government, was repeated hundreds and thousands of times by the media and has by now been thoroughly accepted by Albertans, almost all of them.  It's hard to understand why.  It's costing them dearly.
   The explanation is that it is propaganda in action.  It is in the nature of propaganda that, if it is repeated often enough, even the Big Lie becomes accepted as the truth.

Propaganda

As far back as 1928, Edward Bernays, Sigmund Freud's nephew, wrote in his book Propaganda:

The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society.  Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. . . . The important thing is that [propaganda] is universal and continuous; and in its sum total it is regimenting the public mind every bit as much as an army regiments the bodies of its soldiers.^{[1, 2, 3]}

Someone else, far more famous but perhaps not as influential on a global and on-going basis, wrote along similar lines even before that:

The function of propaganda does not lie in the scientific training of the individual, but in calling the masses' attention to certain facts, processes, necessities, etc., whose significance is thus for the first time placed within their field of vision. ...

All propaganda must be popular and its intellectual level must be adjusted to the most limited intelligence among those it is addressed to. Consequently, the greater the mass it is intended to reach, the lower its purely intellectual level will have to be. But if, as in propaganda for sticking out a war, the aim is to influence a whole people, we must avoid excessive intellectual demands on our public, and too much caution cannot be extended in this direction. ...

The receptivity of the great masses is very limited, their intelligence is small, but their power of forgetting is enormous. In consequence of these facts, all effective propaganda must be limited to a very few points and must harp on these in slogans until the last member of the public understands what you want him to understand by your slogan....

The function of propaganda is, for example, not to weigh and ponder the rights of different people, but exclusively to emphasize the one right which it has set out to argue for. Its task is not to make an objective study of the truth, in so far as it favors the enemy, and then set it before the masses with academic fairness; its task is to serve our own right, always and unflinchingly.

—Hitler, Mein Kampf, Chapter VI

The message with deregulation was simply: "Deregulation is good for the economy of Alberta."  That message was repeated incessantly.  Therefore by now virtually all Albertans bought into it.  For the Big Lie to be universally accepted, it only needs to be told over and over. 

The tools by which to inundate the masses with propaganda have become far more persuasive and all-pervasive since Hitler's time (off-site).   With deregulation, people never had a chance.  It is surprising to see how many people still insist that deregulation is good for them, even though it hurts them enormously to pay for power and natural-gas bills that are now double and more than what they were a little over a year ago (in 2000).  Hitler knew it: never underestimate the enormous capacity of the masses to forget.  It doesn't help the people that their representatives relentlessly repeat the propaganda message aimed at the masses:

We will continue to monitor energy supplies and pricing and take appropriate action when necessary in the best interest of all Albertans.
    The Alberta Government is committed to putting more money back into the pockets of Albertans.

Ed Stelmach (PC), Alberta Minister of Transportation,
MLA Vegreville-Viking, 2002 04 19,
in his response to an open letter on utility pricing policies.

Ed Stelmach failed to explain how billions of dollars in energy subsidies paid out of the pockets of Albertans, causing a massive shortfall in funding in 2001, higher taxes in 2002 and massive defunding of medical services, and how electrical power bills that are now double and triple of what they were in December of 2000 will put "money back into the pockets of Albertans."  However, as far as propaganda goes, the truth hardly matters and is an obstacle that is easily overcome.  What matters far more is to keep repeating the propaganda message uniformly and to saturate the public with it until it is accepted by the vast majority of people as the truth.^{[2, 3, 4}

The calculations done by General Circulation Models (GCMs) are the main source of the information that fuels the global warming hysteria.  Nevertheless, not one of them comes acceptably close to accurately calculating what the climate presently is at any location, let alone of the whole Earth.  Not only that, but all of the GCMs differ widely from one another as to what the climate was in the past, and as to what it is supposed to be in the future.

Therein lies the problem.  No one in his right mind will base any decisions about the future on tools that cannot determine with acceptable accuracy what the present is and the past was.

