Alberta’s energy marketplace is on the verge of a major overhaul to both its deregulated natural gas and power markets, which, among other things, would converge electricity and gas plans, allow long-term contracts for the retail market, and provide pool price flow-through for power and monthly spot prices “in perpetuity” for gas. With a draft approved already by government and stakeholder groups, the proposals will be considered by the Alberta legislature next spring.

On Wednesday, Energy Minister Murray Smith presented the sweeping reform plan, which he said would offer more independence, accountability and market competitiveness while building on the current framework. Alberta’s wholesale natural gas markets were deregulated in 1986, and small industry was given choice options in 1998. The Power Pool of Alberta was introduced in 1996, leading the way to bring competition to the wholesale electricity markets, and regulated generators followed in 2001. Today, said Smith, there is a “robust” supply-demand balance for the large user, with 22 retailers/marketers to choose from.

“Virtually all industrial consumers buy directly from producers and marketers,” said Smith. “The contracts may be long- or short-term, based on spot prices, or on futures contracts.” The natural gas agreements also are all bilateral. However, the same type of choice has not developed in the retail market for residential, farm and small commercial operations, he said.

Only EPCOR Energy Services Inc. of Calgary and Enmax Energy Corp. of Edmonton serve the small retail market currently. To broaden the choices, the Energy Ministry wants to converge the gas and power markets, and give companies the opportunity to bundle services and offer more benefits. The government also wants more product offerings to allow consumers to have more choices between such things as lowest possible costs or locked-in rates.

“This market will take longer to develop,” said Smith, who noted that there had been “limited success” so far. The Alberta market is “relatively small,” and companies may not consider the efficiencies of scale by operating in the province, he added. With the concern of market dominance by two companies, and reports of poor service in some areas, Smith said the ministry has to fix the problems.

Among other things, the ministry would establish an Independent System Operator (ISO) with an independent governing board; increase the independence of the balancing pool; expand the responsibility of the Market Surveillance Administrator; establish a regulated rate option (RRO) flow-through; and better align natural gas and electricity customer choice.

The Alberta Energy and Utilities Board (EUB) would be given authority to approve distribution and RRO tariffs for municipally owned utilities that have affiliates operating outside their municipal boundaries under the revisions as well. Finally, the ministry wants Medicine Hat’s energy trades to be included under the Payment in Lieu of Taxes regulation.

“Market refinements are a necessary step in the ongoing transition of Alberta’s electricity and natural gas sectors. We want to ensure continued development of a fair and competitive electricity and natural gas marketplace for consumers,” said Smith.

While it won’t mandate their separation, the ministry would remove systemic barriers to inhibit separate ownership between the retail markets, transmission companies and pipeline companies. For example, the EUB would regulate cities’ wires where there is not a separation of ownership. The ministry said separate ownership may increase the overall billing charge in the short term, since the wires or pipelines owner will bill all the retailers at the wholesale level while retailers are responsible to provide a single bill for their customers. The EUB would continue to regulate RRO billing charges.

The policy directions already have been approved by the ministry, which is proposing their implementation in a revised Electric Utilities Act and revised Gas Utilities Act, which would be given to the province’s legislature next spring. For more information on the proposed plan, visit the Alberta Energy Ministry’s web site at https://www.energy.gov.ab.ca/com/default.htm.

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