UPDATE: On August 27, 2025, the AESO released the final technical design for the Restructured Energy Market (REM). The document lists and discusses the key features of the REM design, which includes Locational Marginal Pricing, an Enhanced Day-Ahead Market for Operating Reserves, and New Pricing for the energy market offer cap and price cap.
During Fall 2025, details of the REM design will be discussed by the AESO and stakeholders. The implementation of the REM is scheduled for mid-2027.
Check out our in-depth article here for more details on the finalized REM design.
In March 2024, the Minister of Affordability and Utilities (MUA) directed AESO (the Alberta Electric System Operator) and MSA (the Alberta Market Surveillance Administrator) to commence drafting a technical design proposal for a Restructured Energy Market (REM). The directive was influenced by informed recommendations from the respective reports of the AESO and the MSA. The AESO Report revealed that its preliminary plan for the REM is designed to improve system reliability and affordability.
Two temporary policy changes were announced to support the transition to the REM. These amendments were implemented through new regulations and alterations that work within AESO’s rules, such as:
- Ensure an appropriate reserve margin of electricity supply by requiring advanced commitments from natural gas generating assets, directed by AESO, when there is an anticipated risk or peak, such as extreme weather or other peak demand situations.
- Prevent market dominance by any single electricity generation supply entity within Alberta by mandating an equitable pricing standard if net revenues exceed a predefined threshold.
Major modifications to the current energy-only market are part of the REM strategy, and these changes are being phased in according to milestone dates that have been set by AESO and how the new REM system is going to work.
The ultimate purpose of REM is to ensure a robust and flexible energy supply that can adjust to the interconnected electric grid’s changing requirements while advancing clean energy/decarbonizing initiatives. The REM further seeks to mitigate the influence of market dominance and offer consistent investment signals to bolster reliability throughout the province. AESO’s report for phasing in the REM system to implement it will allow for the effective introduction of critical measures, such as:
- Enhanced reliability through optimizing existing supply and potential new reliability services and standards.
- Short-term price protection for consumers via a market power mitigation framework.
- Medium-term investment incentives in dispatchable energy and demand response with new pricing mechanisms and markets.
- A long-term option to directly contract controllable supply to ensure reliability, used only as a last resort due to its significant impact on investor confidence and the market.
In December 2024, changes were announced:
- Costs for new transmission infrastructure will be assigned on a cost-causation basis, where those who use the most power pay for any cost increases. Ratepayers currently pay 100% of the cost to build new transmission lines.
- The changes ahead also include moving to a day-ahead model, meaning that if there are any expected electricity peaks or usage, it will be notified a day ahead for electricity providers.
The new legislation was expected in the spring of 2025. Affordability and Utilities Minister Nathan Neudorf said that transmission costs are roughly equalized throughout the province, and distribution is very regional. Northern rural Albertans currently pay three to five times as much as those in metropolitan centres. Ratepayers will save money regardless of where they live with the new proposed project.
It’s been said that while it’s difficult to pinpoint what the average Albertan pays for electricity, the changes will mean that ratepayers will now be paying 100% or less, regardless of area. When an area needs to be developed, ratepayers whose power usage increases would pay for the additional cost. However, if the needs are already met in a certain area, where a resource such as wind or solar is available, for example, those advocating for that resource would bear the cost of upgrading the systems. Neudorf also mentioned that, say, those building off the grid would need to pay to build transmission lines.
Some recently announced data centres will be self-sufficient, with no need to connect to the transmission grid. The proposed changes aim to encourage the building of new power plants in optimal locations and on existing infrastructure.
Day-Ahead Market Changes
Currently in Alberta, power generators provide a real-time price based on market conditions. One of the AESO’s proposed market reforms (as outlined on March 11, 2024) included moving to a day-ahead market (DAM) where power generators will commit their 24 hours in advance rather than a few hours beforehand. According to the AESO, this will help reduce price volatility and generate more competition between generators.
This change will also provide more competition and discipline in the bidding behaviours of all the provincial generators because they will all see their pricing 24 hours in advance and be able to see the trending numbers and prices. With most jurisdictions in North America going towards the REM changes, this will help discipline the price spikes and lead to a more stable pricing market.
Several temporary measures are in place before the legislation is approved, including the mark power mitigation legislation that was passed in March 2024, which has restricted generators from charging high prices.
The purposes and benefits of the new changes, including the new day-ahead markets, new reserve products, dispatch to manage reliability, wider price range, scarcity pricing, co-optimization, and market power mitigation, have their own key benefits listed below.
New day-ahead markets
- Allows parties to firm up pricing a day in advance to inform operational decisions, and ensures that adequate resources are available and can be delivered in real-time. Key benefits of this are more centralized coordination and control of generator operation and short-term revenue certainty to dispatchable generators
New reserve products
- New markets to ensure resources are rewarded for providing attributes needed to respond to changing supply and demand conditions. The benefits of this are that ramping products will compensate for the dispatchable capability, which will be compensated for by the products that are held back to meet more frequent ramp events.
- DAC product creates a market signal for the value of dispatchable capability
Dispatch to manage reliability
- Effectively manages transmission constraints, unit commitment, net demand variability and ramping. Current tools will not be robust enough to operate a system with more transmission congestion and greater variability.
Wider price range and scarcity pricing
- More effectively and precisely communicate the value of energy and reliability products at times of scarcity, including to attract more import responses. The benefits of this are dealing with supply surplus situations effectively and attracting more responses.
- Demand response and imports during times of scarcity are included.
- Better market signals for the value of dispatchable capability.
Co-optimization
- Achieve the lowest cost to meet energy and reserve requirements, given the new suite of products. Benefits include a robust pricing framework to handle clearing all offers and setting prices for energy and reserve products every five minutes based on system conditions.
Market power mitigation
- Providing guardrails to limit the potential for excessive exercise of market power, while allowing the price of energy and ancillary services to be determined by strategic offers.
- Economic withholding is a key feature of the new electricity market
- That said, excess withholding can produce economic inefficiencies and adversely impact the affordability of electricity for consumers.
That all said, these are the current announced changes proposed and will be rolling out as the timeline is dictated by the AESO and markers met. It should be in full effect by the spring of 2025.
On May 23, 2025, the AESO released an updated technical design for the Restructured Energy Market. The document outlined key changes to the REM, including:
- Removal of Day-Ahead Energy Market and the Day-Ahead Commitment product: Following stakeholder feedback, AESO removed the Day-Ahead Energy Market and the Day-Ahead Commitment product to reduce complexity, narrow the REM design scope, and focus on key market changes.
- Removal of Congestion Avoidance Market (CAM): Removed based on stakeholder concern about its complexity and the lack of testing in other markets. Instead, Locational Marginal Pricing (LMP) will be used for producers. Consumers will continue to settle at a uniform price but may opt to settle at their LMP.
- New Transition Mechanism: Under consideration. Designed to provide a degree of financial protection from the transition away from the current planning standard to an Optimal Transmission Planning (OTP) standard. AESO will progress the discussion and consultation on the transition mechanism with stakeholders, in coordination with the OTP consultation.
- Updated pricing: The energy market offer cap will increase to $1,500/MWh, and then will increase further to $2,000/MWh in 2032. The energy price cap will be set at $3,000/MWh. The price floor will remain at $0/MWh initially but will decrease to -$100/MWh in 2032. The scarcity pricing curve will reflect the value of the ramping product to set the price between the energy offer cap and the price cap when ramp capability is limited.