• Reality check: UAH (University of Alabama in Huntsville) monthly globally averaged lower atmospheric temperature variations since 1979 as measured by NOAA and NASA satellites.

We are now as dependent on electrical power as on the air we breathe, the water we drink and the food we eat, and it is just about as certain to be available. That is why we take it for granted, and that is why we should resent that it is being used to extort money from us.
   There is nothing wrong with a reasonable rate of return on investment and operating costs.  Once upon a time, the rate of return for utility companies was held and guaranteed at 6 percent per year.  That was with respect to telecommunications, with the power companies it is said to have been even less than that.  It is understandable that power prices may have to increase a little as time goes by, to allow for the cost of inflation, but when the price for power is quadrupled overnight, that is obscene, worse than usurious. It is worse than criminal.  That's when the price of electrical energy becomes a major cause of inflation.
   When it is our own government that causes the price of power to quadruple from one day to the next, it becomes very difficult to find expressions that can describe how despicable and deplorable that is.

Electrical power didn't come to the Bruderheim rural area until 1948.  The Bruderheim REA is the oldest rural electrification association in Alberta. Certainly, some people had their own generating plants then, but they were happy to give them up. Now they are looking for alternatives to deregulated utilities.  For some it's that or go bankrupt.

Deregulation was and still is hard on the members of Alberta's REAs.  There are efforts to amalgamate, so as to benefit from the economics of scale, but there also were subtle suggestions and not-so-subtle statements over the years, that the REAs outlived their usefulness, that they should sell out to the power companies.
   Of course, the power companies will make such suggestions.  Their primary objective is to make the biggest returns on their investment, not to make sure that rural customers have power at a reasonable price and at a reasonable rate of return to the power companies.  The REAs are an obstacle to them.  They want to be able to charge for power what the market will bear.  What better vehicle to do that with is there than to charge what people are willing to pay for an essential service, a service without which they can no longer exist.
  
Think again if you believe that attempts to abolish and eradicate the REAs are anything new.

The status of the Rural Electrification Administration was also a campaign issue. Goldwater had said in Denver, Colorado on May 3, 1963 that the time had come "to dissolve the Rural Electrification Administration." Wishing to appear as an orthodox Goldwater clone in every respect, Bush had failed to distance himself from this demand. The REA was justly popular for its efforts to bring electric power to impoverished sectors of the countryside. Yarborough noted first of all that Bush "wouldn't know a cotton boll from a corn shuck," but he insisted on leveling "so un-Texan a blow at the farmers and ranchers of Texas. To sell the REAs in Texas to the private power monopoly would be carrying out the demands of the big Eastern power structure and the wishes of the New York investment bankers who handle the private power monopoly financing. My opponent is in line to inherit his share of that New York investment banking structure," Yarborough told a gathering of Texas REA officials.

George Bush: The Unauthorized Biography
by Webster G. Tarpley & Anton Chaitkin
Chapter -IX- "Bush Challenges Yarborough for the Senate"

Nothing is new under the sun. It is just that our perception becomes a little sharper as we become older, and if not, we'll be in for a rude awakening, unless we start pushing up daisies first.

Of course, from as far back as Grandfather Prescott, the Bush family had and still has very strong ties to very wealthy and extremely powerful banks.  That explains why George Bush Sr. wanted to have the REA wiped off the face of the Earth. 
   Do you ever wonder to whom Ralph Klein owes his allegiance?  It doesn't seem to be to the majority of Albertans, because those have the screws tightened by him and his party big-time, unless you feel that ever increasing provincial taxes, service fees that triple, quadruple and more, and indirect taxation in the form of tripling and quadrupling the price of power over night are truly good for us.  A spreadsheet was used in documenting an analysis of trends in electric energy costs.  The figures presented relate to an REA member whose monthly power consumption is 1000kWh.  The basic figures were calculated by applying the same parameters that are used to calculate our power bills.
    As of now the spreadsheet caters only to a 7.5kVA service, but even if rates that apply to the other types of services that are being offered will be incorporated, the end result won't change much.

