Written By Jessica Kennedy, Martin Ignasiak, David Macaulay, Larissa Lees, Nathan Green and Siobain Quinton

Background

Nearly two years after receiving Royal Assent, the Government of Alberta proclaimed the Electricity Statutes (Modernizing Alberta’s Electricity Grid) Amendment Act (the Act) on March 6, 2024.¹ The Act, formerly Bill 22, received Royal Assent May 31, 2022, but proclamation was delayed until the related regulations were developed and came into force.

The Act amends key legislation including the Alberta Utilities Commission Act, the Electric Utilities Act and the Hydro and Electric Energy Act. Important supporting regulatory amendments include the updated Hydro and Electric Energy Regulation and the Transmission Amendment Regulation.²

The changes further several initiatives undertaken by the province over the past several years, including an Alberta Utilities Commission (AUC) inquiry on Alberta’s distribution system, and provincial engagement with stakeholders on facilitating energy storage deployment.

The following changes enabled by the Act and supporting regulations include:

Enabling Energy Storage

Proclamation of the Act is expected to facilitate the development and expansion of energy storage in Alberta. The Act provides definitions for "energy storage facility," and "energy storage resources" and the associated amendments to the Hydro and Electric Energy Regulation establish, for the first time, a formal application process for participants wanting to build energy storage facilities in the province. Previously, the treatment of energy storage facilities under the legislation was ambiguous, leading to ad-hoc regulatory treatment by regulators under a regime that did not contemplate the unique aspects of energy storage resources.

At the annual IPPSA conference on March 11, 2024, the Minister of Affordability and Utilities indicated that the government views the Act as an initial step to facilitating demand-side management in the province.

Enhanced Transmission and Distribution Planning

The Act and supporting regulations, including amendments to the Transmission Regulation (T-Reg), also enable the Alberta Electric System Operator (AESO) to procure non-wires services, including energy storage, to address their system planning needs. Previously, the AESO could only make "specific and limited" exceptions to its system planning requirements, including the requirement to plan an uncongested transmission system.³ The "specific and limited" language has now been removed, suggesting the AESO may have greater flexibility in its system planning processes to propose non-wires services more frequently and on a permanent basis moving forward. This change may serve to enhance reliability and cost management by providing additional tools to manage periods of high demand or transmission system constraints and by delaying or avoiding the need to invest in additional transmission wires infrastructure.

Under the amended T-Reg, if the AESO chooses to procure non-wires services, it must competitively procure those services except where:

1. there is only one electricity market participant available;
2. competitively procuring a non-wires service is not feasible or appropriate; or
3. it is more appropriate for technical reasons that the non-wires service be provided by the owner of a transmission facility.

While no changes to the procurement of traditional wires solutions were included in the T-Reg amendment, the Government of Alberta has signaled additional changes to transmission policy—including the T-Reg—are coming, acting on some of the topics it outlined in its 2023 Green Paper (PDF). We discussed these potential changes in our previous post: Change on the Horizon for Alberta's Electricity Regulatory Regime in 2024.

Clarity on Self-Supply and Export

Proclamation of the Act provides clarity to industrial generators currently engaging in self-supply and export and expands opportunities for additional self-supply and export arrangements. Industrial generators have been subject to regulatory uncertainty for several years due to a series of decisions by the AUC in 2019 and 2020 finding that self-suppliers are prohibited from exporting excess electricity to the grid (starting with the EL Smith Decision).⁴

The Act amends section 2(1)(b) of the Electric Utilities Act (EUA) by exempting the portion of electric energy produced by a generating unit that is "self-supply" from application of the EUA in certain conditions. To meet this exemption, the portion of the electricity that is “self-supply” must be produced on a property of which a person is the owner or a tenant and consumed on that same property by that owner or tenant. A third party may own the generating unit and produce the electricity.  If the conditions of section 2(1)(b) are met, self-supply and export of excess electricity to the grid is now permitted.

The EUA and associated regulations previously required power producers to either consume all the electric energy they produced on site, or to offer all the power generated for export to the grid, with limited exemptions. In particular, parties wishing to build large-scale cogeneration capable of self-supply and export previously needed to obtain industrial system designations (ISDs) to do so. However, as noted by the AUC in its 2019 and 2020 decisions noted above, certain legacy generators had been engaging in self-supply and export without an ISD under a policy of implicit forbearance. The recent changes under the Act should provide comfort to legacy generators engaging in self-supply and export, which is now expressly permitted under the legislation.

In summary, the following consumer-generators may now self-supply electricity and export electricity to the grid:

• Industrial operations within an ISD under Section 4 of the of the Hydro and Electric Energy Act;
• Small-scale renewable generators under the Micro-generation Regulation;
• Oil and gas facilities using natural gas that would otherwise be flared under the Flare Gas Generation Regulation;
• Certain municipally-owned generators under the Municipal Own-use Generation Regulation; and
• Self-suppliers that meet the new exemption under section 2(1)(b) of the EUA.

While changes under the Act provide much needed certainty and clarity for power consumers seeking to engage in self-supply and export, the changes also contemplate that the ISO tariff must provide the AESO with a reasonable opportunity to recover “a just and reasonable share” of transmission costs from self-suppliers (except where those self-suppliers are subject to an ISD). Details regarding these tariff changes—which are aimed at limiting incentives for system bypass and transmission cost avoidance—have yet to be determined. Currently, self-suppliers avoid transmission costs associated with the electricity consumed from on-site generation. The lack of clarity on transmission connection costs is likely to impair the ability of those looking to self-supply to accurately assess the economics of investing in on-site generation. Further details on this matter are expected in the forthcoming ISO tariff application, which will be subject to AUC review and approval.  

Winding Down the Balancing Pool

Another change enabled by the Act is the formal winding down of the Balancing Pool. Many of the responsibilities of the Balancing Pool became redundant when the remaining Power Purchase Arrangements (PPA’s) expired in 2020. The proclamation of the Act formally enables the transfer of the Balancing Pool’s remaining responsibilities to another entity, advancing steps to dissolving the Balancing Pool. Order in Council 045/2024 amends the Payment in Lieu of Tax Amendment Regulation to allow for this transition, which will come into force January 1, 2025. 

Next Steps

Proclamation of the Act and its regulations seeks to advance the government’s goals of providing reliable and affordable electricity, promoting low-carbon electricity and meeting the needs of Albertans. Although the changes broadly clarify the major policy decisions related to, and statutory treatment of, energy storage, details regarding implementation will likely be required to clarify when and how energy storage will be utilized in transmission and distribution planning as non-wires alternatives and how such use will be considered in the corresponding tariffs. Similarly, it remains to be seen whether and, if so, what, changes to the ISO tariff will be made to allocate transmission costs to self-suppliers.

Further engagement related to the T-Reg is ongoing and additional changes are expected. For more information on these developments and their potential impacts, Bennett Jones Energy Regulatory group is ready to assist.   

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