The Competition Bureau has inked a consent agreement with TransAlta, an electrical power generation assets company, regarding its acquisition of Alberta-based Heartland Generation.
TransAlta had agreed to acquire 100 percent of Heartland Generation’s business operations in Alberta and BC on November 1, 2023. However, a review by the Bureau found that the proposed transaction could significantly reduce competition within Alberta's wholesale electricity supply market. The review was conducted based on information from stakeholders such as the two merging parties, third parties, and regulators.
According to the Competition Bureau’s statement, electricity generators owning large portfolios of generating assets had strong incentives to participate in economic withholding because the profits lost due to withholding some generating capacity would be lower than the extra profits that would be earned throughout the portfolio as a result of increased electricity prices.
This incentive is particularly strong for generators with a generating assets portfolio comprising a combination of higher and lower marginal cost generating assets. The Bureau added that barriers to entry were high for non-renewable electricity generation sources due to time and sunk costs racking up during the development of new electricity-generating assets.
To alleviate the Bureau’s concerns, TransAlta consented to sell Heartland Generation’s Poplar Hill and Rainbow Lake 4 & 5 electricity generation assets to one or more independent purchasers, who the Commissioner of Competition will approve.
The Bureau confirmed that the sale is expected to resolve the identified competition issues after examining the effect of each facility on TransAlta’s ability and incentive to participate in economic withholding. It investigated the generating unit type, generation capacity, marginal cost, historic pricing and supply behaviour.
The complete consent agreement has been published on the Competition Tribunal's website.
Consent agreements include remedial measures to mitigate the potential anti-competitive effects of mergers. Once registered with the Tribunal, such agreements have the same impact as a court order.