______________

1. PR!: A Social History of Spin, By Stuart Ewen (1996, US$30.00 / hardcover / 496 pages, ISBN: 0-465-06168-0, Basic Books, A Division of Harper Collins).  If you wish to find out more about Edward Bernays, search the Internet for <+"Edward Bernays" +propaganda> (excluding the chevrons), about 826 URLs will be returned.

2. Television and the Hive Mind, by Mack White

3. Freedom of Expression

4. Without the help and eager collaboration of various government sectors (e.g.: political activists in the judiciary) and of public organizations, Hitler would not have been able to succeed in spreading the Big Lie.  An instance of how propaganda is spread in modern times is provided through the story of Rigoberta Menchú:

Salon Magazine, 1999 01 11

D A V I D_H O R O W I T Z

I, Rigoberta Menchú, liar

How left-wing propagandists, a fellow-traveling Nobel committee and a corrupt media perpetrated a monstrous hoax.

The story of Rigoberta Menchú, a Quiché Mayan from Guatemala whose autobiography catapulted her to international fame, won her the Nobel Peace Prize and made her an international emblem of the dispossessed indigenous peoples of the Western Hemisphere and their attempt to rebel against the oppression of European conquerors, has now been exposed as a political fabrication, a tissue of lies. It is one of the greatest hoaxes of the 20th century....(Full Story)

 

Analysis of the impact of deregulation

During 2001 we consumed power that had been contracted for at 18¢/kWh, an increase of 13.81¢/kWh from the 4.19¢/kWh we had paid in the previous month.  Naturally, deregulating a commodity that had never been deregulated (in a market in which there is essentially no competition) drove the price of power right through the ceiling.   The cozy pricing scheme that the power companies put in place for themselves didn't help things either.  (See Albertans seem to like being cheated.)
    In addition to the higher price per kWh we have to pay to get electric power delivered to us.  The price for that was 1.27 cents per kWh for most of 2000 and 0.653 cents per kWh for most of 2001.  In September of 2001 it increased again to 1.061 cents per kWh and there has been no change to that since then.

Instead of receiving power at a more advantageous price to consumers, many consumers (e.g: factories and steel plants), had to introduce shift work, so as to be able to take advantage of lower prices during the off-hours of consumption.  Some of them closed shop or moved elsewhere.  The price for electrical power under the Alberta Advantage was literally killing them.

It was a tough choice to make for Ralph Klein, tell the truth and lose votes in the 2001 elections, or fudge the figures.  It was quite a gamble that catering to the few big producers required of him, but it paid off.  The voters, hooked on TV, peanuts, beer and the "Alberta Advantage", never caught on.
   The consumers lost out, but what is wrong with pulling the wool over their eyes?  It always worked before, didn't it?  Why shouldn't it have worked again?  And it did work only too well, at a great cost to us all, and now we must pay!

The subsidies came off January 1, 2002.  To boot, we'll be paying for the next 30 months for a good portion of the price of power we consumed in 2001. As a result, our March 2002 power bills were about twice as high or higher than they were for March 2000.   They'll stay up there for the next 30 months.  Then they'll drop by about $25 a month, to get us hyped-up for the next provincial elections.

Here is a summary of what our choices were, to explain why we got served the dish we are now having a tough time cramming down our throats.  However, whether we want it or not, down our throats it must go, all for "The Alberta Advantage."  What advantage?  Tell the people that had to shut down their businesses.

The following graph (Figure 1) depicts the totals shown on the power bill for a given member who uses power at the rate of 1000kWh/month, for a few selected months during the 2001-2005 interval.

Figure 1

Update 2005 05 10: The 2004 provincial elections took place 2004 11 22
The Progressive Conservative Party gained a 71.1% majority in the Legislature.
23.9% of eligible voters voted Progressive Conservative.
The voter turnout was 54% of eligible voters.

And here is a more detailed picture, just in case you want to see it all.

