Notice of Specified Penalty
Sponsor Energy Inc. (“Sponsor”) is a licensed retailer of electricity and natural gas in Alberta. In this decision, the AUC considered a notice of dispute filed by Sponsor in respect of a notice of specified penalty issued to Sponsor and confirmed the disputed specified penalty, as issued.
On June 11, 2018, Bill 13: An Act to Secure Alberta’s Electricity Future, which amended the Alberta Utilities Commission Act, came into force. Bill 13 added Section 63.1, empowering the AUC to issue a notice of specified penalty, in accordance with rules to be established by the AUC, to persons violating an AUC rule, order, or decision. Under Section 63.1, parties who receive a notice of specified penalty are entitled to register a dispute.
The AUC approved Rule 032: Specified Penalties for Contravention of AUC Rules and related amendments to certain rules pertaining to customer care and billing issues on December 11, 2018, with an effective date of January 1, 2019.
The AUC issued a notice of specified penalty to Sponsor pursuant to Section 63.1 of the Alberta Utilities Commission Act and Rule 032 on November 7, 2019. On January 21, 2020, Sponsor filed a notice of dispute with respect to the notice of specified penalty.
AUC staff charged by the AUC with the responsibility to investigate complaints and contraventions of AUC rules, orders, and decisions and to make recommendations to the AUC regarding the imposition of specified penalties in respect of the enforcement of AUC rules, orders and decisions was referred to as “Enforcement Staff.”
The AUC assigned AUC staff (the “Review Staff”) and an AUC panel (the “Review Panel”) to consider Sponsor’s notice of dispute. These individuals took no part in the investigation of, or the issuance of, the disputed notice of specified penalty and, as of the assignment date, measures were put in place to separate Enforcement Staff and the AUC panel that issued the notice (the “Enforcement Panel”) from the Review Staff and Review Panel.
Pursuant to Section 3(1) of Rule 032, the AUC may issue a notice of specified penalty “if the Commission is satisfied that a person has contravened one or more of the AUC rules listed in the penalty table” attached to the rule. The content of a notice of specified penalty is set out in Section 3(2) of Rule 032.
Section 4 of Rule 032, discussed in further detail below, contains a list of factors that the AUC may consider in deciding to issue a notice of specified penalty. The factors enumerated in Section 4 are as follows:
(a) the impact on any person adversely affected by the contravention;
(b) the number of persons affected by the contravention;
(c) the timeliness of the action taken by the person who committed the contravention to address the conduct, activity or omission that resulted in the contravention;
(d) the level of satisfaction of the persons affected by the contravention resulting from any action taken by the person who committed the contravention;
(e) if the conduct, action, or omission that resulted in the contravention was an isolated instance or a recurring problem; or
(f) any action taken by the person who committed the contravention to ensure compliance in the future.
Section 5 of Rule 032, along with the penalty table attached to the rule, describe a methodology for determining a specified penalty amount for contraventions of certain AUC rules. The AUC rule contraventions identified in the penalty table include contraventions of certain provisions of Rule 021: Settlement System Code Rules and Rule 028: Natural Gas Settlement System Code Rules, which are relevant in the circumstances of the notice that is in dispute.
Both Rule 021 and Rule 028 contain provisions related to a retailer’s responsibility to use the correct de-select reason (“DSR”) code when notifying a wire service provider or gas distributor that the retailer will no longer provide service to a customer at a site.
With respect to electricity service, Subsection 2.5(2) of Rule 021 states:
(2) A retailer must use the correct de-select reason code when notifying a [Wire Service Provider] that it will no longer provide electricity services for the site.
With respect to gas, Subsection 2.5(2) of Rule 028 states:
(2) A retailer must use the correct de-select reason code when notifying a distributor that it will no longer provide electricity services for the site.
In this case, the disputed notice of specified penalty related to contraventions of Subsection 2.5(2) of Rule 021 and 2.5(2) of Rule 028.
In its notice of dispute, Sponsor did not deny that the contraventions occurred, but disputed the notice of specified penalty on the basis that Enforcement Staff did not follow the process outlined in Rule 032:
While we are not disputing the errors that were made, and the unfortunate impact to the customer, we are disputing the Specified Penalty on the grounds that the AUC did not follow the process outlined in Rule 32.
Sponsor Energy is concerned that the AUC did not consider the factors required under Section 4 (factors to be considered), specifically, section 4 subsection (f) was not considered prior to determining the fines outlined in the Specified Penalty AUC 2019-114.
Sponsor asserted that Enforcement Staff did not contact it to ascertain whether any actions were taken to prevent contraventions in the future, and that changes to its call centre processes resulted in a “complete turnaround in the improper use of drop codes.”
Enforcement Staff disputed that it is required to consider each of the factors outlined in Section 4 of Rule 032 prior to issuing a notice of specified penalty. Enforcement Staff emphasized that this interpretation would effectively change the meaning of the word “may” within that section, contrary to modern principle of statutory interpretation.
In response, Sponsor argued that the only manner in which Enforcement Staff can properly exercise discretion is if it collects adequate information on each of the factors enumerated in Section 4 of Rule 032. Sponsor argued that the investigation conducted by Enforcement Staff did not properly gather information that would allow Enforcement Staff to exercise its discretion appropriately.
The AUC previously determined that Enforcement Staff holds the onus of demonstrating the evidentiary basis for a disputed notice of specified penalty on a balance of probabilities. Enforcement Staff must also demonstrate that the process steps for issuing the notice outlined in Rule 032 were followed, that the penalty in the notice was calculated properly, and that the Enforcement Panel approved the issuance.
In Decision 24752-D01-2020, the AUC confirmed that once Enforcement Staff has satisfied the required onus to the applicable standard of proof, there is no further obligation to demonstrate how the Enforcement Panel considered the exercise of its statutory discretion to maintain the validity of a notice of specified penalty. Rather, the onus shifts to the party disputing the notice to demonstrate that it was unreasonable.
The Review Panel considered Sponsor’s arguments and found no reason to revisit the AUC’s previous findings on the allocation of the onus and standard of proof applicable to specified penalty proceedings, as described in Decision 24752-D01-2020. The Review Panel did not consider it reasonable to interpret Rule 032 as imposing on Enforcement Staff a positive obligation to demonstrate that it considered or investigated the factors in Section 4 prior to issuing a notice of specified penalty. Such an interpretation contradicts the plain language of the enabling legislation.
The Review Panel was of the view that the factors in Section 4 are a non-exhaustive and non-mandatory list. Although these factors may provide guidance to an Enforcement Panel, the inclusion of this list in Rule 032 does not constrain the AUC’s authority to issue a notice of specified penalty where it is satisfied that a contravention has occurred.
In any specified penalty proceeding, the scope and extent of the investigation carried out by Enforcement Staff will necessarily respond to the circumstances of the particular contravention, including the available evidence and the particulars of the scrutinized conduct. Accordingly, the factors in Section 4 may or may not be relevant. The Review Panel did not accept Sponsor’s suggestion that the operation of Rule 032, or the broader legislative scheme, requires Enforcement Staff to conduct an investigation into factors beyond what is necessary to satisfy its onus.
The Review Panel rejected Sponsor’s arguments regarding the fettering of the Enforcement Panel’s discretion, as well as arguments regarding the denial of procedural fairness. It also disagreed with Sponsor’s argument that the Enforcement Panel failed to provide reasons, noting that the notice of specified penalty set out the circumstances of the contraventions and facts relied on by the Enforcement Panel.
The Review Panel dismissed the notice of dispute and confirmed the specified penalty set out in the notice of specified penalty.