On June 9, 2026, the Government of Alberta enacted the Data Centre Regulation, AR 117/2026 under the Electric Utilities Act (EUA), codifying the province’s “bring your own generation” (BYOG) policy and providing the legal foundation for the Alberta Electric System Operator’s (AESO) grid connection process for large data centres. The Regulation operates alongside the AESO’s evolving Phase 2A process and its Guide to AESO Connection Requirements for Transmission-Connected Data Centres (TCDC Guide), but its scope is broader, codifying flexible tools that the AESO can adjust as the framework evolves. The Regulation is in force, but the Phase 2A rules are not yet finalized, with feedback due on the AESO's recently-released draft framework on July 13 and rollout anticipated in August 2026.
For background on the AESO’s Large Load Integration Program and the EUA amendments enabling the Regulation, see our earlier posts, Large Load Integration on Alberta’s Electricity Grid: The AESO’s Proposed Approach for Data Centre Connections and Alberta Advances Regulatory Changes to Facilitate Data Centre Development.
This post addresses (select a topic below to jump ahead):
- Large data centre thresholds and anti-avoidance measures
- Tethering, the central BYOG mechanism
- Prioritization for large data centres (LDCs) that bring their own generation
- Bridging to energize load ahead of tethered generation
- Load shedding and curtailment risk for LDCs
- Project readiness and interconnection requirements
- Key dates and next steps
- Conclusions and remaining areas of regulatory reform to support the burgeoning AI data centre industry
Large Data Centre Projects
The Regulation defines data centres as facilities housing and operating computing equipment for applications including cloud computing, AI, digital asset mining and digital services. A “large data centre” (LDC), which is subject to the Regulation, has a maximum direct transmission demand of 75 MW or more. The AESO may lower this threshold as required for grid reliability.
The AESO noted an increase in applications just below 75 MW. The Regulation’s anti-avoidance rules prevent structuring around the 75 MW threshold:
- Aggregation power: The AESO may treat multiple connection requests as a single LDC where the facilities are physically or operationally integrated, sit on the same or adjacent parcels or share common ownership.
- Active enforcement: The AESO will aggregate co-located facilities unless the proponent demonstrates that they are physically, electrically, operationally and legally distinct.
Proposed BYOG Framework
The Regulation and the AESO's proposed large load integration rules implement a BYOG framework prioritizing LDCs that offset their load impact with new generation.
Tethering
Tethering is the central BYOG mechanism. A data centre is tethered if it commits to bring offsetting generation into the grid's common pool to match its load. Tethering is an administrative and regulatory construct; generation may be, but is not required to be, co-located with, or connected directly to, the data centre.
The AESO may designate a project as a “tethered data centre” for grid connection purposes. Key features include:
- Linked SASRs: An applicant may associate its LDC request with one or more system access service requests (SASRs) for new or underutilized generating units or energy storage.
- Joint progression: Under Phase 2A, the data centre and generation projects link their SASRs through a tethering application and progress together through the AESO connection process.
- Generation-related risk: Any delay, downsizing or cancellation on the generation side can impact the data centre's regulatory process, up to and including cancellation.
Only (i) new generation or storage; (ii) existing facilities requesting a capacity increase; or (iii) existing facilities with an underutilization declaration, qualify for tethered designation. With respect to the latter, the AESO may declare a pre-existing generating unit "underutilized", determine its supply rate, and deem it to have received modified SAS, giving generators with existing excess capacity a route into the BYOG framework.
Combined tethered generation or storage must reliably supply energy at a rate at least equal to the data centre's maximum demand.
The AESO has broad discretion over tethering under the Regulation, and the scope of tethering under the Regulation is broader than the draft framework in the AESO's Phase 2A process. For instance, the Regulation allows for any type of generating unit and energy storage to be used for tethering, while the AESO's proposal is limited to gas-fired generation only (thereby excluding renewable generation, storage assets and hybrid facilities). The Phase 2A limit is expressly provisional. The AESO will revisit qualification at each intake cycle (initial intake is expected to start later in 2026 following rollout of final BYOG process rules, discussed below).
Prioritization for BYOG Data Centres
Tethered designation triggers priority processing for associated LDC projects, meaning most active LDC developments are likely to pursue tethered generation in the near term. Key sequencing requirements include:
- Priority over non-tethered LDCs: The AESO must prioritize SASRs for tethered data centres over non-tethered LDCs.
- Generation-first sequencing: Without bridging (discussed below), the AESO must not provide SAS to a data centre until its tethered generation has received its own SAS – i.e., absence behind-the-meter generation, a data centre cannot energize ahead of its tethered generation.
- Capacity cap: The load and generation MW thresholds must be aligned. The data centre's approved system demand limit cannot exceed the capacity of its tethered generation, requiring project phasing to align between data centre and power plant(s).
Bridging
Bridging allows a tethered data centre to energize before its paired generation is fully operational.
