An Electricity System in Transition: The Electricity Law Amendment Act 2021 | Blake, Cassels & Graydon LLP

At November 17, 2021, The Honorable Dale Nally, Associate Minister of Natural Gas and Electricity, presented Bill 86, the Electricity Law Amendment Act, 2021 (ESAA), in the Legislative Assembly of Alberta. With the ESAA, the Government of Alberta (the Government) is taking action to modernize an Alberta electricity system in transition. The rapid evolution of technology, including that related to energy storage and renewable energy production, as well as a number of recent decisions and investigative reports from the Alberta Utilities Commission (AUC ), have all contributed to the changing landscape of electricity generation, transmission and distribution in Alberta.

The government appears to recognize these challenges and opportunities, saying the ESAA “will help build investor confidence in the Alberta power grid and support a modern and innovative power system.” More precisely, the ESAA proposes to

• Create a new regulatory framework specifically for energy storage;

• Allow unlimited self-supply and export; and

• Introduce the planning of the distribution system.

To achieve these goals, the ESAA will amend the three main laws governing Alberta’s electricity grid: Alberta Public Utilities Commission Act, the Electricity Utilities Act (EUA) and the Hydraulic and Electric Power Act (HEEA).

The changes to the ESAA will be accompanied by changes to other regulations, and possibly new regulations, and the government intends to have the ESAA promulgated at the same time as the related regulations come into force, d ‘by the end of 2022.

The changes will create new opportunities for companies in the electricity generation and storage sector. Many details still need to be worked out, especially in new or amended regulations, and companies in the power sector need to stay informed and active in government relations and up to date with AUC and Alberta Electric developments. System Operator (AESO).

Although the ESAA has not yet passed first reading, for convenience we refer here to the proposed amendments in the ESAA as changes that will occur.

ENERGY STORAGE

Grid-scale energy storage, largely battery energy storage, is in the early stages of growth in the Alberta market. Alberta’s first grid-wide battery storage project, TransAlta’s WindCharger battery storage project, did not come online until the end of last year, and most projects in Energy storage have so far been offered as part of larger power plants. Both AESO and AUC are adapting to this new technology, with an ongoing commitment to the AESO energy storage roadmap and AUC having recently created a new section of its rule. 007, which details the information that should be included in different types of AUC applications. , applicable to battery storage facilities.

The new arrangements for energy storage in the ESAA will provide a framework for these existing processes of regulatory change. This new framework creates a completely new and distinct category of energy facilities for which AUC approval is required, energy storage facilities. The legislative framework for energy storage facilities will largely parallel the existing framework for power plants. The new AUC rule 007 requirements for battery storage facilities may guide the type of information required for energy storage facility applications under the ESAA, but the AUC may also develop a new section of rule 007 more directly in line with the implementation of ESAA.

Owner of the transmission and distribution network Ownership of energy storage

ESAA will allow Distribution Facility Owners (DFOs) and Transmission Facility Owners (TFOs) to own energy storage and recoup the costs of that ownership, but only in limited circumstances. These limitations will tend to prioritize competitive public procurement.

First, if DFOs and TFOs choose to own energy storage, the costs and expenses of that storage will be recoverable in their tariffs, but it is not clear whether this will be on a flow-through or capitalized basis – This is not yet the case. to be determined. In addition, it is not clear whether DFOs and TFOs that own energy storage will be able to sell electricity from that storage to the grid.

In addition, DFOs in particular will only be able to own energy storage facilities if that property is approved by the AUC. The AUC can approve such a request only in limited circumstances that encourage competitive procurement of non-wired services prior to or in lieu of DFO ownership of energy storage facilities, in most cases.

TFOs will not be subject to a general ban on owning energy storage facilities. However, only energy storage facilities that are part of the needs identification documents requested by the AESO and approved by the AUC will be part of the transmission lines under the HEEA, placing a large part of the decision-making for the development of energy storage based on the transmission network on the AESO.

SELF-SUPPLY AND EXPORT

Self-supply is currently prohibited by the interpretation of the AUC of the EUA and the HEEA, with the exception of designated industrial systems that generate electricity as part of an integrated industrial process, of certain municipal sites, micro-generation installations of less than 5 megawatts (MW) and gas-generating flares.

ESAA will remove this ban, allowing any market player to produce electricity, consume part of this electricity on site and sell electricity to the grid via the Power Pool. This can create opportunities for electricity users to more economically meet their own electricity needs while exporting to the grid when they generate excess electricity or when it makes sense to do so.

However, self-supplied market participants will have to pay a fair and reasonable portion of the costs of the transmission system, as determined by AESO in its tariff. These costs will be billed directly to market participants who are connected to the transmission system and to DFOs with self-supplied customers. The ESAA will allow but will not require the AESO to charge this tariff on a gross basis over all generation and consumption of electricity by a self-supplied market participant, and not just on what the participant to the market consumes and exports to the network.

The ESAA will also confirm that industrial systems continue to be able to self-supply and export, and that industrial systems will not have to pay the new tariff covering self-supply.

The self-provisioning changes in the ESAA reflect many of the findings of the Do-It-Yourself Sourcing and Exporting – Alberta Utilities Commission Discussion Paper published on June 5, 2020 and, as shown here, how self-supply and export will be treated financially will ultimately be determined in a future AESO tariff proceeding.

PLANNING THE DISTRIBUTION SYSTEM

Related to issues of energy storage and self-supply, but also with broader implications, the ESAA will place an obligation on MPOs to prepare distribution network plans, assuming the Minister leads the preparation of these plans in the regulations, and the obligation to make decisions on “non-wired services” as part of their decisions regarding the construction, modernization and improvement of the electrical distribution system.

To align with this new obligation, the ESAA will grant the Minister the power to make regulations regarding the plans of the electrical distribution system, including with respect to their objectives and goals, the information that must be included, as well as than their timing, frequency and sharing. Much of the impact of ESAA in terms of distribution system planning will be determined by these regulations.

CONCLUSION

While the changes to the EESA will affect both transmission and distribution networks, they address many of the concerns raised by the recent Final report of the distribution system survey published on February 19, 2021, which addressed the regulatory and economic challenges of distributed energy resources, including energy storage and self-provision. However, the Distribution System Survey, while concluding that self-sufficiency issues, including the contributions of self-sufficiency market participants to transportation costs, were a “primary issue”, also noted that there were positive opportunities to be seized through the integration and appropriate pricing of distributed energy resources (Distribution System Survey, paragraph 258). ESAA is starting to capitalize on these opportunities, but many ideas such as value-added pricing, prioritization of wireless alternatives, and integrated system planning have yet to be addressed.

Ultimately, the development of a modern electricity grid capable of effectively achieving the intended policy objectives will require the contribution and commitment of all electricity stakeholders. As the AUC stated in the Distribution System Investigation Report, “The continued evolution of the electricity system will require thoughtful planning and actions on the part of the distribution utilities, the Commission and the Commission. other stakeholders ”(Distribution System Survey, paragraph 497). We will continue to monitor developments in this area.