Alberta electricity exchange on launch pad

June 16, 2000
The Alberta electricity forwards market is scheduled to be launched in the fourth quarter of this year, AgraLink Exchange Ltd., Calgary, and the Industrial Power Consumers & Cogenerators Association of Alberta reported Thursday.


The Alberta electricity forwards market is scheduled to be launched in the fourth quarter of this year, AgraLink Exchange Ltd., Calgary, and the Industrial Power Consumers & Cogenerators Association of Alberta (IPCCAA) reported Thursday.

The new electronic exchange will provide large industrial buyers an opportunity to contribute to the design of the trading mechanisms and contracts to be traded, bringing balance to the market, says Dan Macnamara, executive director of IPCCAA, whose members consume 55% of the electricity used in Alberta.

"While the electricity market in Alberta continues to be flawed," he said, "there is a very real need to provide a means for our members to manage the price risk for electricity purchases as we move into 2001."

Repeated price excursions into the $500 (Can.)/Mw range and an average price in April of nearly $97/Mw vs. historic norms of $25-35/Mw have many buyers concerned about the impact on energy costs in 2001, when the legislated protection disappears, said AgraLink Pres. Sheldon Fulton. AgraLink Exchange is a developer and operator of internet-based electronic exchanges.

"We see a forwards market as critical to providing an effective means to reduce the extreme volatility and high price spikes occurring in the hourly market," Fulton said. "The involvement of the buy side in the development of the contracts to be traded and the impact of IPCCAA in bringing focus to this market will assist in restoring order and discipline to electricity pricing."

Greg Baden, general manager of power for Shell Oil Co. affiliate Coral Energy, an initial supporter of the exchange adds, "We view the Alberta Watt Exchange as a progressive step in the ongoing development of a competitive electricity market in Alberta."

Pool conflict
AgraLink and IPCCAA said in a statement the two organizations believe it would be a conflict of interest for the Power Pool of Alberta to operate the forwards market. A government agency set up in 1995, the power pool operates the hourly market and system control functions and will operate the forthcoming balancing pool.

When deregulating energy markets, it's critical for the private sector to participate in developing new market mechanisms, Macnamara said. "If government agencies just step in at each stage then new organizations never get a chance to develop. We hope that the power pool will work with Watt-Ex in the development of new market products and services," he explained.

Similar encouragement of private-sector initiatives in electricity trading are occurring in various jurisdictions around the world, Fulton said. He noted the California Public Utilities Commission just voted to end the mandated use of the government-appointed California Power Exchange.