Electricity – Markets
Application
In this decision, the AUC determined that the settlement agreement reached by the AUC enforcement staff (“Enforcement Staff”) and ATCO Electric Ltd. (“AE”), proposing an administrative penalty of $31 million, is in the public interest. The settlement negotiations resulted from a complaint to the Enforcement Staff alleging a pattern of self-dealing and deception perpetrated by AE to benefit its shareholders and the shareholders of an AE affiliate at the cost of Alberta ratepayers.
Decision
The AUC approved the settlement agreement without variation. It was satisfied that accepting this settlement agreement is consistent with the public interest and will not bring the administration of justice into disrepute.
Applicable Legislation
Alberta Utilities Commission Act, SA 2007, c A-37.2 – ss 8, 23, 63, and 66.
AUC Rule 001: Rules of Practice.
AUC Rule 013: Rules on Criteria Relating to the Imposition of Administrative Penalties.
Electric Utilities Act, SA 2003, c E-5.1 – ss 37, 119.
Pertinent Issues
It was alleged that when building a regulated transmission line, AE took advantage of its position as a regulated utility to benefit its unregulated affiliate, ATCO Structures & Logistics Ltd. (“ASL”). AE knowingly sole-sourced a major contract for a directly assigned capital project, the Jasper Interconnection Project transmission line (the “Jasper Project”), at rates above fair market value to secure a contract and a financial benefit for ASL. AE then sought recovery of millions of dollars above fair market costs from ratepayers for that sole-source contract. Further, AE created a misleading paper trail justifying its decision and concealing critical information regarding the decision to sole-source the contract – namely, to benefit its unregulated affiliate ASL – to avoid the AUC’s detection of its actions and improperly recover those above fair market costs from Alberta ratepayers.
Generally, the AUC decides if a settlement agreement is fit and reasonable and falls within a range of acceptable outcomes given the circumstances. To evaluate if the agreement is in the public interest, the AUC assessed the seriousness of the contravention, the compliance system, and the self-reporting or cooperation of the contravener.
The AUC noted that the AE contravened the Electric Utilities Act by failing to fulfill its duties and obligations as an electric utility operator in Alberta. AE violated its obligation to be honest, true, accurate, and not misleading in providing information in its applications before the AUC. The AUC found that this contravention strikes at the core of a properly functioning regulatory system and its importance cannot be overstated.
The AUC found that the contraventions are very serious and noted that factors in Rule 013 speak to the seriousness of the contraventions.
The AUC considered the harm caused by the contraventions and found that the magnitude of the proposed $31 million penalty and the proposed terms and conditions are proportionate to that harm.
The AUC evaluated the settlement agreement in its entirety. It was satisfied that accepting this settlement agreement is consistent with the public interest and will not bring the administration of justice into disrepute.
