AESO Pricing Framework: Associate Minister Nally
Associate Minister of Natural Gas and Electricity Dale Nally issued the following statement on the Alberta Electric System Operator’s (AESO) Pricing Framework Recommendations to the Minister:
“In July 2019, our government made the decision to return to the cost-effective and reliable energy-only electricity market, instead of continuing the former government’s unnecessary transition to a capacity market. The decision to return to energy-only was widely applauded by stakeholders – including both traditional and renewable power generators, as well as consumers – who wanted to ensure long-term stability of electricity costs and generation.
“As part of this decision, we asked the AESO to analyze the province’s pricing framework, which sets the maximum and minimum limits that companies can charge for the wholesale price of electricity into Alberta’s power grid. This review was intended to determine whether changes were needed to make the province’s energy-only system even more effective.
“The AESO has completed its report and I am happy to accept its recommendation to maintain the province’s existing electricity pricing framework, as the review reflected widespread support for this. Industry expressed that the existing framework is a transparent and efficient system where ratepayers benefit from the cost stability it provides by limiting price hikes. This report reconfirms that Alberta’s energy-only market delivers the best value for Albertans when it comes to their electricity. The system, as it stands, is working as intended and we thank the AESO for its in-depth review.
“It’s clear that our decision to maintain an energy-only market is already benefiting Albertans. An energy-only market is straightforward to operate and understand – generators are paid only for the energy they produce. We have a proven track record of providing Albertans with an affordable and reliable supply of electricity and offering investors with certainty when building projects in our province. In fact, since our decision to stay with the energy-only market in 2019, Alberta has seen over $1 billion worth of generation projects announced, including just over 1,200 megawatts of renewable projects.
“Staying this course will ensure continued stability for Alberta’s electricity market – benefitting power consumers and helping to attract further private investment and innovation.”
The AESO completed a comprehensive analysis of the current pricing framework’s ability to ensure it effectively communicates market conditions to electricity suppliers.
This ensures they generate the appropriate level of electricity to meet the power needs in the province reliably and affordably at any given time.
This work included a collaborative stakeholder engagement process on the framework, including three separate sessions with 19 stakeholders covering a broad range of market participants, agencies, and various associations.
Alberta’s energy-only pricing framework consists of an offer cap of $999.99/megawatt hour (MW-h), a price cap of $1,000/MW-h, and a price floor of $0/MW-h. Each of these works together to allow the market to operate in a competitive fashion.
The offer cap helps protect consumers from unreasonable prices while providing fair opportunity for generators to recover their fixed and variable costs.
The price cap sets the maximum companies can charge to produce electricity, while the price floor establishes the minimum.
Provincial Press Release August 28, 2020 1:03 pm