Report from the President and CEO
(excerpt from the 2020 Annual Report)
The unprecedented global health and economic crisis defined 2020. The crisis brought with it challenges the likes of which none of us have ever faced, and it also acted as a catalyst for sudden and rapid change in our society, including how we work, socialize, shop, and manage our health.
I am incredibly proud of how the Balancing Pool responded to the challenges of 2020. The successful execution of our strategy over the past years allowed our organization to enter the crisis from a position of strength. Our commercial team adapted its Power Purchase Arrangement (“PPA”) management strategies in reaction to deteriorated market fundamentals, always guided by the Balancing Pool’s mandate to manage the PPAs in a commercial manner. These efforts coupled with careful financial planning allowed us to finance a substantial portion of the Government of Alberta’s Utility Payment Deferral Program, which permitted Alberta electricity consumers and retailers to defer utility payments through the peak months of the economic lockdown. Even with these new financing obligations and the presence of weak market conditions, the Balancing Pool had no need to increase its borrowing over the course of the year, and it remains ahead of its original loan repayment schedule. These successes of 2020 all took place while our staff transitioned seamlessly to a full remote working environment for the first time.
Alberta’s electricity consumers benefit from the Balancing Pool’s financial position through the Consumer Allocation. The collection from consumers fell again this year, falling from $2.50 per megawatt hour (“MWh”) in 2020 to $2.30 per MWh in 2021. Even with the recent years’ collections, the Balancing Pool has remitted a net amount of over $4 billion to consumers over the course of its mandate.
2020 also marked another significant change for the Balancing Pool and Alberta’s electricity industry, but one that has been long expected: the expiration of the PPAs. The PPAs were one of the primary mechanisms used by the Government of Alberta to introduce competition into the supply of electrical power over a 20-year period. As I look back on the transition that took place over the last 20 years, it is clear to me that the market has matured into the fair, efficient, and openly competitive one that its architects intended. With the expiration of the PPAs, all generation facilities formally subject to the PPAs are now under the control of the facilities’ owners, and the Balancing Pool no longer has an active position in the market.
Over the coming years, the Balancing Pool’s strategic focus will be on resolving outstanding claims associated with the PPAs. The Balancing Pool is required to backstop certain events related to the PPAs, including events of force majeure, changes in law, PPA unit destruction, PPA party default, unit decommissioning, and PPA termination. Alberta electricity consumers must ultimately fund valid claims, and it is the Balancing Pool’s obligation to assess, verify, and sometimes dispute them. The Balancing Pool will continue to ensure consumer funds are protected while simultaneously providing generators the payments they are entitled to receive.
I would like to conclude by thanking the people that enabled the Balancing Pool to not only persevere through 2020s challenges, but to also be in a position to support our industry and the people of Alberta. Thank you to our dedicated staff, our engaged Board of Directors, and our valued industry stakeholders. We now venture forth on the new path that lays before us with hope on the horizon and a new-found resiliency and courage that only weathering a crisis can bring.
President and Chief Executive Officer
April 14, 2021