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Study: Alberta capacity market could cost consumers up to C$1.44B in 2021-22

Alberta power consumers risk paying as much as C$1.44 billion too much for power if the province's grid operator goes ahead with the planned implementation of a capacity market in 2021, according to a study.

The province's generation resources are more than adequate to delay the implementation of the market reforms, which would have consumers paying as much as 40% too much for power if the change comes as planned in November 2021, the study by EDC Associates Ltd. said. The document was prepared by the Calgary, Alberta-based consultant for the Consumers Coalition of Alberta and submitted as evidence to the Alberta Utilities Commission, which is reviewing the planned change.

"November 2021 appears to be earlier than necessary to introduce a capacity market as the market's existing supply/demand balance more than satisfies the government's minimum target, resulting in the transition requiring consumers to pay more than 40% more for power in 2021-22," the report said. "Any delays in the regulatory proceeding and/or implementation timeline would therefore be a benefit to the consumer without being a detriment to system reliability."

Alberta has been working to reform its deregulated generation market since a government initiative moved up the retirement dates of coal-fired generators that once supplied the bulk of the province's power. The Alberta Electric System Operator, or AESO, was directed to design a capacity market to insure power supplies are adequate to back up renewables that are being brought onto the network. While units at coal-fired plants operated by TransAlta Corp., ATCO Ltd. and Capital Power Corp. have been shut down, others are being converted to run on natural gas to take advantage of cheap, abundant supplies of the fuel. Those conversions have extended the lives of some units slated for retirement.

While the EDC study's estimate of the gross minimum procurement in the capacity market of 18,262 MW for 2021-22 was almost identical to the grid operator's finding of 18,305 MW, it suggests the AESO underestimated some sources of renewable and independent power production. The report said the AESO estimate left out about 60 MW of planned generation from a provincial renewable power initiative, did not include anticipated solar supplies and did not account for so-called price-sensitive load which accounts for as much as 300 MW.

"The 2021-22 fleet exceeds the government's minimum target and so ... EDC estimates that the current fleet could lose approximately 100 MW in order to meet the minimum," the report said. Adding the missing supplies to the grid operator's resource adequacy model could provide a buffer of as much as 400 MW according to the study.

The Alberta Utilities Commission proceeding is No. 23757.