Electricity Market
The laws of supply and demand drive Alberta's wholesale electricity market and guide developers’ decisions regarding investment in new generation. A competitive electricity market invites new investment, resulting in new power generation and new export opportunities.Investor confidence in Alberta is demonstrated by the number and value of new projects announced and recently built. This growth provides a foundation of reliable, competitively priced power to reinforce our long-term ability to compete in business at home and abroad now and in the future.
Since the mid 1990s, following steps to restructure Alberta's electricity supply industry, a number of different companies have invested in developing new sources of power for the province. Among these projects are a number of joint ventures involving major utilities, industrial operations and independent power producers.
Several of these projects include co-generation and wind-powered electricity generation. Co-generation, the simultaneous production of heat and electricity, is a way to add highly efficient capacity to the provincial power grid. About 2,300 megawatts or 80 per cent of new generation added since 1998 are co-generation projects (some of Alberta's largest co-generation plants are associated with oil sands development). Since 1998, 297 MW of generation from wind power have been added to the electricity grid and 244 MW are under construction.
How are electricity prices set in Alberta?
Retailers buy electricity in large volumes from the wholesale markets, and then sell the electricity in smaller packages to their customers. The prices residential, farm and small business/commercial customers pay are known as retail prices.
Electricity prices are set when companies that make electricity (generators) offer to sell their electricity to buyers (energy retailers). Energy retailers buy enough electricity to meet their customer supply requirements. Retail rates reflect the prices in the wholesale markets, together with some margin and profit for the energy retailer.
What affects electricity prices?
Wholesale prices are affected by many factors that relate to the supply and demand for electricity. These factors include:
- generation outages
- maintenance down times
- weather/temperature
- provincial growth
- new generation coming on stream
- water levels in dams
- wind
- price of fuel (coal and natural gas) used as generation inputs
- time of day, and time of the year electricity is to be used.
What are the methods used to buy electricity?
Energy providers purchase electricity through a combination of long-term contracts with the generation companies and short-term purchases. Energy providers then sell the electricity to consumers, either at the regulated rate or under contracted terms. Below are some of the methods energy providers use to purchase energy:
- NGX auction
- for more information, go to NGX Auction and click on power auctions
- Alberta Electric System Operator (AESO)
- this is where all wholesale electricity is dispatched and the current wholesale price is provided
- Bilateral agreements
- agreements made between a generator and a retailer
- Power purchase arrangements
- energy that was purchased for terms up to the year 2020 for the generating station’s output
- Forward month index
- an index that shows the upcoming month’s prices
- Request for offers
- is a request for proposal or offers by a company that wants to buy electricity. The company seeks offers from generators to supply the retailer. For regulated companies, the request for offers is done through the NGX.
- Contracts or other methods to ensure customers always have electricity available
- a contract is an agreement between two parties (buyer and seller) on how they will exchange and pay for the energy delivered
Do I have a choice when buying electricity?
Retail customers generally have two options when buying electricity. Customers may lock in their electricity rates by signing one of many contract packages offered by retailers. Customers who do not want to commit to a contract automatically get assigned the regulated electricity rate.
Regulated Rates
Before electricity can be sold to consumers; the retailer’s electricity purchasing method is approved by the Alberta Utilities Commission (AUC). Once approved, the retailer purchases energy and files the energy rate with the AUC. These rates change every month and are posted here. This regulated rate is what consumers pay if they have not signed a contract.
Retail Contracts
If you sign a long-term contract with a retailer there may be times when the contract price is higher than the regulated rate, while at other times it may be lower than the regulated rate. Contract customers can be assured the energy price will be the same for the length of the contract term. Customers can compare current retail rates on this page.
