Appeal Denied – ATC
This decision arises from four separate appeals filed by Saskatchewan Power Corporation and its subsidiary Northpoint Energy Solutions (“Saskpower”), British Columbia Hydro and Power Authority and its subsidiary, Powerex Corp. (“BC Hydro”), ATCO Power Ltd. (“ATCO”) and TransCanada Energy Ltd. (“TCE”) regarding AUC Decision 2013-025: Alberta Electric System Operator, Objections to ISO rule Section 203.6, Available Transfer Capability and Transfer Path Management (February 1, 2013) (“Decision 2013-025”).
Decision 2013-025 upheld ISO rule Section 203.6: Available Transfer Capability and Transfer Path Management (the “ATC Rule”) proposed by the Alberta Electric System Operator (“AESO”) governing the allocation of system available transfer capability (“ATC”) over the interties that connect the Alberta electric system to neighbouring jurisdictions.
The respondents to the appeal, the AESO, Montana Alberta Tie Ltd., a wholly owned subsidiary of Enbridge Inc. (“MATL”), Morgan Stanley Capital Group Inc. (“MSCG”) and NaturEner USA, LLC (“NaturEner”) opposed the appeals, on the grounds that the findings in Decision 2013-025 were reasonable.
The ATC Rule, as determined by the AESO, operates in the following manner:
(a) At T-2, or two hours before a given dispatch hour, pool participants submit to the AESO their interchange transactions over each of the interties;
(b) The AESO, at T-85, or 85 minutes before a given dispatch hour, determines if the combined individual transfer paths of the Alberta/BC intertie and MATL intertie will exceed ATC limits on those transfer paths. (Due to the configuration of the intertie owned by MATL, the Alberta/BC intertie and MATL share a capability limit for the purposes of ATC);
(c) The AESO, also at T-85, posts total import offers and export bids for individual paths and its ATC allocations for each transfer path;
(d) At no later than T-20, the AESO must receive pool participants’ import and export transaction schedule submissions (known as “e-tags”);
(e) The AESO then validates e-tags, and includes them in the interchange schedule as a dispatch in the energy market merit order. Following this step, the energy is physically dispatched onto the Alberta Interconnected Electric System for the dispatch hour.
The ATC Rule thus created a pro-rata methodology for allocating ATC in situations where there is more demand for ATC than there is capacity. This differed from the previous methodology in which the AESO would schedule dispatches over the Alberta/BC intertie, and the Saskatchewan/Alberta intertie, and would curtail transmission schedules on a last-in-first-out basis when transaction volumes are greater than ATC, according to the timing of e-tags. The AESO determined the continued operation of this last-in-first-out methodology could result in unfairness to market participants once the intertie owned by MATL became operational.
Decision 2013-025 dismissed objections from the appellants, who submitted that the ATC Rule was not in the public interest, did not support the fair efficient and openly competitive operation of the electricity market in Alberta, and that the ATC Rule was technically deficient.
Leave to appeal Decision 2013-025 was granted on two questions:
(a) First, did the AUC err in law in its interpretation of section 29 of the Electric Utilities Act (“EUA”) by finding that the AESO was required by statute to provide system access service to intertie operators; and
(b) Second, did the AUC err in law in its interpretation of section 16 and/or section 27 of the Transmission Regulation (“T-Reg”)?
Section 29 of the EUA states “The Independent System Operator must provide system access service on the transmission system in a manner that gives all market participants wishing to exchange electric energy and ancillary services a reasonable opportunity to do so.”
Section 16 of the T-Reg provides that the AESO, in exercising its duties under the EUA, must prepare a plan to restore the operation of interties that existed on August 12, 2004 to their path rating, and to implement such a plan as soon as practicable. However, subsection 16(4) of the T-Reg provides that “This section shall not be interpreted as meaning that priority should be given to interties that existed on August 12, 2004 over interties existing after that date in respect of the allocation of available transfer capability.”
Section 27(4) of the T-Reg applies to an intertie proposed to be constructed, and requires that the cost of planning, designing, constructing, operating and interconnecting an intertie must be paid by the person proposing the intertie and other persons to the extent they directly benefit from the intertie.
The Alberta Court of Appeal (“ABCA”) adopted a standard of review of reasonableness in reviewing Decision 2013-025.
Preliminary Matter
The ABCA addressed one preliminary matter seeking to strike parts of the facta of two appellants, ATCO and BC Hydro. The respondents requested striking portions of the appellants’ facta on the basis that ATCO and BC Hydro’s submissions strayed beyond the questions on which leave was granted, or that leave was denied on those questions.
