Canada: TransAlta Complaint About Market Surveillance Administrator Dismissed By Alberta Utilities Commission

Last Updated: May 29 2014
Article by Randall W. Block, QC, John Blair, QC and Sandi Shannon

Most Read Contributor in Canada, September 2016

One of the roles of the Alberta Utilities Commission is to regulate the conduct of Alberta electricity market participants so as to promote a fair, efficient and openly competitive electricity market in that province. As part of that mandate, the Alberta Utilities Commission Act (AUCA) established the office of the Market Surveillance Administrator (MSA), a position which has been described as serving a "watchdog" function in respect of traders, generators and other market participants. In order to provide a check and balance, the AUCA also contains a formal complaint procedure available to market participants if they object to the manner in which the MSA carries out its mandate.

Following a lengthy investigation that commenced in 2011, the MSA concluded in late 2013 that in its view TransAlta Corp. and two of its employees had contravened relevant legislation (the Electric Utilities Act and the Fair, Efficient and Open Competition Regulation) in relation to a corporate strategy that entailed scheduling repair outages at certain plants during periods of peak electricity demand (generally, weekday evenings), thereby allegedly manipulating electricity prices to the benefit of TransAlta's trading portfolio.

In late 2013, TransAlta and the two employees were informed that the MSA believed they had contravened the legislation and, as a matter of fairness, were invited to respond to the allegations. Shortly after responding (but prior to the MSA formally referring an enforcement proceeding to the Commission) TransAlta and the employees filed written complaints under s. 58 of the AUCA with the Commission about the MSA's conduct during both the investigation and a consultation period which pre-dated the investigation.

Pursuant to s. 51 of the AUCA, the MSA requested that the Commission initiate a hearing into the allegations. The MSA also asked the Commission to dismiss the three complaints under s. 58(2)(a) of the AUCA, which provides for mandatory dismissal of any complaints that are related to a matter the substance of which "is before [... ] the Commission".

That provision of the AUCA had not previously been interpreted, so the issue attracted considerable industry interest. TransAlta and the employees argued that their complaints should not be dismissed, first on the basis that since the complaints preceded the enforcement matter having come before the Commission they could not be related to a matter that "is" before the Commission; secondly, that complaints about the MSA should be dismissed only if they are clearly unmeritorious; and thirdly that their complaints were not related to the MSA's enforcement matter.

On May 14, 2014 (AUC Decision 2014-135) the Commission issued a decision agreeing with the MSA that the complaints were related to a matter before the Commission at the time of the dismissal application,  and were required to be dismissed. It did not matter that the complaints had been filed before the enforcement matter was actually brought before the Commission by the MSA. The Panel also agreed with the MSA that the concerns expressed by TransAlta and the employees about the MSA should be addressed in the context of  the MSA's enforcement hearing as possible defences or mitigating factors, but not as statutory complaints. In its reasons, the Commission ruled on the proper statutory interpretation of s. 58(2)(a) and concluded that the purpose of the provision "is to address the conflicts that could arise where a complaint and a matter brought forward by the MSA are premised on common issues". Here, the Commission concluded the complaints and the MSA matter were related in that both concerned  the timing of TransAlta's discretionary outages and its forward trading in the electricity market. It also concluded that an overly technical or literal interpretation, namely that the MSA matter would already have to be before the Commission at the time of the complaint, could "produce an absurd result" and therefore that no such interpretation should be adopted.

In the result, the Panel dismissed all three complaints and ordered that a hearing  of the MSA's allegations commence in August 2014. The decision will make it more difficult for a party under investigation to delay or change the character of enforcement proceedings by filing a complaint about the MSA. Decisions under s. 58 are not subject to appeal, so the complaint dismissal ruling is final and binding.

Randall Block, QC, John Blair, QC and Sandi Shannon of Borden Ladner Gervais LLP represented the MSA in the application.

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