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Alberta

Federal electricity regulations threaten Albertans with high costs and power outages

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Alberta responds to dangerous federal electricity regulations

Alberta has submitted detailed analysis showing why proposed federal regulations will threaten the province’s electricity grid.

Alberta is rapidly reducing emissions and targeting a carbon-neutral grid by 2050. Electricity emissions have declined by 53 per cent since 2005 and the province will have phased-out all coal generation by early 2024.

However, in August, the federal government released its draft Clean Electricity Regulations, which propose rigid rules to try and achieve net-zero electricity by 2035.

Based on expert analysis and industry consultations, Alberta’s government has submitted a detailed response outlining the technical problems with these regulations. The province’s analysis found that these regulations are unrealistic, ineffective and could compromise grid reliability to an unacceptable degree, resulting in the very real risk that Albertans will not have access to an essential service, like power, when they need it.

“These regulations are irresponsible and reckless, setting unrealistic targets and even banking on technologies that don’t exist. They will result in Albertans shouldering an unbearable cost for an electricity system that will no longer deliver the safety, reliability and affordability upon which our lives depend. We will not permit these dangerous and unconstitutional regulations to be imposed upon our province.”

Danielle Smith, Premier

“The standards and enforcement that Ottawa is proposing would put the safe, reliable and openly competitive market of Alberta’s electricity system at risk, all for targets that aren’t feasible or realistic. We cannot allow the reliability of our electricity to be compromised and risk public safety during the coldest months of the year, when people need the power most. We urge Ottawa to abandon these regulations and work with us on a realistic path that aligns with our own emissions-reduction goals.”

Rebecca Schulz, Minister of Environment and Protected Areas

Some of the key problems outlined in Alberta’s technical submission include:

Flawed modelling creates unrealistic targets

The modelling tools used by the federal government lack the capability to properly assess Alberta’s energy-only market, including the province’s large share of cogeneration. The federal tools also use incomplete proxies to evaluate system reliability, leading them to drastically underestimate the negative impacts.

The federal modelling also relies heavily on technologies that are currently not ready to be deployed, assuming that they will soon be easily or quickly available. As a result, the federal modelling offers an unreliable and inaccurate picture of the costs, impacts on reliability and outcomes of these regulations. With better modelling, the federal targets would be unachievable.

Unachievable standards

The regulations propose unachievable emission standards, with limited flexibility and using a rigid approach that will not work. The standard is also based on unproven design specifications that will be very challenging for operators to meet, even under optimal conditions, and potentially impossible given the operational variability that occurs in electricity grids on a daily basis.

Notably, Ottawa’s standard is significantly higher than those proposed in the United States in May. Standards need to be based on actual performance.

Creating a retirement cliff

The proposed regulations set an end of prescribed life of 20 years, despite the typical operating life of natural gas units being closer to 45 years. This will create stranded assets and massive retirement “cliffs,” as large numbers of natural gas facilities go off-line.

Approximately 55 per cent of Alberta’s existing and approved natural gas generation installed capacity would be subject to the federal emissions standard by 2035. The unnecessary retirement of best-in-class natural gas units would have massive negative impacts on Alberta’s electricity system.

A one-size-fits-all approach won’t work

It is clear that the federal government drafted these regulations based largely on the electricity systems of Canada’s three largest provinces, which primarily rely upon hydroelectricity and nuclear energy.

Regional differences must be recognized, including flexibilities for those jurisdictions most negatively affected by the regulations. When Ottawa exempted home heating oil from the carbon tax, they recognized the need for this flexibility. Alberta and all provinces deserve the same consideration.

Flawed understanding of natural gas

Alberta currently relies on natural gas for more than 70 per cent of its generation. Alberta’s grid reliability is maintained through natural gas generation to backup and balance intermittent sources of power such as wind and solar. Considering the seasonality of renewable resources, Alberta anticipates the need for efficient high-capacity abated natural gas units for decades to come.

The regulations are so rigid and strict that they will effectively make it economically unviable for companies to build and operate natural gas facilities, including abating emissions through carbon capture, utilization and storage (CCUS).

Inflexible and punitive compliance options

The draft regulations are unnecessarily punitive with inflexible compliance options. As written, generators must not emit or they could face criminal penalties under the Canadian Environmental Protection Act, which includes a threat of incarceration. The regulations also increase red tape, increase costs, and offer very little flexibility for industry.