ATCO and BC Hydro’s facta disputed the finding that interties were part of the Alberta interconnected electric system, and that the AUC had improperly argued the AUC’s interpretation of the term “reasonable opportunity” as it appears in section 28 of the EUA and section 15 of the T-Reg. ATCO and BC Hydro submitted that questions of statutory interpretation require consideration of the entire statutory scheme and context.
The ABCA determined that while statutes must be read in their entire context, it does not give a party free rein to reargue all statutory interpretations. A party must treat the remaining statutory interpretations by the tribunal as settled for the purposes of the appeal.
On those grounds, the Court granted the motion to strike the offending portions of the appellants’ facta.
Analysis
The ABCA noted two findings of fact made by the AUC in Decision 2013-025 that were critical to the decision on these appeals:
(a) Interties do not create ATC, but that ATC is a function of the underlying system and is realized by connecting those systems through an intertie; and
(b) ATC is a system resource and does not belong to any particular intertie.
On the issue of the AUC’s interpretation of section 29 of the EUA, the ABCA noted the AUC’s findings that “reasonable opportunity” in section 29 requires the AESO to treat each market participant, whether a generator or an intertie, equally. Access must be non-discriminatory, and that no advantage may be given to one participant over another. The Court also noted the AUC’s finding that once a market participant has made an investment in infrastructure to connect to the Alberta electric system, it is clear that the market participant wishes to exchange energy.
The ABCA determined that the AUC’s findings in this respect were well within their expertise, was not inconsistent with their prior decisions, and did not rely on any single modifying word of the enactment. Rather, it considered the overarching scheme and purpose of the EUA to ensure the fair, efficient and openly competitive operation of the electric market in Alberta.
The Court determined that the AUC’s findings with respect to section 29 of the EUA in Decision 2013-025 were not unreasonable.
With respect to section 16 of the T-Reg, the Court noted that the AUC interpreted subsection 16(4) of the T-Reg as preventing the balance of that section from being taken as the basis for giving priority ATC allocation to the interties existing on August 12, 2004. The AUC also determined that not granting priority ATC allocation to existing interties was appropriate in the context of the scheme of the EUA.
The appellants submitted that section 16 imposed an obligation on the AESO to restore the path ratings of each intertie, whereas the ATC Rule decreases the path ratings by allocating it amongst other interties such as the line owned by MATL. The appellants submitted that the ATC Rule thereby undermined the express purpose of section 16.
The ABCA rejected these arguments, finding that the obligation referred to a plan to restore the interties, and that there was no explicit timeframe for restoring the existing interties. Instead, the ABCA accepted the argument of the AESO, that section 16 cannot be used as a basis for providing a priority allocation of ATC, and that the scheme and context of the EUA requires the AESO to allocate ATC on a non-priority basis.
The ABCA held that, although some interpretations may give rise to a large number of possible, reasonable conclusions, the onus is ultimately on the appellants to show that the selected interpretation is one that the statutory language cannot bear. The Court determined that the AUC’s interpretation of section 16 of the EUA in Decision 2013-025 was therefore not unreasonable.
With respect to section 27 of the T-Reg, the Court noted the AUC’s finding that there was no evidence persuading the AUC that the costs in section 27 of the T-Reg have not been paid by the operator of the MATL intertie. The AUC also found that ATC, as a system resource, did not belong to any one participant or intertie. As a result of this finding, the AUC also determined that intertie restoration costs were therefore appropriately characterized as system costs, and therefore outside the scope of the proceeding before the AUC.
The Court held that the factual determination that ATC was a system resource led the AUC to arrive at the not unreasonable conclusion, that ATC related costs were not costs under section 27 of the T-Reg.
Finally, the Court considered the broader public interest issues. The appellants argued that it cannot be in the interest of Alberta ratepayers for the AESO to allocate ATC to a privately owned and for-profit intertie in the manner that the ATC Rule does, and would deprive ratepayers of ATC paid for indirectly by the payment of their rates. Thus, since ATC is a public good, it should not be shared with or allocated to a private for-profit entity to the detriment of Alberta ratepayers.
The ABCA also rejected these arguments, noting that the public interest arguments strayed into the realm of cost considerations, and were not germane to the appeal itself.
In the result, the appeals from Decision 2013-025 were dismissed, in effect, upholding the ATC Rule.
