The province has announced that based on recommendations from the Alberta Electric System Operator (AESO) and the Alberta Market Surveillance Administrator, the government is making regulatory changes to improve the rules around economic withholding.
"High and volatile electricity prices are a top concern for Alberta’s government. These changes will encourage more competition, improve reliability and make utility bills more affordable for Albertans," a release from the province stated.
The two temporary policy changes are being implemented via new regulations 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.
According to Nathan Neudorf, Minister of Affordability and Utilities, the previously set-up market rules are out of date.
"..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."
The second change 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."
According to the government, power generators offer to sell their electricity to Alberta’s grid and in an energy-only market, like in Alberta, this 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."
On March 11, AESO also made a statement about the province's announcement, saying that 'The Minister of Affordability and Utilities (MAU) has directed the AESO to move forward with stakeholder engagement and detailed design on our Restructured Energy Market Recommendation (REM Recommendation).'
"The AESO will leverage the collective knowledge of the electricity industry, and work with the Market Surveillance Administrator, to develop the technical design by the end of 2024"
According to the Alberta Utilities Commission (AUC), regulated rate options (RRO were capped at a maximum of 13.5 cents per kWh from January 2023 through March 2023.
"Any excess amounts above that ceiling that weren’t collected from customers were included in a deferral account by the provider that will be collected from the provider’s RRO customers during the recovery period of April 2023 to December 2024. The RRO Stability Regulation stipulates that the remaining deferred amount is to be divided by the number of months remaining in the recovery period."
A graphic provided by the Alberta Utilities Commission (AUC) shows the fluctuations in regulated rate options (RRO) for electricity. (Graphic credit to Alberta Utilities Commission (AUC))The government's announcement comes on the heels of last week's announcement to modernize the province's power grid. On March 6, it was also announced that the Electricity Statutes (Modernizing Alberta’s Electricity Grid) Amendment Act, was put into effect.
"The act and its accompanying regulatory amendments will help Alberta’s electricity system adapt to new technologies and the changing ways that consumers interact with the grid. By modernizing our electricity grid, with the input of Albertans and industry stakeholders, Alberta’s government is continuing to work towards a carbon-neutral electricity grid by 2050."
The legislation includes allowing Alberta businesses to build more energy storage and more on-site power generation with the option to sell excess power to the grid.
"The newly proclaimed regulations will also provide greater opportunities for commercial businesses to generate their own power with the option to benefit from selling their excess energy to the grid."
The province said that currently, Alberta has 190 MW of energy storage connected to the grid, with 398 MW more with approvals and 140 MW under construction. Energy storage currently connected to the grid often supplies contingency reserve services to support grid stability.
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