Thread by @JenniferYeremiy

In support of @TheRealDKGray's Alberta electricity market issue, here's what I've learned from Sheldon Fulton (an energy market consultant living in Calgary who has had an active role in the evolution of Alberta’s power market since 1996). 🧵1/

Remember: the UCP “Alberta Affordability Action Plan” included a price cap and deferral for individual homes on the variable regulated rate (RRO) option in cents/kWh. If you’re on a fixed contract, this program has not impacted you. 2/

Note: the green line is the price cap of 13.5 cents. Anything not paid above that is being deferred.
The Jan to March capped period of ~$200 million is being recovered as an energy surcharge of 2.5 cents/kWh for the next 21 months.

The AAA Plan is a “buy now, pay later” deal.3/

Back in 2020, in response to electricity generators seeking “Fair, Efficient and Open Competition”, then Energy Minister @sonyasavage re-instated an “economic withholding” clause that allows generators to set their own price. 4/

Economic withholding is a form of market manipulation that allows prices to be driven higher by withdrawing available generating capacity during periods of tight supply and demand. 5/

As the Alberta electricty pricing mechanism uses the one-price-for-all process, withdrawing supply drives up the price for all generation dispatched. This behaviour was specifically not allowed for the first ten years of de-regulation... 6/

partially motivated by the practices of companies such as ENRON in 2000/01 in California. After significant lobbying by the generators with the MSA and government, it was allowed in 2011 within a policy referenced as OBEG (Offer Behaviour Enforcement Guidelines)... 7/

to ensure new investments in generating capacity as investors would add generation if prices got too high. This reasoning didn’t hold as prices moved very low in 2015 (see 11/ image). A new policy to address the need for an added generation was introduced as a capacity market. 8/

The OBEG guidelines were revoked in 2017.

The reinstatement of an "economic withholding" policy in 2020 that allows for market manipulation when the concern for market power increased significantly with the end of the Power Purchase Arrangements in January 2021... 9/

resulting in just four companies controlling 60% of the offer supply – recognizing that a very significant portion of the remaining 40% of offer supply is co-gens in oilsands producing steam for oil extraction. 10/

Since the change in 2020, the prices electricity users are paying (orange bars) is higher 50% higher than historical prices and well exceed the historical relationship to natural gas itself (blue line). 2021 was the first year AESO prices averaged over $100/MWh, ... 11/

eclipsed by 2022 at $165/MWh – with 2023 currently on target for $157/MWh with gas prices sinking to $2.25/Gj – resulting in a Market Heat Rate (MHR) mark-up around 70 times the cost of natural gas! Historical margins were 15 to 20 times. 12/

Note: currently, there is no buyer in our electricity market. The “price” of electricity in Alberta is based on the cost to generate a coal unit for electricity. Before 2020, the regulator (MSA), had the ability to determine and ensure generators adhered to a fair market... 13/

with regard to “counterfactual pool pricing”. With the addition of “economic withholding,” the UCP gave the producers free rein to disregard the MSA. Each month in 2022, energy generators took higher pricing (blue) than the MSA declared as FAIR. 14/

For twenty years, Albertans paid an average of $4.2 billion in electricity per year. In the past ten years $40.7 billion… in the last 3: $37.2 billion. Over-valued by ~85%, should be $20 billion according to our regulator (MSA)!!! This information is ALL PUBLIC. 15/

This is a snapshot of how the market price manifests on a given day (April 21, 2023). Note the high prices (blue) during ramp-up and down of peak usage (in grey, the 30-day rolling average price is in orange.

And the capper… 16/

Look who is receiving a premium to pool pricing, the winner: duel fuel (yes, coal and gas) are receiving the highest price in 2020, followed by natural gas (simple cycle), then gas/steam, then solar, hydro… last but not least, wind power is receiving a discount to MSA pricing17/

Now, what does any of this have to do with a carbon tax? You got it, nothing! We are all complaining about carbon tax meanwhile the price of electricity is UNREGULATED and overriding any carbon tax-related cost to consumers by a landslide! 18/

What to do about it? The Alberta Utilities Commission (AUC) will conduct a review process should they receive an Energy Market complaint but you must notify your utility service provider first. 19/ auc.ab.ca/auccomplaintfo…

What I will do about it as your @AlbertaPartyNW MLA 1) policy - seek to remove “economic withholding”, ensuring Albertans are the primary market 2) give the MSA back its whistle and 3) ensure the system incentivizes clean energy generation considering the entire life-cycle./end

#AbPoli #AbLeg #AbElection2023