Limiting new technologies

The proposed federal electricity regulations will limit the adoption of important new technologies like hydrogen and CCUS by setting unproven and unrealistic performance standards for facilities. This imposes high costs, introduces investor risk, and creates challenges such as older facilities not being able to upgrade or retrofit new technologies. The result will be added costs and grid reliability risks.

Risks to reliability and safety

Alberta requires reliable electricity power in periods when intermittent sources are not generating. In December 2022, the 5,000 megawatts of installed renewable capacity generated as little as 187 megawatts of energy at one point during a period of cold weather with little wind or solar generation. Natural gas was needed to keep the province from experiencing blackouts.

The proposed allowable peaking provisions – needed to ensure that power is available at any time, under any weather conditions – will result in Alberta not having enough power available when needed most. This is dangerous and irresponsible. The proposed low annual-run-hour limit and emissions restrictions do not enable natural gas assets to respond when needed to increasing demands and the variability of intermittent generation.

A ridiculous approach to emergencies

The proposed treatment of emergencies is unacceptable. It is untenable for the federal government to require post-emergency sign-off by a federal minister. Alberta’s provincial system operator knows best when we have an emergency, not politicians in Ottawa. Provinces must have flexibility to call on generators during emergencies to protect the safety and security of families and businesses, without the threat of punitive action on system operators or generators.

Inadequate financial support for those hit hardest

The federal government released the draft regulations without providing the financial supports needed to enable this transition. Any claims otherwise are false. Federal modelling indicates the regulations will cost $58 billion – since 60 per cent of the net costs will fall on Alberta, the province should receive 60 per cent of the necessary federal funding. Also, the $58-billion figure is likely incorrect as it’s based on flawed modelling and does not adequately consider the distribution and transmission and other costs that will be required. Other third-party assessments further estimated the costs reaching into the trillions.

Next steps

Alberta continues to call on the federal government to respect jurisdictional authority and the enshrined rights and responsibilities of the provinces. The Supreme Court of Canada’s decision on the Impact Assessment Act confirmed the unconstitutionality of the federal government’s ongoing efforts to interfere with electricity and natural resource sectors of all provinces.

The Alberta-Ottawa working group continues to discuss how to bring Ottawa’s efforts to achieve carbon neutrality in the economy in line with Alberta’s Emissions Reduction and Energy Development Plan. If this alignment is not achieved, Alberta will chart its own path to protect its citizens and economy by ensuring the province has additional reliable, affordable and sustainable electricity brought onto the power grid.

Alberta officials will continue to share technical information and analysis on these regulations with the federal government as required to achieve a more practical and realistic approach.

Quick facts

  • Alberta has reduced electricity emissions by 53 per cent since 2005.
  • According to Canada’s Constitution, legislating and regulating the development of electricity explicitly falls within the jurisdiction of the province (92A (1) (c)).
  • The Alberta Electric System Operator found that Alberta would face disproportionate risk and costs, compared with other provinces, as a result of the federal electricity regulations.
  • The Public Policy Forum previously indicated that the cost of the federal electricity approach could be more than $1 trillion and as high as $1.7 trillion.

Alberta

Alberta’s fiscal update projects budget surplus, but fiscal fortunes could quickly turn

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From the Fraser Institute

By Tegan Hill

According to the recent mid-year update tabled Thursday, the Smith government projects a $4.6 billion surplus in 2024/25, up from the $2.9 billion surplus projected just a few months ago. Despite the good news, Premier Smith must reduce spending to avoid budget deficits.

The fiscal update projects resource revenue of $20.3 billion in 2024/25. Today’s relatively high—but very volatile—resource revenue (including oil and gas royalties) is helping finance today’s spending and maintain a balanced budget. But it will not last forever.

For perspective, in just the last decade the Alberta government’s annual resource revenue has been as low as $2.8 billion (2015/16) and as high as $25.2 billion (2022/23).

And while the resource revenue rollercoaster is currently in Alberta’s favor, Finance Minister Nate Horner acknowledges that “risks are on the rise” as oil prices have dropped considerably and forecasters are projecting downward pressure on prices—all of which impacts resource revenue.

In fact, the government’s own estimates show a $1 change in oil prices results in an estimated $630 million revenue swing. So while the Smith government plans to maintain a surplus in 2024/25, a small change in oil prices could quickly plunge Alberta back into deficit. Premier Smith has warned that her government may fall into a budget deficit this fiscal year.

