Robert Hemstock, BComm, LLB
MSA vs Balancing Pool
After the Balancing Pool assumed control of the terminated PPAs, the Market Surveillance Administrator ("MSA") launched an investigation into the Balancing Pool's behaviour as the new owner of the PPAs.
In the fall of 2018 the Balancing Pool admitted to the MSA that it had breached Section 85(1)(b) of the Electric Utilities Act for not managing the terminated PPAs in a commercial manner. The MSA concluded that the Balancing Pool should have acted to stem its losses by terminating the unprofitable PPAs sooner than it did.
The MSA and the Balancing Pool entered into a Settlement Agreement under which the MSA agreed the Balancing Pool would not have pay any penalty for its breach, even though a penalty in the millions of dollars could have been assessed by the MSA. An application to approve the Settlement Agreement is presently before the Alberta Utilities Commission ("AUC").
The MSA's application to the AUC, indicates the MSA also had reservations that the Balancing Pool sold its electricity from the PPAs at prices below what it could have achieved from the market. For the purpose of the Settlement there was no agreement between the MSA and the Balancing Pool as to whether the Balancing Pool's offer strategy for the terminated PPAs was in compliance with Section 85(1)(b) of the Electric Utilities Act. So this issue appears to currently be unresolved.
The Independent Power Producers Society of Alberta ("IPPSA") has expressed concern that despite these serious findings of breach of law by the Balancing Pool, the MSA has proposed to the Alberta Utilities Commission that no penalty be applied to the Balancing Pool for its breach. IPPSA filed a report prepared by a consulting firm named EDC Associates Ltd. with the AUC asserting that if the Balancing Pool had bid its PPA electricity into the market to fully recover all its variable and fixed costs to break even, power prices would have risen sharply and in just 2017 alone generators would have “earned an additional $1.7 billion gross operating margin”.
Chris Varcoe wrote an insightful article in the Calgary Herald on September 21, 2018 on the MSA Settlement Agreement with the Balancing Pool. In the article Varcoe queried "But precisely why the Balancing Pool acted that way, or what role the NDP government played in its actions, remains a mystery." Albertans deserve to know the answer to this question.