Budget 2025: What It Means for Electricity / Power Grid
Alberta Budget 2025 increases Affordability and Utilities spending to $168M, up 27%, with grid modernization and Rate of Last Resort rollout.
Affordability and Utilities total expense
$168M
+$36M from 2024-25
Rural Utilities Grant Program
$19M over 3 years
Consumer awareness funding
$4M in 2025-26
New program
Sector Impact Summary
Alberta's electricity and power grid sector receives a moderate but meaningful budget increase in 2025, focused primarily on consumer affordability, grid modernization, and managing the final stages of the coal-to-gas transition. The Ministry of Affordability and Utilities sees total expense rise to $168 million in 2025-26, an increase of $36 million (27%) from the 2024-25 forecast of $132 million. Operating expense specifically climbs from $124 million to $160 million.
The increase is driven by several converging factors. Payments under the Renewable Electricity Program (REP) are rising by $16 million as lower electricity prices fall below contracted strike prices, requiring the government to make up the difference to REP operators. Coal phase-out accretion expenses of $13 million continue as the province honors commitments to affected generators through 2030. A new consumer awareness initiative receives $4 million in 2025-26 (rising to $5 million annually) to educate Albertans about their electricity options following the January 2025 introduction of the Rate of Last Resort.
The broader context for this sector is one of transition and potential transformation. The government remains committed to a carbon-neutral power grid by 2050, grid modernization is underway, and rapidly growing electricity demand from data centres and industrial projects could fundamentally reshape Alberta's generation requirements. However, the budget's direct financial footprint in this sector remains modest compared to the scale of private investment driving grid evolution.
Key Budget Measures
Affordability and Utilities operating expense: $160 million. Up $36 million from the prior year. Includes funding for utility regulation, consumer protection, and the Utilities Consumer Advocate that represents residential, small business, and farm consumers. (Source: Fiscal Plan 2025-28, Expense, p.89)
Renewable Electricity Program increased payments: +$16 million. REP payments are increasing because lower electricity prices have fallen below contracted strike prices. Since September 2019, REP has generated approximately $217 million in net revenue for government, but the relationship has shifted as electricity prices moderate. (Source: Fiscal Plan 2025-28, Expense, p.89)
Coal phase-out accretion expense: $13 million. Annual cost related to the government's commitment to compensate coal-fired electricity generators affected by the accelerated phase-out, with payments to be completed by 2030. (Source: Fiscal Plan 2025-28, Expense, p.89)
Consumer awareness initiatives: $4 million in 2025-26, rising to $5 million in each of the following two years. New funding to explain electricity options following the January 2025 introduction of the Rate of Last Resort, which provides consumers with more predictable and stable electricity and natural gas prices. (Source: Fiscal Plan 2025-28, Expense, p.89)
Rural Utilities Grant Program: $19 million over three years ($6 million annually) to support rural utility infrastructure across the province. (Source: Capital Plan Details by Ministry 2025-28)
Funding Changes
| Item | 2024-25 Forecast | 2025-26 Estimate | Change |
|---|---|---|---|
| Affordability and Utilities operating expense | $124M | $160M | +$36M |
| Affordability and Utilities total expense | $132M | $168M | +$36M |
| REP payments (incremental) | N/A | +$16M | Increase |
| Consumer awareness (new) | $0 | $4M | New |
(Source: Fiscal Plan 2025-28, Expense, p.89)
Capital Investment
Capital investment in the electricity sector through the Affordability and Utilities ministry is modest, totaling $24 million over three years:
- Rural Utilities Grant Program: $19 million over three years ($6 million annually) supporting rural communities' utility infrastructure needs.
- IT and general capital: $5 million over three years for ministry technology systems.
Significant private sector investment in generation capacity, including renewable energy projects and potential nuclear (small modular reactor) development, is not captured in the government capital plan but will shape the sector's trajectory. (Source: Capital Plan Details by Ministry 2025-28)
Risks
Lower electricity prices increasing REP costs. As electricity prices decline, government payments to REP operators whose contracted strike prices exceed market prices will continue to increase. The REP's net revenue contribution of $217 million since 2019 could erode if prices remain low.
Grid modernization challenges. Modernizing Alberta's electricity grid to enhance reliability, integrate distributed energy resources, and accommodate new large-scale demand (such as data centres) requires significant regulatory reform and infrastructure investment beyond what is captured in this budget.
Tariff-driven equipment cost increases. U.S. tariffs and Canadian retaliatory measures could increase costs of imported generation equipment, transformers, and grid infrastructure components, potentially raising capital costs for new private sector projects.
Demand surge from data centres. Alberta's AI Data Centre Strategy could drive substantial new electricity demand that the current grid may not be equipped to handle without significant generation and transmission expansion. Planning for this demand requires coordination across multiple ministries and agencies.
Opportunities
Grid modernization leadership. The government is leading a comprehensive modernization of Alberta's electricity grid to enhance reliability, improve affordability, and enable integration of distributed energy resources and new technologies. This positions Alberta for next-generation grid capabilities.
Rate of Last Resort consumer protection. The January 2025 introduction of the Rate of Last Resort provides consumers with more predictable and stable electricity and natural gas prices, supported by the new consumer awareness campaign.
Expanding generation capacity. Alberta has experienced significant growth in generation capacity from renewable projects coming online. Further capacity additions will benefit electricity prices and moderate inflation, with electricity price declines already contributing to lower consumer costs.
Data centre demand growth. Alberta's AI Data Centre Strategy could drive substantial new electricity demand, creating long-term growth opportunities for generators, grid operators, and related infrastructure providers.
Carbon-neutral power grid by 2050. The government's commitment to a carbon-neutral power grid by 2050 provides a long-term policy framework that supports investment in clean generation, including potential small modular reactor development.
What's Missing
The budget lacks detail on how Alberta will fund the grid infrastructure upgrades needed to accommodate large-scale data centre development. There is no specific allocation for small modular reactor development or nuclear energy planning despite the government's expressed interest. The budget does not address how grid capacity will be expanded to meet growing industrial demand, leaving this largely to market forces and private investment. There is no mention of energy storage investment or programs to accelerate battery and storage deployment, which are increasingly critical for grid stability as renewable penetration grows.
Net Assessment
The electricity and power grid sector receives a modest but targeted budget increase focused on consumer affordability and managing transition costs. The 27% increase in Affordability and Utilities total expense is driven primarily by structural costs (REP payments, coal phase-out) rather than transformative new investment. The sector's most significant developments -- grid modernization, data centre demand growth, and the potential nuclear roadmap -- are largely policy-driven rather than budget-driven, with the transformative investment expected to come from the private sector.