Alberta Utilities Commission Issues Decision Confirming Scope of Module C Decision on Line Losses

In its recent decision (27048-D01-2022), the Alberta Utilities Commission (AUC) confirmed the scope and nature of its previous Module C decision, which was part of protracted regulatory and court proceedings relating to transmission line loss. In it, the AUC confirmed that in the Module C decision, it was only determining which market participants were to receive new invoices for line losses at first instance for the historical period of January 1, 2006, to December 31, 2016 (Historical Period), and not which market participants would ultimately be responsible for paying those invoices (or receiving refunds) under separate commercial agreements.

During the transmission of electricity, some energy is "lost" from the transmission system, usually in the form of heat. This lost energy is known as transmission line losses. The Alberta Electric System Operator (AESO) manages and recovers the costs of transmission line losses from generators. To recover the costs of transmission line losses, the AESO makes certain rules to establish and maintain loss factors. The AESO then determines charges or credits for individual generators using those loss factors. In 2005, the AESO proposed a rule that set out the methodology for calculating loss factors (Line Loss Rule) to be used to determine transmission line loss charges and credits under the ISO tariff.

Milner Power Inc. (Milner) objected to the Line Loss Rule.The AUC's predecessor dismissed Milner's objection and approved the line loss rule. Milner then successfully appealed that decision, and the matter was remitted to the AUC for rehearing.  The AUC subsequently upheld Milner's objection and found the line loss rule to be unlawful.  The AUC heard the original proceedings in multiple modules including Module A, which was released on January 20, 2015, where it concluded that it had jurisdiction to correct for payment or receipt of line loss charges and credits retroactively during the Historical Period. The Module B decision was issued on November 26, 2015, and approved a new methodology for calculating loss factors to be used to determine loss charges and credits on a go-forward basis beginning on January 1, 2017. The Module C decision was released on December 18, 2017, and considered the appropriate methodology to calculate loss factors for the Historical Period as well as the appropriate recipient for those new invoices (either credits or charges). Ultimately, the AUC decided that any new invoice issued by the AESO should be sent to the previous contract holders for line losses in the Historical Period as opposed to current parties who held those contracts.  That resulted in the AESO issuing invoices to the parties who held the historical contracts commencing in October 2020.

In the course of the Module C decision, the AUC made it clear that it was not determining ultimate liability for any line loss charges or charges including which party might ultimately be responsible for paying those invoices as a result of commercial agreements.

In this case, a line loss refund is owed to the Calgary Energy Centre (CEC). Calpine Power LP was the holder of the applicable contracts for the CEC for the period in question in 2006. Effective September 11, 2008, ENMAX Energy Corporation (ENMAX) purchased all of the shares of CEC and an assumption assignment and novation (AA&N) agreement was duly executed which transferred any line loss credits to ENMAX.  The AESO was a signatory to the AA&N agreement whereby it recognized and consented to the assignment.

Despite the clear terms of the AA&N agreement and the fact it was entered into years before Calpine's dissolution, the AESO brought an application before the AUC to request guidance alleging that the AUC somehow had jurisdiction to decide what party was ultimately entitled to the refund.  The AUC categorically dismissed the AESO's application noting that, among other things, the reference questions posed by the AESO went far beyond mere guidance, that the AUC did not have jurisdiction to decide what party was ultimately liable for line losses (or to receive credits) and that the AUC was not, in the Module C decision or otherwise, opining upon what parties were ultimately responsible for line losses (or credits) based upon separate commercial arrangements.  Instead, the AUC reiterated that those issues were to be resolved through the normal legal process between claimants.

To that end, ENMAX had previously filed an Originating Application seeking relief that it was entitled to the applicable refund during the Historical Period based upon the clear terms of the AA&N agreement. The AESO attempted, in the court proceedings, to stay those proceedings pending the decision of the AUC; however, that stay application is now moot and the court will determine the matter.

As a result of this decision, it is clear that the AUC will not be deciding which party is ultimately responsible for line losses charges (or entitled to credits). To the extent that there is any dispute, those issues will be resolved through the normal legal process between claimants.
Blakes LLP successfully represented ENMAX in this matter.

For further information, please contact:

Dalton W. McGrath, KC, FCIArb   403-260-9654
Michael O’Brien                             403-260-9753
 
or any other member of our Litigation & Dispute Resolution group.