Alberta Budget 2025: Electricity Generator Stakeholder Brief

Executive Summary

Alberta Budget 2025 positions the electricity sector at the intersection of several major trends: growing data centre demand, rising population, increasing natural gas fuel costs, and continued emissions reduction obligations under TIER. The Affordability and Utilities ministry receives $160M in operating funding, signaling ongoing government attention to consumer electricity costs. Natural gas prices are forecast to more than double from C$1.20/GJ to C$2.50/GJ, significantly affecting gas-fired generation economics. The $301M Alberta Broadband Strategy and broader digital infrastructure investment signal load growth that will require generation and transmission capacity additions.

Top 5 Relevant Budget Measures

1. Natural gas price forecast at C$2.50/GJ -- more than double the C$1.20/GJ in 2024-25, rising to C$3.10/GJ by 2026-27. This directly increases fuel costs for gas-fired generators, which comprise the majority of Alberta's generation fleet.

2. Affordability and Utilities operating at $160M -- this ministry manages consumer affordability programs and utilities regulation. The budget allocation signals ongoing government focus on protecting consumers from energy cost increases.

TIER regulation spending of ~$646M over 2025-28 -- covering close to 600 regulated facilities including large power plants. The regulation applies to about 60% of Alberta's total carbon emissions, with options to meet targets, use credits, or make compliance payments.

Alberta Broadband Strategy at $301M over three years -- with $106M in 2025-26 and $194M in 2026-27. Data centres and digital infrastructure projects require substantial and reliable electricity supply, creating significant load growth opportunities.

Population growth forecast at 2.5% -- while decelerating from 4.4% in 2024-25, continued population growth drives residential and commercial electricity demand. Alberta's population is projected at 5.009 million, sustaining baseline load growth.

Risks

Fuel cost escalation. The natural gas price forecast moving from C$1.20 to C$2.50/GJ represents a significant increase in the primary fuel cost for gas-fired generation. Rising oil sands production and increased LNG export potential are expected to support higher gas prices, which flows directly into generation operating costs.

Affordability intervention risk. With a dedicated Affordability and Utilities ministry and $160M budget, the government maintains capacity to intervene in electricity pricing. Consumer protection measures -- including potential rate caps, rebates, or regulatory changes -- could constrain generators' ability to pass through increased fuel and compliance costs.

TIER compliance trajectory. The TIER regulation covers large power generators, and while Alberta positions this as a competitiveness tool, emission reduction benchmarks may tighten over time. The interaction between TIER compliance costs, carbon credit pricing, and electricity market prices creates complex risk management requirements.

Data centre demand uncertainty. While data centre load growth represents a significant opportunity, the pace and scale of actual development depends on interconnection capacity, regulatory approvals, and broader technology market conditions. If load growth materializes faster than generation additions, reliability could be strained.

Tariff impact on capital costs. U.S. tariffs of 15% on imported goods affect power generation equipment, transformers, turbine components, and control systems. This increases the capital cost of new generation builds and major maintenance projects.

Opportunities

Data centre load growth. Alberta's emerging position as a data centre hub -- supported by cold climate, available land, and the $301M Broadband Strategy -- creates substantial new electricity demand. Generators positioned to serve this load with firm, reliable power have a competitive advantage.

CCS and clean technology investment. TIER-funded spending of $646M supports clean technology development, including CCS. Power generators investing in post-combustion capture or hydrogen co-firing can access these funds to reduce both emissions and long-term compliance costs.

Gas price competitiveness. While rising gas prices increase costs, Alberta's natural gas remains competitively priced relative to other jurisdictions. The forecast price trajectory supports Alberta's value proposition as a location for gas-fired generation serving industrial and data centre loads.

Grid reliability premium. As intermittent renewable generation grows nationally, Alberta's dispatchable gas-fired generation fleet provides reliability value. The government's emphasis on keeping the lights on and ensuring reliability supports market structures that compensate reliable generation.

Population-driven demand. The 2.5% population growth forecast, combined with industrial development and electrification trends, creates sustained organic demand growth that supports generation investment.