Figure 2

Although the subsidies were set so that they would keep the 2001 bottom line of the power bills just about the same they were at the end of 2000, that looks pretty bad, doesn't it?  However, if it was ever true that you shouldn't look a gift-horse in the mouth, it is certainly true that we should beware of Greeks (or politicians) bearing gifts, especially if in the end we wind up paying the price for the gifts.  The end is always important, and you can never tell the size of an animal unless you look at all of it, not just the head or its start but all of it, including its tail-end.

Figure 3

Update 2005 05 10: The 2004 provincial elections took place 2004 11 22
The Progressive Conservative Party gained a 71.1% majority in the Legislature.
23.9% of eligible voters voted Progressive Conservative.
The voter turnout was 54% of eligible voters.

The lower left-hand portion on that graph, containing the various items from Jan. 2000 to Mar 2002, excluding the mounting debt of the rate shortfall that we started to pay off during February 2002, that is what was presented to us on the bills we received during the past two years.  A picture of all that those bills identified is presented in Figure 2.  Unlike a bank or a credit-card company or any other creditor, the power companies didn't want us to know just how much we were in debt on the power we had bought during 2001.  Figure 3 represents the whole truth, all of it.  The amount racked up by the consumer used in the example comes to $821.94.
   What does all of that mean in relation to what you have to pay?  The green line in the following graph (Figure 4) represents the bottom line on your bills, beginning in Jan. 2000, up to May 2005.

Figure 4

Update 2005 05 10: The 2004 provincial elections took place 2004 11 22
The Progressive Conservative Party gained a 71.1% majority in the Legislature.
23.9% of eligible voters voted Progressive Conservative.
The voter turnout was 54% of eligible voters.

The cost curves relate to someone who consumes 1000kWh/month.

The pink line represents what someone would have had to pay, and pay in the future, if there were no further price changes, no taxpayer-funded subsidy and no power on credit, and if Ralph Klein would not have given a darn whether he would have lost votes in the last provincial elections or not.

The yellow line represents the same, except that power was bought at seven cents credit for every kWh bought during 2001 and that that debt is being paid off from Jan. 2002 to Jul. 2004.

The green line represents the same as the yellow line and that the taxpayers chipped in about $75/month for the member.  If he had to pay more in taxes than that "gift" was worth, he didn't really receive a gift, because he paid for it himself, and he had no say on what he could spend his money on.   The money went to the power companies.  If he didn't have to pay any provincial taxes at all during that time, he theoretically received a gift worth $75/month.  However, whether he paid taxes or not, all government services deteriorated on account of the shortfall in taxes revenues that Ralph Klein caused by dipping too deep and too often into the barrel to hand out those monthly "gifts".

The blue line?  That is what the payment history and cost projection would have been if Ralph Klein would have left power prices alone and would have catered to the people instead of to the power companies.

As to the estimated date for the next elections, surely Ralphie-Baby will get back in with an overwhelming majority.  If he managed to do it even though the bottom line on the power bills didn't change before the 2001 elections, imagine what will happen when it drops by $25 before the next elections!  Surely the plan must be to win on account of that so big and so overwhelmingly that the PCs will have to appoint an opposition from within their own ranks.

The next graph, Figure 5, shows what the bottom lines will be for a range of monthly consumption rates ranging from 0kWh to 10,000kWh per month.  Note that the first interval with higher power costs affects members with consumption rates of more than 1000kWh to a far greater extent than those with a 1000kWh or less.  That's targeted propaganda, propaganda for which we must pay.  That's putting our money where our mouth is, or, rather, having the government taking it out of our mouths.  In true Marxist fashion, it's taking from those that have to give to those in need: to the government and power companies.
   Instead of their bills staying the same as with members that use 1000kWh, members that had to use more power than that saw their bills increase because their consumption and not the residential subsidy becomes the controlling factor. Their bills almost doubled.  After the subsidies came off and they began to pay back their debt that Ralph Klein and the power companies caused them to rack up, their bills more than doubled, compared to the bills they received at the end of 2000.
   After they are finished paying back the rate shortfall, they'll still be paying twice what they had to pay for December of 2000.  I bet that for a lot of them the dream of the "Alberta Advantage" is more like a nightmare.  Consider that a lot of them have trouble scratching enough money together to hold their bankers from foreclosing.
   For someone in the 10,000kWh per month range, to have to begin making 31 monthly payments of $269 in addition to power costs that doubled and whatever else they must cover surely can't be easy.

