On July 27, 2015, the Alberta Utilities Commission (the
Commission) released its
decision on the Market Surveillance Administrator (MSA)
allegations against TransAlta group of companies (TransAlta), Mr.
Nathan Kaiser and Mr. Scott Connelly. In the decision, the
Commission had to consider whether TransAlta, Kaiser and Connelly
engaged in conduct that did not support the fair, efficient and
openly competitive operation of Alberta's electricity market.
The Commission found against TransAlta, but not the
individuals. Penalties will be determined in a future
The Commission finds against TransAlta on the outage
The Alberta Market Surveillance Administrator (MSA) alleged that
in November/December 2010 and February 2011, TransAlta
intentionally took some of its coal-fired generating units offline
for repairs during periods of high demand, when it was open to
TransAlta to delay those repairs to a period of lower demand. These
coal-fired generating units were subject to power purchase
arrangements (PPAs), which were introduced in Alberta in 1998
through the Electric Utilities Act in order to address the
concentration of market power held by TransAlta Utilities, ATCO and
EPCOR, who controlled approximately 90 per cent of the
province's generating units at that time.
The MSA submitted that TransAlta engaged in this conduct to
drive up electricity prices to benefit TransAlta's portfolio.
The MSA asserted that this conduct restricted or prevented
competition and restricted or prevented a competitive response and
manipulated market prices away from a competitive market
After considering the evidence and arguments presented to it,
the Commission found against TransAlta on the outage allegations.
The Commission concluded that TransAlta had in fact, on four
occasions, timed outages at its coal-fired generating units which
were subject to PPAs on the basis of market conditions rather than
by the need to safeguard life, property or the environment (as
described in Article 5.2 of the PPAs). TransAlta could have
deferred each of the outage events to off peak hours, but chose
instead to take them during peak or super-peak hours to maximize
the benefit to its own portfolio.
TransAlta's timing of outages increased average pool prices
from what they would otherwise have been had the outages been
scheduled to commence on off peak hours. This meant that for each
of the four outage events, TransAlta restricted or prevented a
competitive response from the respective PPA buyers. It had also
manipulated market prices away from a competitive market outcome.
Each of the four outage events was therefore contrary to Sections
2(h) and (j) of the Fair, Efficient and Open Competition
Regulation and, therefore, Section 6 of the Electric
The Commission finds against TransAlta, but not the
individuals, on the trading allegations
In addition to the outage allegations, the MSA also alleged that
Kaiser, Connelly and TransAlta had non-public information regarding
the capability of certain TransAlta generating units to produce
electricity in 2011 and improperly used that non-public information
to trade in Alberta's electricity market.
While the Commission found that Kaiser did use non-public outage
records to trade contrary to Section 4(1) of the Fair,
Efficient and Open Competition Regulation, it was determined
that he took all reasonable steps to avoid a breach of the statute
by seeking and getting direction from senior TransAlta management
with respect to his eligibility to trade. The Commission concluded
that this meant that Kaiser had established the defence of due
diligence, and was not in contravention of the Electric
However, by letting Kaiser trade while in possession of a
non-public outage record, TransAlta breached Section 4(1) of the
Fair, Efficient and Open Competition Regulation.
The Commission found that there was no evidence that Connelly
had used outage records to trade in 2011.
The findings in this decision were the first phase of the
proceeding. The Commission has determined that it must now proceed
to the second phase of this proceeding to consider what remedy the
Commission will impose against TransAlta. Under the
Alberta Utilities Commission Act, the Commission can fine
TransAlta up to $1 million for each of the days that comprise the
four outage events, as well as taking back the economic benefits to
TransAlta from the increase in electricity prices during the outage
periods. Costs of the proceeding can also be imposed against
For its part, TransAlta has
indicated that it is reviewing the decision, including whether
to appeal to the Court of Appeal (which must be done within 30
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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