Less than a week after Alberta’s last coal fired power plant was officially shut down the UCP government has enacted electricity market changes it says will prevent future price spikes.On Wednesday it announced what it described as “temporary” fixes to address the issue of so-called ‘market withholding’ where producers reserve spare power in order to ensure higher prices.In Alberta’s private energy-only market — the only one of its kind in Canada — power generators are only paid for the power they generate. .Under the system, the lowest priced electricity is bought and dispatched to the grid first. To ensure generators are able to recoup their cost of production, the existing rules allow them offer their power at prices above their marginal cost.In a statement, the department of Utilities and Affordability said economic withholding was initially designed two decades ago — when coal was the dominant source of power — as a legitimate tool to encourage new investment in the Alberta’s power market, leading to lower prices in the long-term. That all changed when the accelerated phaseout of baseload coal six years early and the ensuing emphasis on intermittent renewables altered Alberta’s supply mix. The negative impacts of economic withholding would normally be offset by having adequate competition in the market. However, the accelerated coal phaseout “significantly increased the impact of economic withholding on ratepayers, beyond the original intent of the policy.”.“Albertans need to have affordable and reliable power.Utilities Minister Nathan Neudorf.This led to Albertans seeing prices spike on their power bills, as competition was no longer able to offset the negative impacts of the economic withholding practice, it said.Under a complicated formula the Alberta government is essentially limiting the offer price for large generators if their net revenue exceeds a certain threshold. In addition, it will require natural gas pants to be on line in times of high demand.The changes come into effect July 1 and expire in 2027. Meanwhile, work continues to modernize the entire electricity system.“Albertans need to have affordable and reliable power. That’s why our government is taking action to prevent price spikes on their utility bills, while ensuring the grid has a reliable supply of generation. These new regulations are just the start of how our government is working to modernize Alberta’s electricity system,” Utilities Minister Nathan Neudorf said.
