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The Globe and Mail

Alberta returning to partial regulation of electricity market

Alberta’s current system, known as an energy-only market, allows power generators to sell electricity into a province-wide pool.

Jeff McIntosh/The Canadian Press Images

The Alberta government is preparing to do away with Canada's only deregulated electricity market and return partial government control to the system almost two decades after it was turned over to private competition.

Premier Rachel Notley has long been unhappy with the market-based electrical system created by former premier Ralph Klein. In 2015, her New Democrats campaigned on reintroducing partial regulation to do away with the large price swings seen in recent years and to end any risk of power firms manipulating prices.

With the government now designing an electrical future for Alberta without the coal-fired plants that provide much of the province's power, The Globe and Mail has learned that the government will announce plans on Wednesday afternoon to fulfill that campaign promise.

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The first step took place on Tuesday, when Ms. Notley held a news conference at a private home in her downtown Edmonton riding and announced that she was capping residential power rates at 6.8 cents per kilowatt hour until 2021. An Albertan buying energy at that price would be paying about $40 monthly, according to Ms. Notley.

That cap price is about twice the rate most Albertans currently pay, as power prices have fallen to some of the lowest levels in decades due to oversupply. Ms. Notley's government is concerned that, without some form of regulation, prices could skyrocket as coal-fired plants are phased out.

The Premier dismissed the current system as a failed experiment. "We heard from energy experts that the current market design needs to go," she said, vowing to introduce "smart regulations."

Alberta's current system, known as an energy-only market, allows power generators to sell electricity into a province-wide pool.

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A simple system in theory, the open market doesn't leave the government many options to favour green-power producers or to respond to soaring prices when supply falters. Texas is the only other North American jurisdiction to operate a similarly deregulated market.

"Alberta's energy-only electricity market is broken. It will not bring in the kind of investments that will be needed to power Alberta's future," Mr. Notley said. "Most investors are wary of the volatility in Alberta's unique system."

She vowed to bring the province back into the mainstream of most North American electrical systems. She explicitly ruled out creating a Crown corporation to provide power, as is the case in a number of provinces.

Officials told The Globe the province will announce plans for an electricity model based on a so-called capacity market system. Under that system, the province can plan for demand years ahead and guarantee electrical producers that they will be paid for producing power – even if they can't sell it.

The guarantee is intended to provide an incentive for producers to build new plants, including some that might only be used when wind or solar plants aren't producing enough.

Most of the northeastern United States operates under a capacity market system.

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According to Ms. Notley, the new system will provide "the most cost-effective and least disruptive transition for Albertans and for the very large investment community that also has an interest in Alberta."

She added that Alberta has learned from the soaring power bills in Ontario as that province shifted toward more renewable power, which is why her government announced its cap on power prices before making public plans to transform the power system.

While the province relies on coal power today for most of its electricity, the government has promised to phase out all coal by 2030.

Earlier this week, the federal government announced plans to end all coal-fired power across Canada by the same year.

To replace coal power, Alberta wants 30 per cent of the province's electricity to come from renewables by 2030 and the rest to come from natural gas. Ms. Notley's government has warned that it will cost billions of dollars to convert or build new plants.

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