Electricity – Review and Variance
In this decision, the AUC denied the application from Milner Power Inc. (“Milner Power”) for review and variance (“R&V”) of findings regarding the interest calculation applied to loss factor charges, set out in Decision 26084-D01-2021 (the “Decision”). In those findings, the AUC determined that a simple interest calculation should be applied to loss factor charges recalculated for the period between January 1, 2006, and December 31, 2016 (the “historical period”).
This review concerned determinations in Proceeding 790, Proceeding 26084, and the record of this proceeding, Proceeding 26424. Accordingly, for clarity, each AUC panel is referred to as follows:
The members of the AUC panel who authored the decisions in Proceeding 790 are referred to as the “790 Panel.”
The members of the AUC panel who authored Decision 26084 will be referred to as the “Hearing Panel.”
The members of the AUC panel considering the review application will be referred to as the “Review Panel.”
AUC Review Process
In this decision, the AUC considered the preliminary question as part of the review process set out in Rule 016: Review of Commission Decisions. Milner Power requested the AUC exercise its authority pursuant to section 6(3)(a) of Rule 016, arguing that the AUC had made errors of fact, law and jurisdiction.
The AUC Acted on False Assumptions
Milner Power stated that the Hearing Panel had erred in its finding that, in Proceeding 790, no party raised the nature of interest awarded by the AUC. Milner Power asserted that this finding of fact was wrong and referenced two separate occasions in Proceeding 790 in which it stated that compound interest had been raised.
It further submitted that the Decision was based on the Hearing Panel’s assumption that the Alberta Electric System Operator (“AESO”) had not contemplated the calculation of compound interest. Milner Power submitted that this assumption was incorrect because the AESO had made a calculation of this nature prior to submitting its application in Proceeding 26084. Because the Hearing Panel made the finding it did in paragraph 21 of the Decision, Milner argued that the finding must be material and, consequently, it is a material error to be corrected.
The 790 Panel found that it would be reasonable to apply an interest rate equal to the Bank of Canada’s Bank Rate plus one and one-half per cent to loss factor charges that are recalculated for the historical period. The Review Panel determined that Milner Power did not identify findings in Decision 790-D04-2016 that are contrary to the Hearing Panel’s finding that no party had stated that it intended to use compound interest or included a frequency for doing so.
The Review Panel found that Milner Power had not demonstrated that the Hearing Panel made an error of fact in its findings regarding the submissions received concerning compound interest. Further, Milner Power did not persuade the Review Panel that such an error, if it was made, could lead the AUC to materially vary the decision.
Milner Power submitted that the Hearing Panel failed in the Decision to consider that some generators of the same ISO rate class suffered financial harm and that others benefited by being overpaid, and that the AUC has no choice but to use compound interest to address this financial harm.
The 790 Panel made no findings to the effect that the award of interest, in any configuration, was intended to provide full restitution. Rather it acknowledged that the award of interest would not do this. Interest was found to be awarded to help rectify the time value of money issue, not to provide full restitution. The Review Panel found that it was clear on the face of Decision 790-D04-2016 that the 790 Panel, in considering awarding any interest, had considered if awarding interest was necessary to consider the time value of money and further, it is clear that the 790 Panel was aware of the legislative requirements under the Electric Utilities Act.
As compound and simple interest both account for the time value of money, and as there is no finding by the 790 Panel that interest is intended to provide full restitution, the Review Panel found that Milner Power failed to demonstrate that the hearing panel erred in law by finding that simple interest should be awarded.
Effect of AUC Ruling in Proceeding 790 to Prohibit Reviews
Beyond review of the type of interest awarded, Milner Power proposed that the AUC, on its own initiative, conduct a review on the rate of interest in Decision 790-D04-2016. Milner Power argued that the AUC should award an appropriate rate and type of interest. Because the 790 Panel precluded reviews from parties, an AUC initiated review would be the only remedy available to Milner Power or any other party.
The AUC denied Milner Power’s request. As set out above the Review Panel was not persuaded that the Hearing Panel had made an error of law when determining that the 790 Panel had not considered that interest was intended to provide full restitution. Further, the level of interest was a matter that had been addressed by the 790 Panel and had further been upheld on appeal. The 790 Panel’s rulings did not prevent Milner Power or any other party from seeking relief from the court. The scope of the Decision was restricted to the type of interest, simple or compound. Requesting that the AUC initiate a review on the kind of interest through a review request in this proceeding would undermine the certainty and finality on this issue following the decision of the Alberta Court of Appeal.
Milner Power argued that the Hearing Panel erred in law by adopting, as a default position, that interest should be simple. The Review Panel found that the Hearing Panel had accurately considered applicable precedents, including the cases noted by Milner Power. The Review Panel was not convinced that Milner Power had demonstrated either on the face of the Decision or on a balance of probabilities that the Hearing Panel made an error of law on this ground.
In answering the preliminary question, the Review Panel found that Milner Power Inc. did not meet the requirements for a review of Decision 26084-D01-2021.