Understanding the Actors in Alberta's Energy Market

With so many different actors involved, Alberta's energy markets can sometimes appear confusing. Our guide will help you understand who the main actors in the Alberta electricity and gas markets are, and what they do.

Want more information about Alberta electricity and gas markets? Check out our article about how the Alberta electricity and gas markets work to find out more.

Electricity

Important Electricity Legislation

Learn about the history of energy market deregulation in Alberta

Electric Utilities Act, 1996

The 1996 Electric Utilities Act started the process of deregulation of the electricity markets in Alberta. This act required the generation, transmission, and distribution functions of Alberta utilities to separate, though transmission, distribution and retail sale of electricity remained regulated at the time. The retail electricity market opened to competition in 2001, thanks to an amendment made in 1998.

Electricity generation, however, was deregulated straight away. A single market for all electricity to be bought and sold in the province (the Power Pool), was introduced, and served as a spot market for electricity. This power pool also was responsible for dispatching electricity (electricity transmission). It was run by an Independent Systems Operator (which is now known as the Alberta Electric System Operator, or AESO).

Electric Utilities Act, 2003

The 2003 Electric Utilities Act amended the existing 1996 Act and reconsolidated it with subsequent amendments to consolidate them into a single statute. It restructured the Alberta electricity market. Through it, the AESO was introduced as the independent electricity system operator. The Utilities Consumer Advocate was created to represent the interests of Alberta residential and small business energy consumers.

Regulated Rate Option Regulation, 2005

This regulation changed the status of the default regulated rate, from transitional (as had previously been intended for it to be) to a more permanent status. It mandated a new regulated rate that replaced the ‘transitional’ default rate, requiring electricity distribution facility owners to offer a regulated rate to electricity consumers who use less than 250 000 kWh per year. Through this regulation the electricity purchasing requirements were changed in order to introduce the possibility for greater price volatility.

Alberta Utilities Commission Act, 2008

The 2008 Alberta Utilities Commission Act introduced the Alberta Utilities Commission (AUC). The Act establishes the AUC as a corporation consisting of 9 members, who are appointed by the Lieutenant Governor in Council. Members of the AUC can hold terms of a maximum 5 years, but can be reappointed for subsequent terms (always for a maximum of five years). The AUC is required to act in the public interest when conducting a hearing regarding new energy infrastructure planning.

The AUC act also continued the existence of the Market Surveillance Administrator (MSA), which was established by the Electric Utilities Act. The MSA has a fairly broad mandate to ensure openly competitive energy markets, that includes surveillance, investigation and enforcement.

Alberta Electricity Agencies

Utilities Consumer Advocate (UCA)

The Utilities Consumer Advocate (UCA) has existed since 2003 to represent the interests of electricity and natural gas consumers (whether they be residential, small business, and agricultural). The UCA acts primarily as an information source for Alberta electricity consumers. It also educates Alberta energy consumers about their energy options, offers mediation services (in the event of disputes over utility bills), and represents consumers’ interests in policy discussions regarding energy and in regulatory hearings with the AUC.

Find out more about the Utilities Consumer Advocate

Alberta Utilities Commission (AUC)

The AUC is an independent, quasi-judicial administrative tribunal created by provincial law (see the 2008 Alberta Utilities Commission Act above for more information). It regulates investor-owned electric and natural gas utilities, and is responsible for ensuring that utility service in Alberta is delivered a safe, reliable, and fair manner. The AUC approves the costs of operating the province’s electricity system and rules for the wholesale electricity market. Along with its responsibility for planning new electricity transmission construction, the AUC approves rates charged by utilities for electricity transmission and delivery as well as the regulated electricity rates. It also approves of the terms and conditions of service for electricity transmission, distribution, and supply by RRO providers.

The electricity transmission and distribution sections of the electricity market in Alberta are fully regulated, as the economies of scale make them natural monopolies. The AUC acts as a substitute for competition when approving their rates. The AUC must be satisfied that prices proposed by utilities reflect the cost of providing service (not market prices), including a reasonable opportunity for utilities to recover costs and receive a fair return on investment.

The AUC takes a slightly different approach in setting the regulated rate option (RRO) for residential electricity supply. RRO rates must be just, prudent, and market based, and the AUC must be satisfied that RRO providers’ expenditures in providing service are reasonable.

