Transfer of Fossil Fuel-Based Power Generation Business
In this decision, the AUC considered whether to approve the following transactions:
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ATCO Power (2010) Ltd.’s disposition of all of its shares in ATCO Power Canada Ltd. to Heartland Generation Ltd. and for the transfer of the Cumulative Preferred Shares Series V in the capital of Alberta Power (2000) Ltd. from Canadian Utilities Limited (“CUL”) to ATCO Power (2010) Ltd. and then from ATCO Power (2010) Ltd. to ATCO Power Canada Ltd (the “Heartland Transaction”).
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ATCO Power Canada Ltd.’s transfer of ownership of the Oldman River Hydro Power Plant, the Oldman River 806S Substation and associated connection order to ATCO Power (2010) Ltd (the “Oldman River Ownership Transfer”).
Requirement to Obtain AUC Approval of Certain Transactions
CUL, being a designated owner of a public utility under section 101 of the Public Utilities Act (“PUA”) and a designated owner of a gas utility under section 27 of the Gas Utilities Act (“GUA”), must obtain approval or an exemption from approval from the AUC if it engages in certain transactions outside of the ordinary course of an owner’s business. Failing to do so means that the transaction is void.
Application Filed with AUC for Approval of Transactions
On June 5, 2019, CUL filed the following applications with the AUC:
(i) Application requesting a declaration pursuant to section 101(4) of the PUA and section 26(4) of the GUA that the Heartland Transaction is exempt from the application of sections 101(2)(d)(i) and 102(1) of the PUA and sections 26(2)(d)(i) and 27(1) of the GUA. Or in the alternative, an Order by the Commission approving the Heartland Transaction under sections 101(2)(d)(i) and 102(1) of the PUA and sections 26(2)(d)(i) and 27(1) of the GUA.
(ii) Application requesting approval for ATCO Power Canada Ltd. to transfer ownership of the Oldman River Hydro Power Plant, the Oldman River 806S Substation and associated connection order (collectively the “Oldman River Hydro Project”) to ATCO Power (2010) Ltd.
The Heartland Transaction
Request for Exemption or Approval Under PUA and GUA
The AUC found that an exemption under section 101(2)(d)(i) of the PUA and section 26(2)(d)(i) of the GUA should only be granted in circumstances where the transaction is straight forward, of relatively small value and upon review raises no issues that might harm customers. Accordingly, the AUC decided to consider the application regarding the Heartland Transaction as one for approval (and not for an exemption).
Commission Findings
The AUC set out that the central question in deciding whether to approve a transaction outside of the ordinary course of business under section 101(2)(d)(i) of the PUA or section 26(2)(d)(i) of the GUA, is whether customers are harmed by the transaction. The customers in this case were the consumers of electricity and natural gas utilities served by ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.
The AUC approved the Heartland Transaction under section 101(2)(d)(i) of the PUA and section 26(2)(d)(i) of the GUA, based on finding that there was no harm caused to the regulated customers of ATCO Electric Ltd. and ATCO Gas and Pipelines Ltd.
The AUC noted that the no-harm test and the factors considered by the AUC had evolved over the years and the test now reflected the following:
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customers, to the maximum extent possible, are to be protected against any negative ramifications arising from the transactions;
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customers are not entitled to a level of post-transaction regulatory certainty they would not have realized if the transaction had not been approved; and
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customers are at least no worse off after the transaction is completed after consideration of the potential positive and negative impacts of the proposed share transactions.
The AUC held that the Heartland Transaction related to non-utility, non-rate regulated assets and would not have a harmful effect on regulated utility service or the rates charged for those services. Nor would the Heartland Transaction negatively affect regulatory oversight of CUL. The AUC therefore found that the no-harm test was satisfied and approved Heartland Transaction.
The Oldman River Ownership Transfer
Application for Transfer of Ownership
CUL filed an application under sections 10, 15, 18, 19 and 23 of the Hydro and Electric Energy Act (“HEEA”) to transfer ownership of the Oldman River Hydro Project from ATCO Power Canada Ltd. to ATCO Power (2010) Ltd.
Commission Findings
The AUC held that, based on the information provided, ATCO Power (2010) Ltd., through CUL, had demonstrated that it was eligible to hold the power plant approval, substation licence and connection order in its name.
The AUC noted that in an information response, CUL confirmed that ATCO Power Canada Ltd. was currently bound by a use of works agreement regarding the Oldman River Hydro Project, including conditions that the removal of the power plant would be at the sole expense of ATCO Power Canada Ltd., and done in a manner acceptable to the Minister of the Environment.
The AUC did, however, note that while the applicant requested AUC authorization pursuant to section 10 of the HEEA, which requires AUC approval for operation of a hydro development, the existing authorization to operate that power plant was properly granted pursuant to section 9 (now 11) of that Act. Therefore, the new authorization granted to ATCO Power (2010) Ltd., the AUC held, must also be granted under that section, i.e., Section 11 of the HEEA.
Summary
The AUC approved the Heartland Transaction and Oldman River Ownership Transfer.
