Canada: The Alberta Electricity Market Today

Last Updated: October 18 2016
Article by Kent D. Howie and Alan Ross

Most Read Contributor in Canada, November 2016

This evolution has created the current Alberta Electricity Market with the usual four components.

1. Generation

Generation is an openly competitive component of the Alberta Electricity Market. The generators choose the form of energy they will convert into the electricity they offer into the "energy only" Power Pool. If dispatched, the generators are paid the competitively determined Pool Price for the hour in which they are delivering their electricity into the AIES. New generation is built with private capital that takes the investment risk over the life of the project. This risk has to be managed because it is not backstopped by customers. There is also no central planning of generation in Alberta – at least there wasn't until Alberta recently announced its new climate change policies.

Apart from a price cap ($999.99) and a price floor ($0), outcomes in the real-time Power Pool are determined solely by the forces of competition. Participants are free to engage in unilateral strategies in an attempt to mitigate the Pool Price risk, as long as they do not impede competition or physically withhold generation from the market. Generators with plants of 5MW or more must also comply with the "must offer, must comply" rule, which requires them to offer all of their power, that they do not consume on site, to the AIES through the Power Pool. The physical withholding of supply is therefore prohibited, although it can be priced in the supply offer at the discretion of the generator subject to the price cap and the price floor.

In order to sell or buy power through the Power Pool, one must become a Power Pool Participant. A Power Pool Participant must sign an agreement to abide by the ISO Rules (sometimes called the Pool Rules) and the Pool Codes, meet the Power Pool's prudential, technical control, and communication requirements, pay an annual Power Pool Participant fee, and arrange for transmission or distribution access.

Under the EUA, offers to supply power into the Power Pool and bids to purchase power from the Power Pool determine in a spot market, on an hourly basis, the wholesale market price for electricity in Alberta. We explain in more detail below how this works in the section titled "Determining the Pool Price."

2. Transmission

Transmission (high voltage from 72KV to 500KV) is generally regulated in Alberta under a cost-of-service model. Customers (commercial and residential) pay the owners of the transmission systems ("Transmission Facility Owners" or "TFOs") their capital and operating costs, plus a reasonable rate of return.

The TFOs are generally large corporations that operate to transmit electricity long distances in franchised service territories. The use of dedicated service territories in Alberta is slowly changing for new stand-alone transmission projects. For example, Alberta recently used a competitive process to contract for a new transmission line called the Fort McMurray West Transmission Project that will run from Wabamun (west of Edmonton) to Fort McMurray, Alberta.

There are currently four main TFOs in Alberta, namely AltaLink, ATCO, EPCOR and ENMAX.

Notwithstanding that the TFOs own the transmission system in Alberta, the AESO oversees the design and use of Alberta's transmission system to ensure non-discriminatory access for market participants and the safe and reliable operation of the AIES. It provides system access for market participants to the transmission system within the constructs of the Western Electricity Coordinating Council or WECC that governs the interconnected systems of Alberta, British Columbia and 14 of the western United States. Though the AESO determines and develops a need application for new transmission upgrades, it is actually the AUC that approves the AESO need application work and authorizes a new transmission project. The AESO then assigns the project to a TFO. The AESO pays the TFO based on a cost-of-service model. The transmission tariff setting out the costs that the TFO will charge the AESO for the use of its transmission assets must be approved by the AUC. The transmission rate in Alberta is "postage stamp."

As noted above, system access to the transmission system owned by the TFOs is controlled by the AESO. Accordingly, new Alberta generation that will be transmission connected will have to follow the interconnection process that the AESO has designed in order for that new generation to be built and connected to the Alberta transmission system.

3. Distribution

The local distribution (low voltage of less than 25 KVs) at the load centres is also regulated under a cost-of-service model. Customers (commercial and residential) pay the owners of the distribution systems ("Distribution Facility Owners" or "DFOs") their capital and operating costs, plus a reasonable rate of return.

The DFOs deliver electricity to most consumers in Alberta – all except for very large industrial consumers which are connected directly to the transmission lines. These DFOs include ATCO, FortisAlberta, EPCOR (Edmonton), ENMAX (Calgary), approximately 30 Rural Electrification Associations ("REAs") that are cooperatives that distribute electricity to rural areas of Alberta, and municipalities like Red Deer and Lethbridge. The DFOs operate within specific service areas.

The AUC approves the distribution rates in a tariff for investor-owned and certain municipally-owned DFOs. The REAs and some municipalities determine their own tariffs. These tariffs cover the cost of connecting and disconnecting customers, providing new services, operating and maintaining the distribution system and providing meter-reading services. Retailers bill this distribution tariff on consumers' bills.

Unlike the transmission system where access is controlled by the AESO, system access to the distribution system is managed by the DFOs. Accordingly, new distributed generation will have to follow the interconnection process that the DFO in that territory has designed in order for that new generation to be built and connected to its local distribution system.

4. Retail

Retail of electricity in Alberta has been deregulated and is competitive for large consumers, while small consumers (less than 250,000 kWh per annum), mostly residential, have a choice of either signing a contract with a competitive retailer or choosing a regulated rate with their default supplier. The RRO price is set by the AUC based on the Pool Price for the service areas of ATCO, FortisAlberta, ENMAX and EPCOR, while other municipalities and REAs that own distribution systems determine their own RRO price.

There are also some very large industrial customers who act as self-retailers and participate directly in the Power Pool instead of using a third party retailer.

All retailers and self-retailers buy electricity in the Power Pool.

Footnote

1 www.auc.ab.ca/about-the-auc/auc-information/Documents/AUC_Information/AUC_information_electricityAndtheAUC_02.pdf

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 Mondaq.com.

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

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
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
Password
Confirm Password
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.