The Energy Regulation and Markets Review - Stikeman Elliott

Canada
Competition Bureau review can take, generally speaking, from one to five months or
more depending on the complexity of the competition issues. Following expiry of the
no-close period, the merging parties are free to close unless the Competition Tribunal has
enjoined the transaction because of a finding that a merger would prevent or lessen (or
likely prevent or lessen) competition substantially, but in practice most merging parties
only close upon receipt of an affirmative clearance from the Competition Bureau.
III
TRANSMISSION/TRANSPORTATION and DISTRIBUTION
SERVICES
i Vertical integration and unbundling
Canada has had a competitive interprovincial natural gas market since 1 November
1986. The genesis of this was an agreement between the federal government and the
three western gas-producing provinces of British Columbia, Alberta and Saskatchewan
(commonly referred to as the Halloween Agreement). Consumers can purchase natural
gas directly from producers or indirectly through arrangements with local distributors.
While there is some overlapping ownership, the production, transmission and distribution
segments of the market are generally disaggregated.
The nature of Canada’s electricity market is more complex. The provinces
of Alberta and Ontario have restructured their electricity markets and unbundled
generation, transmission, distribution and retail services. Other provinces have
functionally unbundled some services, but public ownership and vertical integration
remain common.
In Ontario, virtually all transmission remains in hands of the government-owned
transmitter Hydro One Networks Inc (which owns and operates more than 95 per cent
of the transmission in Ontario). The province, however, recently launched a competitive
process to designate a transmitter to develop a major new transmission project; this may
be followed by further competitive processes for other transmission projects. Ontario’s
distribution sector is highly fragmented, with over 80 local distribution companies;
there are opportunities for consolidation and private sector investment in this area. In
April 2012, the Ontario government initiated a review to examine removing barriers and
encouraging consolidation.
In Alberta, the provincial transmission system is owned by a number of utilities
(known as transmission facility owners or ‘TFOs’). The Alberta Electric System Operator
(‘the AESO’) contracts with the TFOs to acquire transmission services. The AESO
oversees the design and use of the transmission system to ensure fair market rates, nondiscriminatory
access for all market participants and the safe reliable operation of the
system. The Alberta Utilities Commission (‘the AUC’) approves the costs for transmission
facility owners to provide their services. The regulated costs of the transmission companies
are passed on to the AESO, which recovers the cost of operating the system and the
transmission companies’ costs through the AESO’s transmission tariff, which is also
approved by the AUC. Like Ontario, Alberta has initiated a competitive process to select
transmitters to develop several major new transmission lines. The distribution system
remains regulated, with distribution tariffs being approved by the AUC. The majority
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