Alberta power grid operator under investigation by watchdog

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Alberta’s market watchdog is investigating the operator of the province’s power grid for possible contraventions of its duty to provide a reliable and fair electricity system.

The investigation by the Market Surveillance Administrator is the latest blow to the Alberta Electricity System Operator, which has battled with the fallout of repeated outages of gas-fired power plants and overestimated renewable generation that have resulted in rolling blackouts across the province.

And it follows a lengthy complaint lodged about the AESO by an energy company owned by Warren Buffett’s Berkshire Hathaway Inc., BRK-B-N called BHE Canada. It accused the grid operator of limiting electricity imports from Montana, which it says jeopardizes renewable power investment in the state and could cost Alberta consumers billions of dollars.

Alberta’s power market is unique in Canada in that it has no central or Crown power provider. Instead, private companies run the power plants that feed electricity into the grid. The AESO works with industry and the government to manage and plan that market.

The MSA launched its investigation on April 4, according to documents filed with the Alberta Utilities Commission, the same day thousands of Albertans grappled with rolling blackouts as the electricity grid came under extreme pressure from a supply crunch.

It was the second time that week that the AESO was forced to issue a grid alert after natural gas-fired power plants went offline. The AESO also issued a series of alerts in January when, amid a brutal cold snap with record low temperatures, spikes in power demand meant Albertans faced days of supply uncertainty after four natural-gas-fired power plants failed because of mechanical and cold-weather issues. A shortage of wind and winter’s long periods of darkness meant renewable sources of power did little to ease the pressure.

It is unclear whether the MSA investigation is the result of repeated power supply failures or the 85-page complaint made by BHE to the utilities commission in February.

Swaths of documents filed with the commission about the investigation reference BHE, but the market administrator would not confirm the reason for its inquiry. (The commission regulates Alberta’s electric utilities and is overseeing the BHE complaint.)

Part of the probe centres on whether the AESO shirked its duties under Alberta’s Electric Utilities Act to operate the power market “in a manner that promotes the fair, efficient and openly competitive exchange of electric energy,” including on the interconnected system that runs outside of the province.

But the inquiry is extremely broad, including how the AESO manages the price of power and data, congestion on the electricity system and what the AESO is doing about it, and how the operator evaluates and plans for transmission projects.

Indeed, BHE said in a letter filed with the commission that “it is difficult to conceive of a more broadly worded and vague scope of investigation,” adding there is no reasonable basis upon which to conclude that the substance of its complaint is the subject of the administrator’s inquiry.

“Given the MSA’s involvement in this proceeding, if it intended to address the substance of BHE complaint as the subject of its investigation it could have simply said so, but it did not,” BHE wrote.

The AESO would not comment on the specifics of the MSA notice of investigation, instead pointing to its response to the BHE complaint.

In that grievance, BHE accused the AESO of engaging in “discriminatory and anti-competitive behaviour.” And it said the AESO failed to allow necessary capacity additions to the grid that would alleviate constraints so imported power can better compete with domestic generation. Instead, it curtailed imports from Montana, as well as British Columbia, to deal with system-reliability concerns the operator itself has identified, BHE said.

The AESO argued in its response, filed to the commission, that BHE’s complaint should be dismissed, particularly as the operator is in the midst of a government-ordered power market restructure – an overhaul that could end up being the most significant change to Alberta’s electricity regime since deregulation.

It wrote that BHE is “alleging myriad, long-standing statutory breaches and seeks expansive relief that, if granted, would send shockwaves across Alberta’s electricity market.”

Energy giant Suncor and power supplier Enmax have both intervened on behalf of the AESO, arguing the BHE complaint should be dismissed. But BHE comes to the fight with support from the Alberta Chambers of Commerce, which represents more than 22,000 members, and Morgan Stanley Capital Group Inc., a trader in the energy and metals markets.

Both urged the market administrator to pursue the multiple allegations contained in BHE’s complaint.

While the government works to overhaul Alberta’s power system, Premier Danielle Smith is fighting a bitter battle with Ottawa over the future of the province’s electrical grid, particularly around the federal government’s plans to reduce greenhouse emissions from Canada’s power grid to net-zero by 2035.

This week, the government tabled legislation that would limit the way city-owned utility companies, such as Calgary’s Enmax and Edmonton’s Epcor, calculate local access fees for electricity and natural gas.