Canada: The Structure Of The Alberta Electricity Market

History and Evolution

Alberta's Electricity Market is unique in Canada. Its uniqueness is best understood through the historical context from which it developed.

Unlike most other provinces in Canada, Alberta did not form one province-wide vertically integrated utility to generate, transmit and deliver electricity when the Province was initially electrified. Instead, the majority of Alberta's electricity infrastructure was developed and owned by either investor-owned or municipally-owned entities.

These entities have now either been taken over or evolved into some of the players that currently operate in the Alberta Electricity Market. For example, in Southern Alberta the Calgary Power Co. Ltd. generated 99% of Alberta's power at one time. It subsequently changed its name to TransAlta, a large generator in today's Alberta Electricity Market. In the City of Calgary, the distribution of power was done by Calgary's municipal power authority that later became ENMAX, another large player in today's market. In the City of Edmonton, the City formed Edmonton Power to generate and distribute power within that city until it became EPCOR, which was later separated into publicly traded Capital Power for generation and municipally-owned EPCOR Utilities for transmission and distribution. Rural Alberta was serviced mostly by Canadian Utilities Limited until 1980, when it was taken over by ATCO. We say this simply to point out that many of the big existing participants in today's Alberta Electricity Market, like TransAlta, EPCOR, Capital Power, ENMAX and ATCO, have, like BLG, a long history and deep roots in the Alberta Electricity Market.

By 1995, on the generation side, Alberta was serviced mainly by three large vertically-integrated utilities, namely TransAlta, ATCO (then Alberta Power), and EPCOR (the "Big 3"), that collectively generated 90% of Alberta's then 8,600 MW of generation capacity. Of that total, 75% was generated by large baseload coal facilities, with the rest split between hydro and natural gas facilities. The Big 3 operated within specific service areas under a cost-of-service regulatory model. Electricity prices in Alberta at that time were set by a central regulatory body.

Creation of the Power Pool – 1996

With the coming into force of the Electric Utilities Act (the "EUA") on January 1, 1996, Alberta moved away from cost-of-service regulation on the generation side. Instead, it established the Power Pool through which all electricity, whether generated in Alberta or imported, in Alberta's Interconnected Electrical System (the "AIES") or grid would be dispatched competitively in a fair, efficient and openly competitive manner. The Power Pool was Canada's first competitive open-access market for the exchange of electricity.

All electricity that is generated and not consumed on site in Alberta must pass through the Power Pool. The Power Pool itself does not buy or sell electric energy, but acts only as a trading platform with financial settlement. It is also "energy only" in that currently generators only receive payments for the electrical energy delivered into the AIES. They do not receive payments for capacity.

The EUA also mandated open access to all transmission facilities in order to support competitive generation. It also put in place financial mechanisms or hedges intended to protect the then existing generation investments of the Big 3 from the new competitive market, while at the same time preventing them from exercising their concentrated market pricing power. The result was that, though developers of new generation were exposed to the risks of the Power Pool and low prices, the existing generation of the Big 3 was protected in 1996, and effectively continued as if it was still operating under the old cost-of-service regulatory model.

Power Purchase Arrangements – 2000

The next big change in the evolution of the Alberta Electricity Market came when Alberta mandated that the existing generation facilities owned by the Big 3 when the EUA was enacted be deregulated and exposed to the risks of Power Pool prices. To do this, Alberta removed the financial mechanisms or hedges that it had put in place when it passed the EUA. They were replaced with a forced auction, whereby the rights to the power from the output from the generation facilities of the Big 3 were sold to qualified bidders. This avoided the Big 3 being forced to divest themselves of their facilities.

The auction was completed using "Power Purchase Arrangements" ("PPA" or "PPAs"). Note the use of the word "Arrangement," as distinguished from the word "Agreement" that we typically equate with the acronym "PPA." In fact, the PPAs are not negotiated contracts – they are statutory instruments determined by Alberta, and enacted by the Alberta Government as Alberta Regulation 175/2000, with "quasi-contractual" characteristics.

The PPAs were used as a way to introduce competition into the Power Pool. The PPAs were intended to allow the "Owners" of the generation facilities the opportunity to recover their fixed and variable costs while transferring the right to offer the output of those generating facilities into the Power Pool to the "Buyers" who were successful in the auction.

The PPAs were, in a sense, a virtual divestiture of the power generated by the existing facilities of the Big 3. They left the ownership and operation of the plants with the Owners, but gave the Buyers of the PPAs the right to offer the electricity into the Power Pool at prices determined by each of the Buyers. The PPAs require that the Buyers pay the Owners their remaining fixed and variable costs, plus a reasonable return on assets – the PPAs mimic the historic cost-of-service model. Accordingly, the Buyers take market risk, and make money if the Power Pool prices exceed the amount they are required to pay to the Buyers under the PPAs, but lose money if the Power Pool prices do not exceed the amount they are required to pay to the Buyers under the PPAs.

The main PPA auction of 12 PPAs occurred in August of 2000, though only 8 PPAs were sold in that auction. Additional auctions for the unsold PPAs or power contracts/strips under those unsold PPAs were held later in 2000, and again in 2002-2003, and in 2005-2006. The approximate $3-billion of proceeds received from these sales was returned by the Province to electricity customers in Alberta as a refund on their bills.

Any unsold PPA was held and managed by a government entity called the Balancing Pool, with it acting as the Buyer under that PPA who offers the electricity from that PPA into the Power Pool. The Balancing Pool is required to manage the PPAs in a commercial manner, which includes managing associated payments, forecasting revenues and expenses, and participating in appropriate regulatory, dispute resolution or other proceedings.

The PPAs expire on the earlier of December 31, 2020 (20 years) or the then estimated end of plant life for the applicable facility. At the end of the term of the PPA the right to the output from the facility reverts back to the Owner.

Currently, there are seven PPAs for coal facilities that have not expired and remain in effect in Alberta:

As a result of changes in Alberta's climate change laws, the Buyers identified below have recently exercised rights under the PPAs to terminate their obligations under the PPAs and turn them over to the Balancing Pool. Though this right of termination (really just a turnover to the Balancing Pool) is now being challenged in court by the Alberta Government, the effect is that the Balancing Pool has, for now at least, become the Buyer under all of the existing PPAs and the party who offers that power into the Power Pool. This development is discussed in more detail below in the section titled "Termination of PPAs."

Retail Market Competition – 2001

Effective January 1, 2001, Alberta also permitted competition to occur in the retail component of the Alberta Electricity Market for residential and small commercial customers. This permits independent non-regulated companies to retail electricity to customers in the form of fixed-price contracts, flow-through contracts, dual fuel contracts (natural gas and power), green power or on-site generation (e.g. roof top solar). Retailers also provide billing and consumer services to these customers.

Any residential and small commercial customer who does not choose a retailer is provided a regulated rate option ("RRO") at a price that is set by the Alberta Utilities Commission ("AUC") for most of the RRO providers. RRO was meant to be a temporary option until more retailers could penetrate the market, but RRO has been repeatedly extended to provide an alternative for these small customers.

About BLG

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Borden Ladner Gervais LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Borden Ladner Gervais LLP
Borden Ladner Gervais LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions