Recognizing that the scope of change in the electricity sector may require new forms of oversight, the regulator of Alberta’s energy sector has launched a wide ranging inquiry on how the various parties will need to adapt. On December 6, the Alberta Utilities Commission (AUC) announced that it would be leading a public process to examine options for reforming the roles played by electric distributors, regulators and other market participants. Mark Kolesar, AUC Chair, said, “The goal of the inquiry is to take a collaborative approach to map out the key issues related to the distribution system’s future, so the Commission can develop the necessary regulatory framework to accommodate the evolution of the electric grid.”
Two of the key questions to be addressed by the inquiry include the following:
1. Where alternative approaches to providing electrical service develop, how will the incumbent electric distribution utilities be expected to respond and what services should be subject to regulation?
2. How should the rate structures of the electric distribution facility owners be modified to ensure that price signals encourage electric distribution facility owners, consumers, producers, prosumers and alternative technology providers to use the grid and related resources in an efficient and cost effective way?
Alberta’s regulated electric distribution utilities, and the Alberta Electric System Operator, have been directed to take part in the inquiry. The AUC is also inviting the participation of groups and individuals with an interest in the inquiry.
Alberta’s Market Surveillance Administrator (MSA) is likely to be an active participant in the inquiry. It filed a submission with the AUC on January 18, laying out its reasons for proposing changes that would allow electric distribution utilities to begin including Distributed Energy Resources in their rate bases. The letter said, “The MSA agrees with the Commission that new technology requires a new regulatory framework for electricity LDCs in Alberta if the benefits of this new technology are to be realized in a timely fashion. This is important. New technology can effectively reduce the cost of providing electricity in Alberta. … [T]he MSA believes that the technologies at issue are largely local generation, local storage, and rapid EV charging. These technologies exist today but are not being implemented as quickly as they could be. The MSA believes they will be implemented more quickly and in a more cost effective fashion if Alberta electricity distributors have the option of providing the new services as rate-base services.
“The MSA would however add four specific questions:
1. Should electricity LDCs be authorized to provide local generation services? If so, should they be allowed to rate-base these services?
2. Should electricity LDCs be authorized to offer electric vehicle charging services in their service area? If so, should they be allowed to rate-base these services?
3. Should electricity LDCs be authorized to offer storage services in their service area? If so, should they be allowed to rate-base these services?
4. What modification to the regulatory framework is required to prevent electricity LDCs having an unfair competitive advantage over unregulated companies providing the same services?
Scale economies of central generation are being challenged by distributed energy resources (DERs). Scope economies, as between wires and DERs, are growing, blurring the line between ‘natural monopoly’ segments of the industry and those that are potentially competitive.”
The MSA letter was signed by Gordon Kaiser, CEO of the Alberta Market Surveillance Administrator, and former Vice Chair of the Ontario Energy Board.
For further information on the proceeding, interested parties can visit the AUC website at http://www.auc.ab.ca/Pages/distribution-system-inquiry.aspx and look for Proceeding 24116.