Figure 5

Update 2005 05 10: The 2004 provincial elections took place 2004 11 22
The Progressive Conservative Party gained a 71.1% majority in the Legislature.
23.9% of eligible voters voted Progressive Conservative.
The voter turnout was 54% of eligible voters.

The total cost of deregulation to the citizens of Alberta is in the billions, and now our taxes are going up some more to pay for it all.  Nobody has made an attempt to estimate the true cost to all of us, and if the government ever did, they sure aren't telling us, but let's take a guess.
   Let's say that there are about a million residential services in Alberta.   Let's say that they used an average of 12,000kWh during 2001.  For that year alone, and not counting any other consequences, the cost increase as per the power bills to residents would then amount to a provincial total of roughly $1.8 billion.
   Of course, the government got back a few hundred millions in taxes from the energy producers.  However, we are footing the bill for the horrendous profits that the power producers raked in on account of the price increase of 374 percent that they engineered for themselves.  We have to pay back the debt racked up, and we have to pay higher taxes now to fill back in the hole that Ralph Klein's Folly dug for us, but I'm afraid that the hole is so deep now, we'll never get out of it again.
   To add to it all, we still have to consider that even if we had paid for the higher price for power right on the spot, without buying any of it on credit, the basic cost of power to us is still $50/month higher now than it was before deregulation.   That adds another $1.8 billion, just for the three years shown on the graph taking us into 2005.
   But that is still not the end of the story.  Residential services account only for a small fraction of all power used.  Power used in industry went up in price, too.  Those cost increases to manufacturers are of course passed on to the end consumers, who then pay for those cost increases as well.  Does anybody want to make a go at guessing how many billions are involved in that? *

* Update 2006 03 19: At the discussion forum of the 2004 Annual General Meeting and Conference of the Alberta Federation of REAs, an estimate of the costs to consumers of the consequences of deregulation was put forth and not disputed by any of the government officials on the discussion panel, $20 billion - representing the costs of deregulation of gas and electricity.  The question was whether the government would be able to estimate whether those costs would ever be compensated for through cumulative advantages of deregulation to consumers.  The government official who responded stated that that would not happen in the foreseeable future, but that, if all the aspects of deregulation would ever be implemented and handled properly, advantages to consumers would eventually come about.

Why does anyone think Ralph Klein is a hero?  He appears to be the worst and most expensive premier we ever had.  Is it possible that his conscience is bothering him, and that that is what is driving him to drink so much?

Note:

You can look at all of these graphs and more, look at the figures from which they were produced, and enter your own figures to convince yourself of the extent to which we all have been shafted, shafted good.  Download the spreadsheet model and play around with it.  (A zipped XLS file, 160kB)
   The spreadsheet is protected, so as to prevent the wrong data from being entered by accident and causing it to dysfunction, but you can enter your own monthly power consumption figures and see the full extent to which you, personally, have been and will be affected.  The various tables and graphs will all be updated with each figure you enter.
   The protection can be taken off the spreadsheet, in case you want to make changes to it to adapt it to different rates in different REAs.  If you , I'll give you the password (write "spreadsheet" in the subject header of the message) and will tell you how to take the protection off (it's easy to do).  However, before you make changes to the layout, first make a copy of the original file and keep it in a safe place, so that you'll have something to go back to if things don't work out with the changes you make.

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Related article:

If you find the explanations offered on this page too difficult to understand, and I can't blame you at all if you do, you can always try the explanation offered by the Alberta Government: Understanding your power bill.  It is possible but not likely that there you'll find the answers you seek.