This should come as no surprise. Alberta’s been on the resource revenue rollercoaster for decades. Successive governments have increased spending during the good times of high resource revenue, but failed to rein in spending when resource revenues fell.

Previous research has shown that, in Alberta, a $1 increase in resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year (on a per-person, inflation-adjusted basis). However, a decline in resource revenue is not similarly associated with a reduction in program spending. This pattern has led to historically high levels of government spending—and budget deficits—even in more recent years.

Consider this: If this fiscal year the Smith government received an average level of resource revenue (based on levels over the last 10 years), it would receive approximately $13,000 per Albertan. Yet the government plans to spend nearly $15,000 per Albertan this fiscal year (after adjusting for inflation). That’s a huge gap of roughly $2,000—and it means the government is continuing to take big risks with the provincial budget.

Of course, if the government falls back into deficit there are implications for everyday Albertans.

When the government runs a deficit, it accumulates debt, which Albertans must pay to service. In 2024/25, the government’s debt interest payments will cost each Albertan nearly $650. That’s largely because, despite running surpluses over the last few years, Albertans are still paying for debt accumulated during the most recent string of deficits from 2008/09 to 2020/21 (excluding 2014/15), which only ended when the government enjoyed an unexpected windfall in resource revenue in 2021/22.

According to Thursday’s mid-year fiscal update, Alberta’s finances continue to be at risk. To avoid deficits, the Smith government should meaningfully reduce spending so that it’s aligned with more reliable, stable levels of revenue.

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Alberta

Premier Smith says Auto Insurance reforms may still result in a publicly owned system

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Better, faster, more affordable auto insurance

Alberta’s government is introducing a new auto insurance system that will provide better and faster services to Albertans while reducing auto insurance premiums.

After hearing from more than 16,000 Albertans through an online survey about their priorities for auto insurance policies, Alberta’s government is introducing a new privately delivered, care-focused auto insurance system.

Right now, insurance in the province is not affordable or care focused. Despite high premiums, Albertans injured in collisions do not get the timely medical care and income support they need in a system that is complex to navigate. When fully implemented, Alberta’s new auto insurance system will deliver better and faster care for those involved in collisions, and Albertans will see cost savings up to $400 per year.

“Albertans have been clear they need an auto insurance system that provides better, faster care and is more affordable. When it’s implemented, our new privately delivered, care-centred insurance system will put the focus on Albertans’ recovery, providing more effective support and will deliver lower rates.”

Danielle Smith, Premier

“High auto insurance rates put strain on Albertans. By shifting to a system that offers improved benefits and support, we are providing better and faster care to Albertans, with lower costs.”

Nate Horner, President of Treasury Board and Minister of Finance

Albertans who suffer injuries due to a collision currently wait months for a simple claim to be resolved and can wait years for claims related to more serious and life-changing injuries to addressed. Additionally, the medical and financial benefits they receive often expire before they’re fully recovered.

Under the new system, Albertans who suffer catastrophic injuries will receive treatment and care for the rest of their lives. Those who sustain serious injuries will receive treatment until they are fully recovered. These changes mirror and build upon the Saskatchewan insurance model, where at-fault drivers can be sued for pain and suffering damages if they are convicted of a criminal offence, such as impaired driving or dangerous driving, or conviction of certain offenses under the Traffic Safety Act.

Work on this new auto insurance system will require legislation in the spring of 2025. In order to reconfigure auto insurance policies for 3.4 million Albertans, auto insurance companies need time to create and implement the new system. Alberta’s government expects the new system to be fully implemented by January 2027.

In the interim, starting in January 2025, the good driver rate cap will be adjusted to a 7.5% increase due to high legal costs, increasing vehicle damage repair costs and natural disaster costs. This protects good drivers from significant rate increases while ensuring that auto insurance providers remain financially viable in Alberta.

Albertans have been clear that they still want premiums to be based on risk. Bad drivers will continue to pay higher premiums than good drivers.

By providing significantly enhanced medical, rehabilitation and income support benefits, this system supports Albertans injured in collisions while reducing the impact of litigation costs on the amount that Albertans pay for their insurance.

“Keeping more money in Albertans’ pockets is one of the best ways to address the rising cost of living. This shift to a care-first automobile insurance system will do just that by helping lower premiums for people across the province.”

Nathan Neudorf, Minister of Affordability and Utilities

Quick facts

  • Alberta’s government commissioned two auto insurance reports, which showed that legal fees and litigation costs tied to the province’s current system significantly increase premiums.
  • A 2023 report by MNP shows
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