November 30, 2023

• The Clean Energy Regulations are still draft and consultations are ongoing.
• Alberta does not have province-owned/Crown electricity generation companies.
• Almost all of electricity in Alberta is generated by private generators on a semi-regulated free market/open trading price system. Only Ontario and Alberta have such a system for pricing electricity to fund generation in Canada.
• A tiny fraction of generation is owned by Calgary and Edmonton where there are two large public distribution utilities (Enmax and Epcor).
• Generation that is fossil fuel-based is allowed to be kept online under the draft Clean Electricity Regulations as a backup or support during times of peak-demand.
• The current discussion around transition is about stranded private investment assets and private company profitability, not the ability to generate electricity from greener sources.
• Alberta has a goal of turning-off coal generation by the end of 2023, six years ahead of the federal mandate showing that the private sector is quite willing to respond to regulations.
• Natural Gas powered generation is the focus of the private-sector and UCP push back on net-zero transition as the majority of coal generation capacity has shifted to using Natural Gas.
• Private generation companies are beholden to federal legislation on green electricity generation.
• Alberta has adopted a motion to tell provincial regulators to not follow specific federal regulations.
• The Alberta government has gone so far as to propose the establishment of a provincial state-owned company to secure the continued use of fossil fuel derived electricity generation. The government has suggested studying the ability for this Crown to act to shore-up profits of private provincial generation and provide some protection against federal fines.
• The federal government has a large fund to fund the transition of private generation away from fossil fuels.

The current battle Alberta's government has taken-up with the federal government is over the supposed clean electricity transition.

The federal government has adopted a 2035 date to essentially start the real transition to net-zero emissions by 2050. To meet this deadline, transition to a lower emitting electricity generation system is necessary well before 2050.

The federal government adopted a process on August 10, 2023, to bring Clean Electricity Regulations (CER) into effect in Canada. The purpose of the CER is facilitate discussions across Canada on moving Canada to reliable and affordable low-emitting electricity generation.

The goal of the draft regulations is to provide a clear timetable for transitioning their generation capacity towards renewable (including nuclear and hydro power) to achieve net zero emissions by 2050.

Not only will current generation need to transition to lower emitting sources, Canada will have to generate 2.35 times more electricity by 2050 under actual net-zero scenarios.

A minimum of $400 billion in investments will be needed nationally through 2050 to meet increased demand simply for lower emitting energy (1.4 times current demand for this scenario) while also undertaking routine maintenance and refurbishment.

84% of Canadian electricity is hydro, solar, wind, and nuclear.

For most provinces—together generating most of the electricity used in Canada—the Clean Electricity Regulations will have limited effect since most provincial regulators are already moving in this direction.

The central focus of this regulation is to support the move away from using Natural Gas by 2050.

However, the regulation will affect Alberta, Saskatchewan, and New Brunswick which still primarily rely fossil fuels for electricity generation and current governments have little interest in telling their generators to shift production.

The transition to lower carbon generation will cost Alberta electricity generation companies a lot of money in both stranded assets and necessary new investments under high borrowing costs. Much of the reason for the high cost is the decision to delay the transition to lower-emission fuels.

Clean Electricity Regulations are being introduced to regulate emissions from electricity generation.

The Supreme Court of Canada when deciding on the Greenhouse Gas Pollution Pricing Act confirmed that the federal government can regulate emissions through carbon pricing.

The progressive legal community and the government's lawyers are saying that this legislation is likely to be constitutional and within federal jurisdiction, particularly because it contains flexibilities when it is applied to emission targets for provinces and emitters.

The Sovereignty Act does not actually purport to oust federal jurisdiction or to expand Alberta jurisdiction.

The Act attempts the following:

1. To declare by resolution that the legislature believes that a federal CER initiative is not constitutional.
2. To make orders that are within provincial jurisdiction on actors in Alberta.
3. Those orders cannot exceed provincial jurisdiction or over-ride federal jurisdiction.
4. Any firm following such an order is still liable for breach of federal law if that law is constitutional.
5. Re-states that where the Alberta legislature believes something, it can act within its normal area of jurisdiction. (This has the same legal effect as saying nothing at all, and just passing a law or making a decision under existing powers.)

However, the Act will result in is conflicting legal or policy directions for public bodies in Alberta and for private actors seeking to comply with all applicable laws (federal and provincial). This conflict will eventually lead to court proceedings to resolve any question as to jurisdiciton/legal status, and orders accordingly. It is this mechanism where the attempt is to slow down implementation of any applicable laws.

This seems to be new legal territory as it is hard to know how it will play out. However, if everyone is actually acting lawfully then the result will be CERs applying in Alberta which means natural gas generators will have to comply.