How the electricity market works
Supply and demand
The hourly price of electricity in the wholesale market is determined by supply and demand, which is affected by:
Supply
- Seasonal maintenance
- Unplanned outages/breakdowns
- Higher wind speed powering wind turbines creating more energy
- Higher fuel costs are passed through in the market price
- New generation projects increasing the supply in the market and lead to competitive prices
Demand
- Demand is highest in the winter and summer, and lower in spring and fall
- Demand is highest between 5:00 - 7:00pm, and lowest overnight
- Demand generally grows with the economy
The electricity industry's four key sectors
Generation
In Alberta, electricity is supplied by a variety of generators that are powered by natural gas, wind, solar, hydro, and biomass, and is supplemented by imported power from British Columbia, Saskatchewan, and Montana. Each generator sells the energy they produce into the wholesale electricity market, and the wholesale price of electricity is set each hour.
Transmission
In Alberta, transmission systems are owned and operated by shareholder or municipally owned companies. The Alberta Utilities Commission (AUC) regulates these companies' transmission costs.
Once generated, electricity travels across Alberta over high-voltage transmission lines to local substations. The Alberta Electric System Operator (AESO) works with the province's transmission facility owners (TFOs) to monitor the system and ensure it is stable and reliable. The AESO also plans upgrades and enhancements to the province's transmission system.
Distribution
From the local substations, electricity travels over the lower-voltage distribution lines homes, businesses, and farms.
Distribution facility owners, which include private companies, some municipalities and Rural Electrification Associations and Co-ops plan upgrades and enhancements to the electric distribution system. The AUC reviews and approves all upgrades and enhancements to the distribution system.
End user (retail)
Default retailers and competitive retailers set retail rates for residential, farm, and small business consumers. Rates set by default retailers are reviewed and approved by the AUC.
Retailers charge non-energy rates to recover the costs of billing and providing customer service.
Choices for buying electricity
Consumers may have options when buying electricity. These fall into two basic categories: default retailers and competitive retailers.
Consumers can use the Cost Comparison Tool to find electricity options in their area.