Alberta Electric System Operator (AESO)

The AESO is a not-for-profit corporate entity created under the Electric Utilities Act that is responsible for operating Alberta's energy grid, matching supply to demand throughout the province. It operates Alberta’s wholesale electricity market, and plans and develops the provincial transmission system (including ties with neighbouring provinces and states, and connecting new sources of generation supply). It acts in Albertans’ public interest, has no financial interest/investment in the Alberta electricity industry, and is regulated by the AUC.

The AESO plays an important role in the Alberta Pool prices for electricity. All electricity that is bought and sold in Alberta must be sold on the same wholesale market (pool). This market is operated by the AESO. The AESO sorts supply and demand bids on a lowest to highest order (called the "merit order") so that demand and supply are matched to the lowest possible price. Fluctuations in supply and demand, and therefore also in price, are constantly monitored. The last price of electricity to be dispatched each minute is known as the "System Marginal Price". These prices are aggregated once every hour into the "Hourly Pool Price". The Hourly Pool Price is the time-weighted average of the 60 one-minute sytem marginal prices. This is the price is used to calculate the cost of electricity to be purchased by retail suppliers.

Market Surveillance Administrator (MSA)

The MSA is an independent enforcement agency that protects and promotes competition in Alberta wholesale and retail electricity markets and in retail natural gas markets. It has the power to recommend fines and penalties to the AUC.

Electricity Transmission

As electricity generation facilities are often located in areas far away from where it is consumed, electricity is transferred across high-voltage power lines before it reaches the distribution network.Transmission facility owners in Alberta are private, for-profit entities, but are regulated by the AUC. Planning for new transmission infrastructure is done by the not-for-profit AESO.

There are four major transmission facility owners: ATCO Electric Ltd., AltaLink Management Ltd., ENMAX Power Corporation and EPCOR Utilities Inc. ATCO and AltaLink are both privately owned, while ENMAX and EPCOR are owned by the City of Calgary and the City of Edmonton, respectively.

Transmission Rates

As the AESO is responsible for connecting demand to supply, it contracts with transmission facility owners to acquire access to their systems and transmission services. Transmission facility owners must submit their rates to be approved by the AUC, but ultimately these rates are paid by the AESO for the use of their facilities. The AESO submits its own rate to the AUC, which includes the total price of all of the transmission facility rates plus its own operating costs. This transmission tariff is paid by distribution facilities in order to access electricity transmission service. Electricity distributors pass on the transmission tariff to consumers with no additional mark-up. Transmission tariffs may be adjusted to make them more closely reflect the true cost through the use of rate riders.

Electricity Distribution

Electricity passes to lower voltage distribution lines before reaching its final point of consumption. Local distribution companies ("utilities") own and operate these lines. These include:

• ENMAX, in Calgary
• EPCOR, in Edmonton
• ATCO in Jasper and surrounding regions, and the north, east, and southeast regions of Alberta
• FortisAlberta Inc., in the centre of Alberta (surrounding Edmonton)

Rural Electrification Associations (REA) also own and operate electric distribution systems to customers in certain specific rural regions of Alberta. They are not-for-profit cooperatives, incorporated or continued under the Rural Utilities Act.

Electricity distribution companies are responsible for maintaining and operating the local distribution lines. They start or stop electricity service, perform meter readings and are responsible for responding to emergencies such as power outages and downed lines. Their rates for services are regulated by the AUC.

Electricity Retail Sector

Alberta residents have a choice of their retail electricity provider. Electricity retailers are responsible for providing electricity supply to consumers (residential or industrial), along with related customer service (billing, etc). There are two types of electricity retail suppliers: regulated rate providers and competitive energy retailers. In most cases, they should be contacted first in the event of a question or problem with your electricity. In Alberta, the electricity retailer is the first point of contact for setting up a new account, or for questions about billing or electricity consumption (except for in an emergency such as a power outage, in which case the wires services provider should be contacted).

Regulated Rate Providers

Regulated rate providers sell electricity at rates approved by the AUC. These rates include the costs of both the electricity supply and of providing the associated services, along with a fixed margin for a fair rate of return on investment (find out how the RRO is established). The procedure by which regulated rate providers purchase electricity is also regulated by the AUC.

In most cases, the local distribution company has the opportunity to sell electricity at regulated rates within its service areas.

Competitive Energy Retailers

Competitive energy retailers sell electricity at rates that are not regulated by the AUC. Competitive retailers are licenced by Service Alberta under the Fair Trading Act. They may have different electricity procurement practices from regulated rate providers, and are able to offer a wider range of price options for your energy.

