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New UserAlberta alters electricity regs to factor coal shut down and mandate gas in peak periods
28 Jun 2024
Less than a week after Alberta’s
last coal fired power plant was officially shut down the UCP government has
enacted electricity market changes it says will prevent future price spikes.
On Wednesday it announced what it
described as “temporary” fixes to address the issue of so-called ‘market
withholding’ where producers reserve spare power in order to ensure higher
prices.
In Alberta’s private energy-only
market — the only one of its kind in Canada — power generators are only paid
for the power they generate.
Alberta’s first coal plant
in Edmonton Alberta Archives
Under the system, the lowest
priced electricity is bought and dispatched to the grid first. To ensure
generators are able to recoup their cost of production, the existing rules
allow them offer their power at prices above their marginal cost.
In a statement, the department of
Utilities and Affordability said economic withholding was initially designed
two decades ago — when coal was the dominant source of power — as a legitimate
tool to encourage new investment in the Alberta’s power market, leading to lower
prices in the long-term.
That all changed when the
accelerated phaseout of baseload coal six years early and the ensuing emphasis
on intermittent renewables altered Alberta’s supply mix.
The negative impacts of economic
withholding would normally be offset by having adequate competition in the
market. However, the accelerated coal phaseout “significantly increased the
impact of economic withholding on ratepayers, beyond the original intent of the
policy.”
Under a complicated formula the
Alberta government is essentially limiting the offer price for large generators
if their net revenue exceeds a certain threshold. In addition, it will require
natural gas pants to be on line in times of high demand.
The changes come into effect July
1 and expire in 2027. Meanwhile, work continues to modernize the entire
electricity system.
“Albertans need to have affordable
and reliable power. That’s why our government is taking action to prevent price
spikes on their utility bills, while ensuring the grid has a reliable supply of
generation. These new regulations are just the start of how our government is
working to modernize Alberta’s electricity system,” Utilities Minister Nathan
Neudorf said.