The 2017 Alberta Budget: Highlights for the Electricity Industry

Alberta Premier Rachel Notley continued to spar this week with Saskatchewan Premier Brad Wall over which approach – austerity versus stimulus – works best in these tough economic times for the two oil dependent provinces. For those who have not followed Prairie politics, the Alberta Budget released earlier this month calls for a $10.3 billion deficit (much the same as last year’s deficit) while the Saskatchewan Budget also released earlier this month calls for only a $685 million deficit. AlbertaPowerMarket.com tries to remain politically neutral, so we will stay out of that fight, but we thought it was worth scanning through the Alberta Budget to see how Alberta’s electricity industry fits into this year’s Alberta Budget.

One thing that is clear from the Alberta Budget is that Alberta’s Climate Leadership Plan (CLP) has its own budget/fiscal plan with its own sources and uses of funds.  This is the part of the Alberta Budget where one finds most of the money to be taken from, and given to, the electricity industry in the Province.

The sources of funds for CLP total $5.4 Billion over the next 3 years, with $4 Billion raised from the Province’s carbon levy implemented generally in Alberta at the beginning of 2017 on fuel use other than the use of electricity.  The remaining $1.4 Billion will be raised from the cash payments to be made by large industrial emitters (including large thermal electricity generators) to comply with the current Specified Gas Emitters Regulation (SGER) and its successor coming next year. We have written about the latter source of revenue from large industrial emitters in the past New Alberta Carbon Levy Methodology to Impact Thermal Generators and Electricity Prices, and are watching with interest Alberta’s output-based allocation system engagement and its implications for a post-SGER world, found here .

The uses of funds from CLP also total $5.4 Billion over the next 3 years, and include $1.5 Billion in carbon levy rebates for low and middle income households, $.6 Billion to implement a small business tax reduction (somehow linked to CLP), and the following additional initiatives that will be important for the electricity industry:

  1. $.6 Billion to be spent on energy efficiency initiatives and small scale renewable energy projects. This is the bucket of money that will fund the solar programs we have previously described at AlbertaPowerMarket.com Sun is Rising on Alberta’s Solar Industry, and other programs for homeowners and businesses to reduce their electricity bills;
  2. $.2 Billion to be spent to help Indigenous communities reduce energy costs and create jobs in renewable energy;
  3. $.3 Billion to be paid as compensation to the coal plant owners whose coal plants will be forced to close prior to the end of their useful life; the balance of the $1.1 Billion total liability ($97 million per year over 14 years on a present value basis) will be paid out to those coal plant owners until 2030;
  4. $1 Billion to be spent to support renewable power, innovation and technology, adjustment funding for coal communities, and trade-exposed businesses. This will fund the payments to generators who are successful under the Alberta Renewable Electricity Program, including this year’s 400 MW procurement for renewable electricity in Alberta that begins this week; and
  5. $1.2 Billion to fund green infrastructure projects such as transit, municipal infrastructure and upgrades to schools and hospitals to reduce emissions and energy costs – stay tuned to see where this money will go.

Besides highlighting these buckets of money available in Alberta for the electricity industry, the Alberta Budget also reiterates Alberta’s:

  1. commitment to phase out pollution from coal-generated electricity by 2030 and to triple renewable electricity supply so that it accounts for 30% of generation by 2030; and
  2. promise to cap electricity rates for residential and small commercial consumers at 6.8 cents per kilowatt hour for the next 4 years which AlbertaPowerMarket.com has already described for you Alberta to Cap Electricity Rates and Bring in a Capacity Market .

All in all, there was nothing new announced for the electricity industry in the Alberta Budget. However, the Alberta Budget does provide us with a good snapshot of the buckets of money that are now available in the Province under CLP for the electricity industry to access.  It also demonstrates that the electricity industry has suddenly become an important piece of Alberta’s budgeting process – something that most of us in the industry find very surprising for this Province.

Kent D. Howie and Alan L. Ross

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