Under a new proposed provincial electricity system, producers in areas where line capacity is at a premium, like the City of Medicine Hat, could face further dwindling profits as they are forced to sell to the grid at discounted pricing.--NEWS FILE PHOTO
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Power producers in areas of Alberta where line capacity is at a premium could face discounted selling prices compared to the rest of province, according to a new proposal from the government to redesign Alberta’s electricity market.
That would likely include southeast Alberta, where City of Medicine Hat power officials are studying how an ongoing remake of the provincial system will affect the publicly owned power plant when they are in place two years from now.
It is already a struggle to match export profits from previous years, according to financial reports and statements from top officials.
It faces the same limitations to export as wind and solar facilities that can flood the system with power depending on weather conditions.
Consultations on the transmission plan and “Restructured Energy Market” (REM) are expected to continue this year for a changeover in early 2027.
“We’re actively engaging in the REM design element (consultations) and will continue,” said Travis Tuchscherer, the city’s manager of energy marketing and business analysis.
“In the bigger picture, we’re looking at how congestion will now be (considered as) part of the transmission system, and potentially localized marginal pricing to deal with that congestion. Those will have impacts on us, and we’re keen to see what that looks like.”
Major lines in the southeast region of the province have seen ordered curtailment – affecting all producers, including the city – over the past two years as wind and solar projects pump massive amounts of energy at certain times onto the grid. More than $3 billion in line upgrades are proposed by the system operator to relieve that strain, but the provincial government has said a priority is keeping transmission costs low by avoiding upgrades as much as possible, or by implementing new cost principles on new generation projects.
Utility Minister Nathan Neudorf told the News some consideration for incumbents is being considered in overall grid planning, but the market-based approach will drive new facilities to areas where line capacity exists.
“We see a high degree of investor confidence as we’re moving ahead,” said Neudorf, arguing that some areas are seeing clusters of wind and solar facility continue to grow with new proposals.
“That’s caused considerable division within the renewables sector. Incumbents are conflicted because new entrances are causing further congestion and curtailments, and making investments less valuable and less economically viable.
“While this is adding some correction and responsibility immediately, the industry and development in the province is not static. It will continue to grow and we’ll continue to build transmission lines and storage to help enable more development and growth, but it will be more thoughtfully considered.”
More information will be made available to generators in May as consultations continue, said Tuchscherer, who stressed the proposal on regional pricing hasn’t yet been made available.
In the southeast, where the City of Medicine Hat offers its power alongside large amounts of wind and solar, the municipal power company would be in the same, theoretically lower-priced sub-market.
Essentially, where there is greater competition to put power on constrained lines, bidding would be compartmentalized within the area, or node, rather than as part of the entire market.
Those lower regional prices wouldn’t stay in the region for customers however, but be averaged across the province-wide price, said Neudorf.
The city’s power plant sells surplus energy to the Alberta grid, but it only bids to supply power at rates that meet its production costs and profit expectations.
Those times have been fewer in the past year as the Alberta market moved to an over supplied position.
In 2023, the energy division produced a dividend of $134 million to municipal reserves as the provincial market hit record-high pricing, but exports fell in 2024 and profits declined 90 per cent.
Administrators have already signalled they do not expect to see strong pricing return for several years at least.
Changes to transmission access charges should have less impact on the city as a mature producer, said Tuchscherer.
Local officials believe the potential addition of Saamis Solar to the city’s internal system (boosting peak production by about 20 per cent), would not trip transmission payment requirements.
