Extremely Busy Year For Alberta Power

Dick Frey, President, Alberta Power Ltd.
For Alberta Power, 1995 was an extremely busy year, both in its normal utility operations and in mapping out a new and different future.

Electricity sales grew by more than three per cent. This was fueled by industrial growth in thecompany's service area, which covers resource-rich areas in the northern and east-central parts ofthe province. Growth was particularly strong in the northwest areas of the province, in both theoil-and-gas sector and forestry.

The year's main challenge, however, was continuing to work with other players to re-shapeAlberta's electric industry.

The province's new Electric Utilities Act takes effect on January 1, 1996. Over the long term, itmeans vertically integrated utilities will become a thing of the past, as generation, transmissionand distribution become separate markets. A fully competitive market will emerge first in thegeneration sector, as suppliers compete to build new plant.

Alberta Power's priority over the past year has been to ensure a competitive market developswhile the strengths of the old structure (which led to electricity prices that are among the loweston the continent) are preserved.

Alberta's industry restructuring is driven by much the same forces that are driving deregulationand competition in the electric industry worldwide. Customers want choice of suppliers, and newplayers want to be able to develop projects and sell the power.

However, Alberta's restructuring is not typical because the province has its own unique startingpoint for change. In particular, the average cost of generation in this province is low. Theprovince does not have the difficulties faced where customers want to find cheaper alternatives tohigh embedded costs.

Some of the key features of Alberta's new structure are:

A new power pool, through which all energy in the province will be traded. The hourly poolprice will be the same for buyers and sellers.
Competitive bidding for future generation. (Existing generation will be traded through the pool,but a legislated price hedge will keep customers from being exposed to pool price and ensurecustomers across the province continue to share its low average cost.)
A province-wide transmission grid, which will be administered by the Grid Company ofAlberta, Inc.

January 1 marks a turning point- not an end point -for change. For example, next year theindustry will go on to study the possibility of expanding competition to the retail level.

For Alberta Power, industry restructuring is a hot topic of discussion these days. It obviouslymeans profound changes. The legislation doesn't require utilities to become separate companiesfor generation, transmission and distribution. However, these various functions will have to beclearly separated and managed.

In fact, this will lead to a stronger, more focused company. It reflects a reality the company hasseen emerging for some time: that each sector has its own business needs and essentially differentcustomers. One of the main priorities for 1996 will be to work out how the company should beorganized to do so.