The Energy Regulation and Markets Review - Stikeman Elliott

Canada
For purposes of expediency, this chapter will discuss the regulation of energy at a
general level with illustrative examples drawn from various Canadian jurisdictions.
i Canadian energy sector
Electricity
The power sector in Canada is principally regulated by the provinces and markets are
regional in nature. Most electricity trade is intra-provincial or north–south, between
provinces and neighbouring US states; there is relatively little east–west trade between
provinces.
Two provinces, Alberta and Ontario, restructured their electricity markets, albeit
with differing success. In the mid-1990s, Alberta deregulated generation, mandated open
access for regulated transmission and distribution and introduced a real-time electricity
spot market. Alberta now has a fully competitive wholesale and retail electricity market.
In 1998, Ontario unbundled transmission, generation and dispatch, and in 2002 it
introduced fully competitive wholesale and retail markets. Deficiencies in Ontario’s
market design and a confluence of other market conditions and political pressures,
however, brought about a partial closing of the Ontario market. Today, Ontario operates
under a hybrid structure where there is nominally wholesale and retail competition, but
a large amount of generation remains regulated or subject to long-term governmentbacked
contracts. The remaining provinces have more traditional government-owned
vertically integrated utility structures, which offer bundled services at regulated rates.
Some provinces – for example, British Columbia, Quebec and Nova Scotia – have limited
generation opportunities for independent power producers, largely in the renewable
sector.
The most significant developments in the power sector centre on investments
in renewable or clean generation and infrastructure renewal and upgrades. Two years
ago, Ontario launched the most ambitious renewable feed-in-tariff (FIT) programme
in North America. Other provinces have followed suit, albeit on a smaller scale. A
number of provinces are also investing in and constructing major transmission and
other infrastructure to facilitate economic and resource development, access renewable
resources (wind, hydro) and facilitate export to the United States. Alberta and Ontario
have launched competitive processes to develop major transmission projects, which are
attracting foreign companies.
Natural gas
The Canadian gas sector, by comparison, has traditionally been characterised by more
national east‐west trade. Most gas production is in the western Canadian sedimentary
basin and gas is shipped via inter-provincial pipelines to eastern Canada and the northeast
United States. Recent non-conventional shale gas discoveries in the midwestern and
north-east United States are transforming the Canadian gas industry. Natural gas prices
have plunged in North America, west-to-east pipeline throughput has substantially fallen
and plans are underway to satisfy eastern Canadian demand from the United States.
As a result, western Canadian producers are eyeing opportunities for new markets and
making plans to export liquefied natural gas (‘LNG’) to Asian markets from Canada’s
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