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Proposed ATCO fine over padded rate requests insufficient, consumers group argues

ATCO president and CEO Nancy Southern addresses the company's annual meeting in Calgary, Tuesday, May 15, 2018. A consumers group is arguing that the $31-million fine proposed for ATCO Electric's attempts to overcharge ratepayers for costs it shouldn't have incurred isn't big enough. THE CANADIAN PRESS/Jeff McIntosh

EDMONTON — The $31-million fine proposed for ATCO Electric's attempts to overcharge ratepayers for costs it shouldn't have incurred isn't big enough, a consumers group has argued.

In documents filed with the Alberta Utilities Commission, the Consumers' Coalition of Alberta says the proposed settlement doesn't adequately compensate people in the province for the harm they have suffered. 

"(Ratepayers) paid something in rates toward this project, which had baked into it rates from a series of contraventions," Jim Wachowich, a lawyer for the coalition, said in an interview.

Wachowich added there's no guarantee the fine is large enough to outweigh the profits ATCO made from the deal. 

Last month, ATCO and the commission's investigative arm proposed a settlement that includes a $31-million fine for the company. 

The settlement came after an investigation into a whistleblower's complaint that ATCO Electric sole-sourced a contract in 2018 for work needed for a transmission line to Jasper, Alta. The agreement says that was partly because another of Calgary-based ATCO's subsidiaries had a deal with a First Nation for projects including the provision of work camps on the Trans Mountain Pipeline expansion.

The statement of facts says ATCO Electric feared that if it didn't grant the Jasper contract to the First Nation, it might back out of its deal with ATCO Structures and Logistics. It's illegal for a regulated utility to benefit a non-regulated company in this way. 

ATCO Electric says it paid about $10.8 million more than the market value for the Jasper line. ATCO sought to recover that money from Alberta consumers through rate increases, an attempt staff tried repeatedly to conceal.

As part of the settlement and fine, ATCO has also offered to reduce its rate request by $10.8 million. The company has said that will compensate Albertans for the attempted overcharge.

Not entirely, Wachowich argues. 

He points out that utilities are allowed to charge provisional -- so-called "placeholder" -- rates in cases like the Jasper project. That means the overcharge has been reflected in power rates since 2019.

Wachowich said while many Albertans will be compensated by the settlement, others won't. They include those who have since moved, died or otherwise ceased buying power from the company.

"Customer recovery will never be perfect," he said. 

As well, he said ATCO's actions were a significant blow to the integrity of Alberta's regulator. The settlement acknowledges the wrongdoing was repeated, hidden and only uncovered through the actions of a whistleblower. 

"This is a black eye on the regulatory process," Wachowich said. 

He pointed out that ATCO chairwoman Nancy Southern recently apologized to shareholders for the company's actions. 

"If shareholders are owed an apology, why are customers not?" he asked.

Wachowich said the settlement contains no clear rationale for how the figure of $31 million was arrived at. In previous fines of this magnitude, companies were required to pay a sum equivalent to the profit they made from the deal. 

"Here, we don't know what the profits are because it's ATCO Structures and Logistics, a related company but not a regulated company. If the profit were far in excess of $31 million to the ATCO group, then this becomes a licence to contravene."

ATCO said it and the (commission’s) enforcement branch will respond to the coalition’s letter next week. The company has until May 19 to file its response, as do commission investigators. 

Unless it decides more information is needed, the commission then has 90 days to deliver its verdict. It can choose to accept the joint submission or reject it and outline further steps.

This report by The Canadian Press was first published May 13, 2022.

-- Follow Bob Weber on Twitter at @row1960

Bob Weber, The Canadian Press