Likely Government Intent

The government views affordable, reliable electricity as a prerequisite for its economic strategy. The creation of a dedicated Affordability and Utilities ministry signals that consumer electricity costs are a political priority. Simultaneously, the emphasis on data centre development, industrial investment, and broadband infrastructure requires substantial new generation capacity. The government appears to be navigating between affordability for consumers and investment signals for generators, using TIER as a mechanism to drive emission reductions without heavy-handed regulation. The absence of major new electricity policy announcements suggests the current market framework will continue, with incremental adjustments.

Immediate Questions to Ask Ministries

1. Affordability and Utilities: What specific consumer affordability measures are being considered for electricity costs in 2025-26, and how will these interact with market-based electricity pricing?

2. Energy and Minerals: What is the government's framework for managing data centre interconnection requests and ensuring adequate generation capacity to serve new loads?

3. Environment and Protected Areas: What changes to TIER benchmarks or compliance obligations are anticipated for the next compliance period for power generation facilities?

4. Technology and Innovation: What data centre development applications are in the pipeline, and what is the projected electricity load from these facilities over the next three years?

5. Treasury Board and Finance: How does the government model electricity price scenarios in its fiscal projections, and what is the assumed relationship between natural gas prices and electricity market outcomes?

48-Hour Action Checklist

• Model generation dispatch economics under C$2.50/GJ gas price assumption across the fleet
• Review TIER compliance positions and credit inventories against updated regulation forecasts
• Assess capital project cost exposure to 15% tariff on imported generation equipment
• Survey data centre inquiry pipeline for expected load growth and connection timelines
• Brief investor relations team on budget implications for generation portfolio economics
• Contact AUC regulatory affairs team for guidance on anticipated proceeding schedules
• Prepare internal communication on key budget takeaways for operations and finance teams

30-Day Monitoring Checklist

• Track Alberta electricity pool price trends relative to natural gas price increases
• Monitor AUC proceedings related to data centre interconnection and cost allocation
• Follow TIER regulation updates including benchmark adjustments and credit pricing
• Assess competitor generation capacity addition announcements and timelines
• Review broadband strategy deployment milestones for associated electricity demand signals
• Monitor government affordability announcements for potential rate intervention measures
• Track quarterly fiscal updates for changes to natural gas price assumptions

Suggested Message Frames

Frame 1 -- Reliable Power for Growth: Alberta's population growth, industrial development, and data centre ambitions all depend on reliable electricity. Generators are making the long-term investments needed to keep up with demand, and stable regulatory frameworks enable these multi-decade capital commitments.

Frame 2 -- Clean Technology Leadership: Alberta's electricity generators are investing in emission reduction technologies supported by TIER funding. From CCS to hydrogen blending, the sector is demonstrating that reliability, affordability, and emission reduction can coexist.

Frame 3 -- Economic Enabler: Every sector highlighted in Budget 2025 -- from health care at $24B to education at $9.9B to technology at $834M -- depends on reliable, affordable electricity. Generators are foundational partners in delivering the government's economic and social priorities.

Opposition Narratives to Anticipate

"Electricity costs are too high for consumers." The political salience of electricity affordability is high. Counter with data on Alberta's market-based system delivering long-term competitive prices, and the need for investment in reliability and capacity to avoid future price spikes.

"Power generators are passing carbon costs to consumers." TIER compliance is sometimes characterized as a cost on consumers rather than a tool for emission reduction. Emphasize that TIER provides flexibility and supports clean technology investment that benefits all Albertans.

"Data centres benefit from subsidized infrastructure." Critics may argue that data centre load growth requires grid upgrades paid by existing ratepayers. Advocate for cost-causation principles in interconnection policy that ensure new loads contribute fairly.

Data Points to Monitor

• AESO electricity pool price and natural gas input cost correlation
• TIER fund balance, compliance payment levels, and credit trading prices
• Data centre development applications and interconnection queue at AESO
• AUC regulatory proceedings on electricity market rules and rate design
• Government affordability program announcements and spending
• Natural gas price trajectory relative to C$2.50/GJ assumption
• New generation capacity announcements and construction timelines
• Broadband strategy deployment milestones and electricity demand implications
• Population growth data and residential electricity demand trends