A settlement has been reached between TransAlta Corporation
(TransAlta) and the Market Surveillance Administrator (MSA) of the
Alberta Utilities Commission (AUC), under which TransAlta will pay
$56 million in penalties to the AUC. The settlement is described in
press release from TransAlta and in news articles (see, for
here). The settlement must be approved by the AUC at a hearing
later this year.
In an earlier
post , we described the July 27, 2015
decision of the Alberta Utilities Commission finding that
TransAlta had engaged in conduct that did not support the fair,
efficient and openly competitive operation of Alberta's
electricity market. The AUC found that in late 2010 and early 2011,
TransAlta intentionally took some of its coal-fired generating
units offline for repairs during periods of high demand. The AUC
concluded that 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
The AUC's earlier decision did not address penalties. Under
the Alberta Utilities Commission Act (the Act), the AUC
has the power to order significant penalties as punishment and to
require disgorgement of economic benefits obtained by wrongful
activity and payment of costs. Under section 63 of the
Act, all of these payments are categorized as
"administrative penalties." The $56 million settlement
reached between TransAlta and the MSA is said to be comprised of a
$27 million "repayment of economic benefit," a $25
million administrative penalty and $4 million in costs. The AUC
hearing on the settlement later this year will determine whether
the proposed penalty is appropriate and in the public interest.
It is not clear, though, that the AUC's approval of the
settlement will be the end of this matter. There remains an open
question of whether consumers who may have over-paid for
electricity as a result of TransAlta's activities have a claim
Earlier this month, the AUC
determined that it does not have jurisdiction to order
TransAlta to make restitutionary payments to consumers. This
determination, made after considering arguments from interested
parties, was based on the wording of the relevant provisions of the
Act. Significantly, according to the AUC, the
Act requires that "administrative penalties" paid to the
AUC shall be paid into the [Alberta Government] General Revenue
Fund. As stated in the AUC's decision (at paragraph 46),
"[i]n the Commission's view, if the legislature had
intended to authorize it to order restitution following an MSA
initiated proceeding, it would have done so, as it has done in
several other statutes, including the Securities
[As an aside, it is notable that the AUC's legislation (the
Act), at least in relation to "administrative
penalties," is different from similar legislation in Ontario.
While the Ontario Energy
Board Act, 1998 (OEB Act) does provide for administrative
penalties to be levied in the event of contraventions of that
statute, the OEB Act contains no express requirement that such
payments be credited to the Government.
Recently, the Ontario Divisional Court confirmed that the OEB
can order restitutionary payments to "remedy a
contravention" of enforceable provisions of the OEB Act.]
Assuming that the TransAlta settlement is approved, the $56
million payment will go to the Alberta Government's general
revenue fund. This is what the
Act requires. In the result, none of the payment will go to
those consumers who may have been adversely affected by
TransAlta's activities. This has caught the attention of at
least one activist in Alberta who appears to be organizing support
for a class action lawsuit against TransAlta (see report
here). It is not clear that the class action lawsuit has yet
been launched. It will not be surprising, though, to see that
happen soon. One can assume that if a class action proceeds,
TransAlta will assert that it has already paid for the consequences
of its actions. However, as the Supreme Court of Canada found in a
2013 case (AIC Limited v Fischer), even where a prior
administrative settlement (in that case with the Ontario Securities
Commission) approved compensation to consumers from a wrongdoer,
that does not foreclose a later class action seeking further
damages against that same party.
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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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