High and volatile electricity prices are a top concern for Alberta’s government. Based on recommendations from the Alberta Electric System Operator and the Alberta Market Surveillance Administrator, the government is making regulatory changes to improve the rules around economic withholding. These changes will encourage more competition, improve reliability and make utility bills more affordable for Albertans.
“Our government is committed to Alberta’s unique and investor-driven energy-only market. However, the market’s rules were designed 25 years ago, and some are no longer optimal for the system today. This will truly make a difference by helping lower Albertans’ utility bills.”
Every hour of every day, power generators offer to sell their electricity to Alberta’s grid. An energy-only market, like in Alberta, only compensates generators for the volume of power they generate. To drive competition, the lowest priced electricity is bought and dispatched first. Generators will sometimes offer their electricity at very high prices to recoup their production costs causing economic withholding. When done by large generators, it can result in higher prices for Albertans.
The negative impacts of economic withholding are usually offset by competition. Longer periods of higher prices, like Albertans have seen over this past year, signal the need to increase competition in the province’s electricity market and help lower prices again. To protect consumers from prolonged spikes in electricity prices, the government has implemented two temporary measures that ensure Alberta has enough power generation available to meet Albertans’ needs, as well as limit the impacts of economic withholding on utility bills.
The two temporary policy changes are being implemented via new regulation and an amendment to the AESO’s rules. The first addresses economic withholding by limiting the offer price of natural gas generating units owned by large generators, if net revenues cross a predefined threshold. The second will address physical withholding, by requiring natural gas generating assets to be made available, as directed by the AESO, in certain circumstances such as extreme weather and other times of peak demand. These two changes still allow generators to earn revenue while ensuring Albertans have access to affordable and reliable power.
Alberta’s government is encouraging investment in the electricity market so that the province’s energy sector can continue to create jobs in the long-term, while making sure electricity is affordable for Albertans. These temporary solutions are part of a larger, long-term effort to modernize Alberta’s electricity grid, ensuring it’s affordable, reliable and sustainable for generations to come.
Quick facts
- Alberta’s energy-only market is highly attractive to investors, and there are over 6,000 megawatts of new generation currently under construction in Alberta.
- The Alberta Electric System Operator manages and operates the provincial power grid on behalf of the Alberta government.
- The Market Surveillance Administrator is a public agency that protects and promotes the fair, efficient, and openly competitive operation of Alberta's electricity and retail natural gas markets.