Attorney General Electricity Battle Over PPAs in Alberta Comes to a Close
March 13, 2018
The Attorney General of Alberta (AG) and ENMAX have recently settled the legal proceedings brought in 2016 (AG Action) by the provincial government against several former buyers of power purchase arrangements (PPAs). The AG previously settled with various PPA buyers in November and December 2016. By a consent judgment filed March 9, 2018, the AG Action was dismissed against all remaining respondents, including ENMAX.
The AG Action sought to, among other things, set aside an opt-out clause under which the PPA buyers terminated those instruments. The clause allowed a PPA buyer to terminate where a change in law made the PPA unprofitable or more unprofitable over the balance of the term. Amendments to the Specified Gas Emitters Regulation, which took effect on January 1, 2016, significantly increased compliance costs for coal plants, triggering this opt-out clause.
In response to this change, all PPA buyers gave notice of termination during early 2016. Upon notification of termination of a PPA, the Balancing Pool is statutorily required to either accept or dispute the termination. If accepted, Section 96(3) of the Electric Utilities Act provides that the Balancing Pool assumes the obligations of a PPA buyer.
In a letter written by the chair of the board of the Balancing Pool of Alberta (Balancing Pool) to the Minister of Energy dated July 12, 2016, the Balancing Pool indicated that it would exhaust its cash reserves in 2016 and become insolvent unless action was urgently taken. The AG Action was commenced to challenge the terminations by all PPA buyers.
ENMAX was the PPA buyer under both the Battle River and Keephills PPAs. ENMAX gave notice of termination of the Battle River PPA effective January 1, 2016 and the Keephills PPA effective May 5, 2016. The Balancing Pool accepted the Battle River PPA termination on January 27, 2016 — well before the AG Action was commenced. However, the Balancing Pool argued that the effective date of termination for the Battle River PPA was about July 13, 2016, the date on which the Balancing Pool took over dispatch and offer control. The effect of using the later date would have been to shift responsibility for the costs associated with ownership of the PPA during the approximately six-month period from the termination date claimed by ENMAX to the date that the Balancing Pool took over dispatch and offer control. On October 11, 2017, the court ruled in ENMAX’s favour in ENMAX PPA Management Inc. v. Balancing Pool, confirming that the effective date of termination of the Battle River PPA was as stated by ENMAX; namely, January 1, 2016 at 12:01 a.m.
With the Keephills PPA, despite ENMAX terminating it on May 5, 2016, the Balancing Pool refused to either accept or reject that termination, citing the existence of the AG Action. On about July 14, 2017, ENMAX applied for injunctive relief to force the Balancing Pool to perform its statutory mandate. In its application, ENMAX claimed that the Balancing Pool was intentionally delaying accepting the Keephills PPA termination in an attempt to thwart ENMAX’s legitimate termination rights. ENMAX was successful in obtaining an injunction (see: ENMAX Energy Corporation v. Balancing Pool). Within days of the court decision, the Balancing Pool confirmed ENMAX’s termination of the Keephills PPA effective on the date stipulated by ENMAX and subsequently took over dispatch and offer control in December 2017.
In the course of these proceedings, ENMAX was successful in several applications against the AG (see for example: Alberta (Attorney General) v. Alberta Power (2000) Ltd. and Alberta (Attorney General) v. Alberta Power (2000) Ltd. For further information, see our previous Blakes Bulletins:
- December 2017: Alberta’s Balancing Pool Confirms Right to Terminate Keephills Power Purchase Agreement
- November 2017: Alberta Court of Queen’s Bench Grants Mandatory Injunction Against Balancing Pool
- October 2017: Court Upholds Commercial Certainty in Alberta Power Purchase Arrangements
- March 2017: Chief Justice Confirms Cross-Examination Principles in Alberta
As noted above, by consent judgment filed March 9, 2018, the AG Action was dismissed against all remaining respondents, including ENMAX. ENMAX and the AG provided press releases publicly announcing the settlement of the matter.
ENMAX was represented by Blakes in all of the matters referenced above.
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