To qualify for bridging, all tethered generation or storage (if/when permitted for BYOG) must first obtain Alberta Utilities Commission (AUC) approval under Alberta's Hydro and Electric Energy Act and satisfy AESO criteria, even if the generation or storage facility is not yet fully operational. Once met, the tethered data centre may energize under bridging arrangements ahead of full generation commercial operation.
Bridging is tightly capped and closely monitored:
- System-wide limit: The AESO may set a system-wide cap on bridged demand and has proposed a limit of 1,600 MW.
- Time limit: Individual bridging contracts are limited to three years.
- Termination: The AESO may suspend or terminate bridged service where its criteria for exchanging electric energy are not met, or where a generation SASR has been cancelled, withdrawn or abandoned.
Load Shedding and Curtailment Risk
The Regulation establishes a two-tiered load management hierarchy:
- Heightened risk for bridged LDCs: If the AESO anticipates inadequate electricity supply, bridged data centres must reduce demand before any other market participant.
- Load shedding risks for all LDCs: In more severe circumstances, all LDCs, including those with operating tethered generation, must reduce before other grid participants.
Bridged loads are therefore further incentivized to closely align their development timelines with the commissioning and interconnection of tethered generation to minimize curtailment risk. For all LDCs, this aspect of the Regulation confirms that any data centre proponents seeking "five nine" reliability will likely require backup power supply.
Project Readiness, Interconnection Process and Technical Requirements
Readiness is the other governing factor in the BYOG framework. The Regulation empowers the AESO to require both generation and load proponents to demonstrate project readiness before providing service, reflected in:
- Mandatory checklist items, including site control, municipal zoning confirmation, conceptual single-line diagrams and, for LDCs, acknowledgement of the TCDC Guide requirements (discussed below);
- Scored criteria, including credit rating, development experience, equipment procurement status, siting approvals and whether capacity for fibre transmission (data centres) or gas supply (for generation) has been secured; and
- Financial commitments, which, for LDCs, include a DTS Commitment Fee of C$15,000 per MW of DTS capacity to be collected before power flow studies are conducted and refunded upon DTS execution.
Upon implementation, this framework will be the first instance where the AESO has required evidence of readiness for load proponents.
Each BYOG application cycle follows a defined sequence: six-week intake, then scoping and commitment, then connection studies (three to six months), then DTS execution. Intakes are planned approximately every nine months, will run in parallel with cluster studies and will repeat as long as system demand outpaces generation.
The TCDC Guide imposes additional technical obligations case-by-case. The AESO may review any transmission-connected data centre regardless of size, including self-supply and behind-the-fence configurations, and lock in requirements through a project-specific Functional Specification. Requirements span facility design, disturbance ride-through, ramping and reconnection limits, real-time monitoring and extensive information disclosure, each of which will affect facility design, timelines and cost.
Key Dates and Next Steps
The near-term BYOG dates are:
- Written BYOG process feedback due to the AESO: July 13, 2026; and
- Final process published and intake opens: late July/early August 2026.
The AESO’s Phase 2B (which may establish ISO rule and tariff changes to support the BYOG process) and Phase 2C (which will consider flexible load structures and market products) will follow as later modules. The AESO will provide further information on engagement scope and timing for these modules later in 2026.
Of note, section 11 of the Regulation expressly removes the requirement for the AUC to consider whether ISO rules made under the Regulation support fair, efficient and openly competitive operation of the electricity market. This gives the AESO broad rulemaking latitude to focus primarily on technical considerations.
Conclusions and Remaining Areas of Reform
Under the proposed BYOG framework, a proponent’s generation strategy will be the primary driver of whether and when it obtains grid access. The sequencing rules, bridging limits and load-shedding hierarchy all favour proponents who align generation development closely with data centre schedules.
Although further details on the AESO's connection process and associated requirements are expected soon, the BYOG framework and the Regulation are centered around grid-connected generation and load. Moreover, they do not address the regulatory limitations to self-supply configurations that continue to present risk and complexity to many proponents. As discussed in our earlier post, So You Want to Supply Your Own Power: Key Considerations for On-Site Generation in Alberta, typical data centre projects are unlikely to meet industrial system designation requirements, and those looking to rely on on-site generation must qualify for the self-supply exemption under the EUA, which is subject to several limiting restrictions. The Government of Alberta is alive to these issues and is developing a bespoke “data centre designation” (DCD) framework to better enable data centres to implement self-supply configurations. We will cover the DCD consultation and its implications in a forthcoming companion post.
Bennett Jones is actively involved in Alberta's rapidly growing data centre industry and will continue monitoring the AESO's large load integration program, related ISO rules, tariff work and technical standards, in addition to the government's ongoing efforts to adjust the legislative framework to the unique opportunities and complexities presented by large-scale data centre developments. For questions about Alberta's data centre regulatory framework, please contact the authors or a member of the Bennett Jones Energy Regulatory practice group.
