Alberta regulator orders ATCO to repay $71-million to customers

Globe and Mail

5 days ago

Alberta utilities and logistics firm ATCO Ltd. ACO-X-T has been ordered to refund $71-million to customers, the latest development in a long-running dispute between the company and the provincial watchdog over electricity rates.
But this week's decision by the Alberta Utilities Commission is far from the end of the regulatory tussle. ATCO chief executive officer Nancy Southern told shareholders at the company's annual meeting recently that ATCO intends to challenge the commission over the issue in the Alberta Court of Appeal in October.
At the heart of the case is the commission's electricity rate-setting formula, called performance-based regulation.
The formula is designed to encourage efficiency by providing incentives for utility companies to reduce costs. The more efficiently a utility operates, the more money it saves. Those savings are then shared with customers through lower utility rates.
ATCO Electric fined $3-million for unearned rate increases, overstating its costs
ATCO delivered $500-million in distribution-cost savings, which is being passed on to customers. But the commission found that those savings could not be clearly attributed to specific utility projects, programs or initiatives, as required by the commission's rules.
Instead, it said that much of ATCO's savings were the result of operational changes, such as its decision not to pursue certain capital projects.
The commission's judgement has come in two phases. The first, released last May, ruled that ATCO's utility rates in 2021 or 2022 'were not just and reasonable.' ATCO was granted a court appeal on that decision.
The $71-million refund announced this week is the second phase of the commission's process. It separated the refund into $35-million for ATCO Electric customers, and $36-million for customers of ATCO Gas.
That equates to roughly $14 per month for ATCO Electric customers for a six-month period, and $3.83 per month for ATCO Gas customers.
Paul Barry, the executive director of the Industrial Power Consumers Association of Alberta, said Thursday his group was hoping for closer to $100-million for just the ATCO Electric side of the decision.
Still, he's pleased some cash will be returned to customers.
'We view it as a positive, and it is setting a precedent that's a clear example of the commission seeking to hold utilities accountable,' Mr. Barry said.
At ATCO's general meeting, Ms. Southern applauded the commission for implementing performance-based regulation. But, she told shareholders, ATCO and the commission have a 'major difference of opinion' in the way that the rules are applied.
'We believe we were operating within the regulatory framework,' she said.
Jason Sharpe, ATCO's chief operating officer, said that ATCO had in fact built more efficient operations and lowered its rates.
He said ATCO believes the commission is applying rules of performance-based regulation retroactively, hence the court challenge.
The refund is to be delivered to customers over six months, beginning in September, the commission ruled. That's particularly prickly timing for the company, Mr. Sharpe said, given it overlaps with the court challenge.
Mr. Sharpe said multiple requests to defer the refund decision until after the case goes through the Court of Appeal were denied by the commission.
'In our opinion, this is a premature refund until it's gone through the full appeal process,' he said, adding that it could create confusion for customers if the court finds in ATCO's favour.
The commission would not comment on Wednesday's decision, but this isn't the first time it has ruled against ATCO.
In 2022, ATCO was penalized $31-million after it deliberately overpaid a First Nation group for work on a new transmission line in 2018, and then failed to disclose the reasons when it applied to be reimbursed by ratepayers for the extra cost.
Mr. Sharpe pointed said the latest decision 'very different,' in that it is a refund, not a penalty, and boils down to different views on how rules are applied.