Natural Gas

Alberta Gas Legislation

Gas Utilities Act

The Alberta Gas Utilities Act, originally passed in 1960 but subsequently amended and updated (most recently in 2013), governs natural gas distribution by investor-owned utilities in Alberta. It gives the Alberta Utilities Commission (AUC) the authority to regulate tolls, tariffs, and service standards charged by natural gas utilities, which are to be based on a cost-of-service approach. Under the Act, prices for gas supply, transportation, and related customer service must be “just and reasonable”.

Default Gas Supply Regulation, 2003

The Default Gas Supply Regulation authorizes the existence of a default gas supplier in a gas distribution service area. The default gas supplier is responsible for preparing a default rate that will recover the costs and expenses of providing gas services to customers. The regulation requires that gas supply costs be updated on a monthly basis. Costs and expenses charged to the customer must be "prudent".

Alberta Utilities Commission Act, 2008

The 2008 Alberta Utilities Commission Act introduced the Alberta Utilities Commission (AUC). The AUC has a similar role in regulating Alberta natural gas markets as it does for electricity: it regulates natural transmission, distribution, and sales, including rates charged to consumers, and service standards.

Alberta Gas Agencies

Alberta Utilities Commission (AUC)

The AUC is is an independent, quasi-judicial agency of the province of Alberta. It regulates the utilities sector, and natural gas and electricity markets, and is responsible for ensuring that utility service in Alberta is delivered a safe, reliable, and fair manner. The AUC approves the rates charged by utilities for natural gas transport and delivery, and the regulated natural gas rates. It also regulates the terms and conditions of customer service for regulated rate providers. It regulates some, but not all, of the natural gas transmission pipeline operators in Alberta. Areas under its jurisdiction include the construction of new pipeline transmission facilities, as well as the tolls, tariffs and service regulations of pipeline operators. AUC approval is necessary for the construction of new transmission pipelines in Alberta.

Utilities Consumer Advocate (UCA)

The UCA represents Alberta natural gas and electricity consumers in regulatory proceedings as well as provides information and educational resources about Alberta energy markets to consumers.

Find out more about the Utilities Consumer Advocate

Regulated Natural Gas Rates

Regulated gas supply rates consist of the cost of the natural gas supply and non-energy charges (customer service and billing). The price of natural gas reflects monthly prices, and is not set by the AUC. These prices are known as the “Gas Cost Recovery Rate" (GCRR) for customers of AltaGas Utilities, and the “Gas Cost Flow-Through Rate" (GCFR) for Direct Energy Regulated Services customers, and are intended to pass along the price of natural gas supply at no mark-up.

Gas Transmission

Natural gas transmission companies own the transmission pipelines that transport natural gas from its point of production to the distribution systems. The natural gas transmission companies in Alberta are ATCO Gas & Pipelines Ltd., AltaGas Utilities Inc., and NOVA Gas Transmission Ltd. ATCO and AltaGas Utilities are regulated by the AUC, but NOVA is subject to federal regulation by the National Energy Board. However, the Gas Utilities Act gives the Alberta Utilities Commission the responsibility to approve transmission tariffs in Alberta based on a cost-of service approach.

Gas Distribution

Gas distribution companies own the gas distribution systems that bring gas into consumers’ homes. They are responsible for operating and maintaining these systems, building new distribution systems where required, connecting and disconnecting customers, and providing meter reading services. Their rates for service are regulated by the AUC, based on a cost-of-service approach. Distribution charges include both fixed and variable (per GJ) costs. The gas distribution companies in Alberta are AltaGas Utilities and ATCO Gas.

Gas Retailers

The gas retailers purchase and sell to the consumer the natural gas that is delivered to them, and are responsible for billing and being the consumer’s primary point of contact. There are two categories of gas retailers:

1. Regulated rate providers: AltaGas Utilities and Direct Energy Regulated Services.
2. Competitive retailers: These include Direct Energy, Encor by EPCOR, ENMAX, and Just Energy

Regulated rate providers provide a 'default' rate option for consumers who do not wish to enter into a competitive contract. This rate is regulated by the AUC, based on a cost-of-service approach, with an allowance for a reasonable rate of return. Regulated retailers must follow a procurement procedure that has been approved by the AUC.

Competitive retailers' rates and procurement policies are not regulated by the AUC. They enter into contracts to provide consumers with gas supply at fixed or variable rates. As is the case for electricity, they are licenced under the Fair Trade Act by Service Alberta