Budget 2025: What It Means for Utilities
Alberta Budget 2025 boosts Affordability and Utilities to $160M operating expense and invests $520M in water and wastewater infrastructure.
Affordability and Utilities operating expense
$160M
+$36M (29%) from 2024-25
Water/wastewater infrastructure
$520M over 3 years
+~$20M for regional projects
Rural Utilities Grant Program
$19M over 3 years
Sector Impact Summary
The utilities sector in Alberta receives a focused package of measures in Budget 2025 targeting consumer affordability, system modernization, and water infrastructure investment. The Ministry of Affordability and Utilities sees its operating expense increase by 29% to $160 million, driven primarily by rising Renewable Electricity Program payments, coal phase-out costs, and a new consumer awareness campaign for the Rate of Last Resort. The budget signals the government's attention to utility cost concerns that remain a significant factor in household affordability.
Beyond the ministry's direct spending, the most substantial utilities investment flows through water and wastewater infrastructure programs. Budget 2025 allocates over $520 million over three years for municipal water and wastewater programs, including nearly $20 million in increased funding for regional projects compared to Budget 2024. This investment addresses the persistent challenge of aging water infrastructure in small and mid-sized municipalities while supporting population growth pressures across the province.
The introduction of the Rate of Last Resort in January 2025 marks a notable policy shift toward consumer protection in the deregulated electricity and natural gas markets. The government is funding a multi-year consumer awareness campaign to ensure Albertans understand their options under the new rate structure. Combined with moderating electricity prices from expanded generation capacity, the utilities sector outlook is cautiously positive for consumers, though providers face margin pressures from lower prices and rising regulatory requirements.
Key Budget Measures
Affordability and Utilities operating expense: $160 million. Up $36 million (29%) from the 2024-25 forecast of $124 million. Includes funding for the Alberta Utilities Commission (AUC), the Utilities Consumer Advocate (UCA), and consumer protection programs. (Source: Fiscal Plan 2025-28, Expense, p.89)
Alberta Utilities Commission budget: $132 million. Funds regulation of the investor-owned utilities sector, generation development, and natural gas and electricity markets. The AUC, Market Surveillance Administrator, and Alberta Electric System Operator (AESO) operate independently of government. (Source: Fiscal Plan 2025-28, Expense tables)
Rate of Last Resort implementation. Introduced in January 2025, providing consumers with more predictable and stable electricity and natural gas prices. Consumer awareness campaigns funded at $4 million in 2025-26 and $5 million in each of the following two years. (Source: Fiscal Plan 2025-28, Expense, p.89)
Municipal Water and Wastewater Program: $195 million over three years ($45 million, $67 million, $84 million). Supports small and mid-sized municipalities in building or enhancing drinking water and wastewater systems. (Source: Capital Plan Details by Ministry 2025-28)
Regional Water/Wastewater Projects - Water for Life: $257 million over three years ($51 million, $111 million, $95 million). Funds regional water and wastewater infrastructure projects with a notable increase compared to the prior capital plan. (Source: Capital Plan Details by Ministry 2025-28)
First Nations Water Tie-In Program: $50 million over three years ($8 million, $15 million, $27 million). Connects First Nations communities to regional water and wastewater systems. (Source: Capital Plan Details by Ministry 2025-28)
Rural Utilities Grant Program: $19 million over three years ($6 million annually). Supports rural utility infrastructure maintenance and upgrades. (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 |
| Municipal Water and Wastewater Program | N/A | $45M (Yr 1) | Ongoing |
| Regional Water/Wastewater - Water for Life | N/A | $51M (Yr 1) | ~$20M increase |
(Source: Fiscal Plan 2025-28, Expense, p.89; Capital Plan Details by Ministry 2025-28)
Capital Investment
Water and wastewater infrastructure represents the largest capital investment relevant to the utilities sector, totaling over $520 million over three years through the Transportation and Economic Corridors ministry:
- Regional Water/Wastewater Projects - Water for Life: $257 million ($51M, $111M, $95M)
- Municipal Water and Wastewater Program: $195 million ($45M, $67M, $84M)
- First Nations Water Tie-In Program: $50 million ($8M, $15M, $27M)
- Capital Region Wastewater Treatment: $10 million (2025-26)
- Sundre Wastewater Treatment Plant: $8 million (2025-26)
Additional utilities-related capital through Forestry and Parks:
- Parks Water and Wastewater Infrastructure: $31 million ($5M, $10M, $16M)
Affordability and Utilities direct capital:
- Rural Utilities Grant Program: $19 million ($6M annually)
- IT and general capital: $5 million over three years
(Source: Capital Plan Details by Ministry 2025-28)
Risks
Rising utility costs for consumers. While electricity prices are moderating, shelter costs including utilities remain a key driver of inflation. Distribution costs vary significantly across the province, and some rural and remote communities face particularly high utility costs.
Aging water and wastewater infrastructure. Small and mid-sized municipalities face persistent challenges maintaining drinking water and wastewater infrastructure. While the $520 million allocation is significant, the total deferred maintenance across Alberta's water systems likely exceeds available funding.
Tariff impacts on infrastructure materials. U.S. tariffs and retaliatory measures could increase costs of imported pipes, pumps, treatment equipment, and other materials needed for water, wastewater, and utility infrastructure projects, reducing the real purchasing power of capital allocations.
REP cost escalation. If electricity prices continue to decline, government payments to REP operators will continue to increase, eroding the program's historic net revenue contribution and adding ongoing fiscal pressure.
Opportunities
Electricity price moderation. Expanding generation capacity from renewable and gas-fired projects is moderating electricity prices, benefiting consumers and businesses. Further price moderation is expected as additional capacity comes online.
Utility system modernization. The government is committed to modernizing Alberta's utility systems to balance affordability, reliability, and sustainability, including integration of distributed energy resources and smart grid technologies.
Rate design improvements. The government is exploring how to design electricity and natural gas rates to best serve Albertans, including making distribution costs more consistent across the province. This could address the significant regional disparities in utility costs.
Water infrastructure investment cycle. The $520 million water and wastewater investment creates a significant opportunity for engineering, construction, and equipment firms serving the utilities sector, particularly in regional and rural communities.
What's Missing
The budget does not include a comprehensive water strategy that addresses the long-term supply challenges facing southern Alberta amid increasing irrigation, industrial, and municipal demand. There is no specific funding for smart metering or advanced metering infrastructure that would support demand management and grid optimization. The budget lacks detail on how the government plans to address regional disparities in utility distribution costs, despite acknowledging the issue. There is no allocation for pilot programs exploring utility-scale energy storage, which is increasingly important for grid reliability.
Net Assessment
The utilities sector receives moderate but well-targeted budget increases focused on consumer affordability and water infrastructure. The 29% operating expense increase reflects rising structural costs rather than transformative new programs, while the $520 million water and wastewater capital investment addresses critical infrastructure needs. The Rate of Last Resort introduction and utility modernization agenda provide a positive policy direction for the sector, though the most significant transformation will depend on private investment and regulatory evolution.