Alberta has introduced legislation to formally pull the plug on a fundamental overhaul of the province’s electricity industry.
Energy Minister Sonya Savage says the province will stay with the current energy-only system, where producers are paid for the spot price of electricity, rather than go with the capacity system that was set to take effect in 2021.
“Alberta’s energy-only market has been operating for more than 20 years,” Savage said Thursday after introducing Bill 18. “It has a proven track record for providing a reliable supply of electricity at affordable prices.”
Bill 18 follows up an announcement made by Savage in the summer that the government, after consulting with consumer and industry stakeholders, would scrap the capacity system.
Savage said the feedback was so overwhelming the government made its decision before the consultation period was over.
“There was no need to drag it out,” said Savage.
“We wanted to get a signal to investors quickly that we were staying with the energy-only market.”
The province did not provide details on who Savage met with and what advice she received before scrapping the capacity market plan.
The former NDP government passed legislation late in 2016 to move to the capacity system to ensure no electricity shortages as Alberta moved to replace coal-fired electricity with more natural gas-fired power and renewables like wind and solar.
Capacity markets pay producers for spot prices but also to build up capacity, even if it isn’t needed.
Alberta’s existing energy-only market is composed of publicly traded companies that get paid in the spot market for the power they produce.
As part of the capacity plan, the NDP capped prices at 6.8 cents per kilowatt per hour during the transition to 2021 to shield people from any electricity bill price spikes.
That 6.8 cent cap remains in place and Savage wouldn’t say if the government will keep it.
NDP energy critic Irfan Sabir said the NDP government launched the capacity system to avoid widespread power outages and to deliver price stability for consumers.
He said that is why Savage avoided answering questions on the fate of the rate 6.8 cent cap.
“What we’ve seen before from the energy-only market is rolling blackouts and price spikes,” said Sabir.
“Consumers will suffer because of this decision.”
Alberta’s electricity market is an outlier. Unlike other provinces, Alberta does not have a Crown corporation to produce electricity but instead relies on the free-market.
The system was brought in by the former Progressive Conservative government of Ralph Klein in 1996 to create a competitive market for electricity generation and give investors incentive to build and operate generating plants.
Sabir said Savage’s decision is all about politics.
“This decision is completely ideologically driven and irresponsible,” he said.
Savage countered that far from putting the system at risk, the decision to stay with energy-only has already attracted new projects, including solar and wind generation.
“These investments were enabled because of the security and the investment stability of an energy-only market,” she said.
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