Federal-Provincial Cooperation in the Canada-Alberta Electricity MOU

The Federal Government and the Government of Alberta signed a Memorandum of Understanding (“MOU”) on November 27, 2025 which highlights the Federal Government’s interest in developing Alberta’s energy sector but also seeks to strike a balance with Canada’s climate change policies.

While media attention to the MOU has largely focused on the improved prospects of a new bitumen pipeline out of Alberta, we have conducted a deeper review of the MOU’s terms to summarize the possible implications for the regulation of electricity and transmission in Alberta.

The Objectives and the Projects

In addition to seeking to increase Alberta’s oil and gas production while simultaneously pledging carbon neutrality by 2050, the MOU also lays out objectives on electricity generation in Western Canada; one of which is to increase electrical generation in Alberta for both consumer and industrial use, including meeting the needs of AI data centres. Another is to create new electricity and energy policies to address consumer affordability, electric grid stability and long-term competitive advantage for private sector investment.

Given these objectives, the MOU supports various electricity-related projects, including:

  • The construction of “thousands of megawatts of AI computing power”.
  • The construction of “large transmission interties with British Columbia to strengthen the ability of the west power markets the ability to supply low carbon power” to oil, liquified natural gas, critical minerals, data centres and carbon capture, utilization, and storage (“CCUS”) facilities.

In addition to significantly increasing generation (to support AI data centres) and significantly increasing the existing inter-tie transfer capability in Western Canada, Alberta and Canada have agreed to promote and support the development of nuclear power generation.

The Government of Alberta has previously expressed concerns over various electricity-related policies and regulations from the Federal Government, particularly those relating to clean energy and renewable energy sources. Unlike provinces such as B.C. and Quebec, which are able to generate a large amount of electricity from hydro projects, a majority of Alberta’s electricity is generated from fossil fuels and there were concerns that reliance on renewable energy sources would leave Alberta without power when weather conditions do not permit the generation of solar or wind power. Transmission interties with British Columbia and Saskatchewan would both lower these risks while also giving Alberta industries greater access to reliable power sources that are “cleaner” than fossil fuels.

But the MOU goes even further. The Federal Government made various commitments that further the goals around electricity generation and address Alberta’s concerns. These commitments include:

  • Suspending the Clean Electricity Regulations (“CER”) pending the negotiation of a new carbon placing agreement between Canada and Alberta; and
  • Working collaboratively with the Government of Alberta to de-carbonize Alberta’s electricity system by designing policies that enable nuclear technology, CCUS and energy storage.

The walk back of many federal environmental regulations, including the CER, has long been called for by the Government of Alberta out of fears that they were inconsistent with Alberta’s current electricity-generating scheme. The commitments by the Federal Government in the MOU thus have the potential for a more cooperative approach between the Governments of Canada and Alberta to encourage changes in Alberta’s electricity generation industry and the development of a more competitive, reliable and de-carbonized electric grid.

For its part, in the MOU the Government of Alberta has committed to:

  • Implement a policy framework to incentivize large investments in data centre development;
  • Work collaboratively with the Government of Canada on the development of a nuclear power generation strategy that can serve Alberta and other markets by 2050; and
  • Work collaboratively with the Government of Canada to build the low carbon generation and transmission grid to support Alberta industries by increasing inter-tie transfer capability between western provinces.

In conclusion, despite the media focus on the potential new bitumen pipeline and the Pathways CCUS project, the MOU has significant implications for the electricity sector, aimed at supporting a transformation in Alberta’s electricity grid by increasing transmission connectedness to other provinces, development of low-carbon electricity generation to power Alberta industries and new policies and regulations for economic competitiveness and grid stability.

The commitments envisioned in the MOU, if successfully implemented, have the potential to significantly increase, diversify and decarbonize Alberta’s generation sources, substantially build up the transmission system, and to make this all happen much more quickly than would otherwise be possible.