Alberta Electricity Provider TransAlta Found Guilty of Market Manipulation, Boosting Case for Decentralizing Generation

Earlier this week, TransAlta — the massive, publicly traded electricity generation company based in Calgary — was found culpable by the Alberta Utilities Commission (AUC) of repeatedly manipulating prices in 2010 and 2011 by intentionally shutting down power plants during peak demand to boost costs for consumers.

The Market Surveillance Administrator estimates the actions — which boosted costs by between 10 and 60 per cent depending on occurrence — made the company $16 million.

TransAlta has denied all claims and floated the idea of taking the case to the Alberta Court of Appeals.

Such a situation once again raises questions about the appropriateness of a deregulated electricity market, a feature Alberta has uniquely sported since 2001.

Some new companies have entered the game since, dividing the market share pie into smaller chunks.

But we’re still talking major players here. In 2014, TransAlta pulled in $2.4 billion in revenue, ENMAX made $3.3 billion and ATCO earned $4.5 billion — which is why, in addition to re-examining regulation (which could help solve the price spikes and blackouts the province has faced for years), some are calling for a decentralized market powered by smaller, closer sources.

“Decentralized energy is bringing energy closer to where it’s needed,” says Moustafa Youssef, owner and installer for Solar Hero. “In a way, you’re transferring the generators from larger corporations to homeowners or building owners. You’re relying less on generators, and their transmission and distribution systems.”

The Case for Decentralizing and Diversifying

Environmental groups have been pushing for this for years: in 2009, the Pembina Institute encouraged the situating of generation far closer to demand, while a 2010 Canadian Solar Industries Association report made the case that decentralization minimizes the likelihood of a large, central facility going down, as well as creating jobs and investment opportunities.

It could also prevent companies from doing what TransAlta did — by generating electricity on your own rooftop (with occasional supplements from your immediate neighbours and the larger grid), individuals can exercise a bit more control.

Unfortunately, Alberta hasn’t done much to promote such a transition.

Microgenerated power — electricity generated from a small site, such as one’s home — is essentially subsidizing the grid. Many solar advocates argue that producers don’t receive fair compensation as solar generates electricity during the daytime (when power is most expensive) but only receives remuneration based on an average monthly price.

The same is happening with wind power: the windiest hours produce the most energy but also result in the cheapest wholesale costs.

“It’s great that it’s driving prices down with renewable means,” Youssef says. “But it is also frightening investors without any secure, long-term guarantees.”

Leaving TransAlta and Co. Behind

The Alberta NDP have alluded to re-evaluating the deregulated market.

If the government does proceed on that front, it could lead to stable pricing for renewables and potential investments in smarter grid technologies that promote decentralized power.

Southern Alberta features some of the best geography in Canada for solar, wind power and cogeneration.

The rapid replacement of coal with natural gas means it will be easier to integrate energy sources, Youssef says, as gas turbine plants are simpler to throttle to follow load capacities than coal. The time seems ideal to take advantage of such factors.

At this point, the Alberta Utilities Commission hasn’t determined penalties for TransAlta’s actions. However, the body can fine the company up to $1 million for each of the 11 days the offence occurred on, as well as taking back the benefits from the infraction.

Company share values plummeted following the verdict. However, the company is expected to have enough liquid assets to cover fines without dividends being affected.

TransAlta was also busted in 2011 for blocking electricity imports from other jurisdictions to boost prices, costing the company $370,000 in fines.

Image Credit: BASF via Flickr