The Energy Regulation and Markets Review - Stikeman Elliott

Canada
number of provinces (including Alberta and British Columbia) have blanket orders that
address this issue by exempting such transactions from filing and registration requirements.
It is important to note that in Canada there is no national securities law and no national
securities regulator. Rather, securities law and regulation is the responsibility of the
provincial and territorial governments; however, many substantive aspects of securities
regulation are harmonised through the use of ‘national instruments’ or ‘national policies’,
which are adopted by each of the provincial and territorial regulators.
iii Contracts for sale of energy
In Ontario and Alberta, wholesale and retail customers may contract to purchase
electricity. In Ontario, residential and low-volume consumers may purchase from
competitive retailers or pay a default price passed through by their local distribution
company; this default price is periodically ‘smoothed’ by the OEB to reduce volatility. As
a result of rate-regulation of most baseload generation, various government subsidies and
price smoothing, the retail market for residential and low-volume consumers has been
significantly dampened. There is a more robust market for commercial and industrial
customers.
In Alberta, consumers are free to purchase their electricity from any licenced
retailer. Neither wholesale nor retail electricity prices are regulated, making Alberta
the only province with fully competitive wholesale or retail markets. Small-volume
consumers who do not wish to purchase electricity from a competitive licensed
retailer are eligible for a regulated rate available to eligible consumers until 30 April
2013. Owners of distribution systems must provide a regulated rate, either directly or
indirectly, by appointing a regulated rate provider. The AUC regulates the rates charged
by the regulated providers. As previously noted, much of the electricity traded in Alberta
is not priced at the hourly pool price; rather the price is set in a direct sales contracts or
forward contracts. These direct sales contracts and forward contracts must be undertaken
in accordance with rules set by the AESO.
In Canada, wholesale and retail customers may contract to purchase natural gas.
Depending on the province, the rate a customer pays for natural gas may be a regulated
rate or a contracted rate. Regulated rates are set by provincial regulators whereas the
provincial regulators have no jurisdiction over competitive contracts.
iv Market developments
A fundamental change that is being considered for Ontario’s wholesale electricity market
is to make transmission-connected renewable resources (particularly wind) dispatchable;
at present, renewable resources self-schedule and get paid whenever they are generating.
Due to the unprecedented increase in renewable resources (both transmission and
distribution-connected) Ontario has been experiencing surplus conditions during
non‐peak periods that have required it to dispatch off nuclear units in favour of wind
and other non-dispatchable renewable resources. The proposed changes are contentious
and may have a significant impact on wind generators whose contracts pay them only
when generating.
As noted above, western Canada is experiencing a number of new developments
that threaten to fundamentally change its oil and gas industry. Conventional oil and
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