Power regulator investigates Balancing Pool complaints

Market Surveillance Administrator eyes alleged breaches of Electric Utilities Act

CALGARY Alberta’s electricity market watchdog is investigating a provincial agency for its handling of controversial power contracts that are losing billions of dollars.

The Market Surveillance Administrator (MSA) says it’s investigating complaints lodged against Alberta’s Balancing Pool, the arm’s-length agency that has been dealing with money-losing power purchase arrangements after they were dropped by industry.

The head of the group conducting the investigation would not comment on the details of the probe or disclose who made the complaints.

The administrator said the complaints refer to potential breaches of the Electric Utilities Act, including a provision that demands the Balancing Pool “carry out its duties in a manner that is responsible and efficient.”

The Balancing Pool said it has done nothing wrong.

“We have nothing to hide and we are fully co-operating with the MSA’s investigation,” said Bruce Roberts, CEO of the Balancing Pool.

Roberts said the agency does not know what’s alleged in the complaints, but a group that represents Alberta power producers said there are widespread concerns in the industry that the Balancing Pool wields an unfair advantage in part because it is backstopped by government loans.

“This is a real problem for generators and consumers in Alberta,” said Evan Bahry of the Independent Power Producers Society of Alberta, adding he has not seen the complaints nor confirmed what they allege.

The investigation comes after Alberta’s electricity market was thrown into upheaval last year over the Notley government’s climate change plan.

Four companies that once bought coal-fired electricity from generators and resold it to the grid under the deregulated system walked away from the power purchase arrangements.

Generators such as Enmax and Capital Power said the deals became even more unprofitable after the province hiked the carbon levy on large industrial emitters last year, increasing their costs at a time when they were already losing money amid historically low power prices.

The money-losing contracts landed in the lap of the Balancing Pool, which is now posting major losses.

The agency said in its latest annual report that it posted a $2.6-billion loss on its operations in 2016, more than five times its $463,000 loss from a year earlier.

The provincial government has authorized the Balancing Pool to borrow money to cover its losses.

MSA administrator Matt Ayers said he couldn’t lay out a timeline or say when it began to investigate, but noted the complaints could eventually be directed to the Alberta Utilities Commission, which can impose fines of up to $1 million for each day that violations occur.

Bahry said he hasn’t seen the complaints but he’s aware of concerns in the industry that the Balancing Pool controls a large chunk of Alberta’s wholesale electricity market — about 25 per cent — and it’s bidding power in at low prices.

“They are a dominant player now, a government agency, and they’re being backstopped by taxpayers through a loan from the government,” he said.

“That is having an impact on the competitive marketplace.”

The Balancing Pool’s chief executive said “virtually all” players in the power market are bidding low prices today because there is an oversupply of electricity.

“Why are they picking on us?” Roberts said. “I don’t think the public would accept us elevating prices to very high levels.”

Roberts suspects the complaints may be related to the fact the Balancing Pool continues to hold on to the power contracts, instead of cancelling them, a route that could stem the agency’s mounting losses.

He said the organization is actively considering whether it will terminate any of the power agreements on its books.

Opposition parties welcomed the probe.

“This investigation needs to answer questions about whether the Balancing Pool is being subsidized by taxpayers to operate at a loss — and if it’s hurting the competitive balance within our electricity market,” Wildrose MLA Don MacIntyre said in a statement.

Energy Minister Marg McCuaig-Boyd rejected suggestions the government has meddled with the Balancing Pool.

She said the government has not directed the agency on the power purchase arrangements or its bidding strategy.