Battle River 5 PPA Termination

The following outlines the timeline associated with the termination of the BR5 PPA:

September 30, 2018: The Battle River 5 PPA terminated at midnight MST.

March 21, 2018: The Balancing Pool provided notice of the termination of the Battle River 5 PPA to Alberta Power (2000) Ltd. (“ATCO”).

March 8, 2018: The Government of Alberta reached a settlement agreement with ENMAX PPA Management, the Buyer of the Battle River 5 PPA and Keephills PPA, bringing a conclusion to the Attorney General of Alberta’s application with the Alberta Court of Queen’s Bench.

January 12, 2018: The Balancing Pool initiated an extensive consultation process with representatives of consumers regarding the reasonableness of terminating the Battle River 5 PPA. The Balancing Pool collected written feedback from all participants in this consultation process and this feedback can be found here. As outlined in legislation, the Balancing Pool also met with the Minister of Energy who did not express any concerns with the proposed termination.

 

The following information is provided by the Balancing Pool to answer the most frequently asked questions regarding the Battle River 5 PPA termination:

Q: Why did the  Balancing Pool terminate the Battle River 5 PPA?

Financial analysis conducted by the Balancing Pool and external market forecasting consultants determined the Balancing Pool would save $105 to $122 million by terminating the Battle River 5 Power Purchase Arrangement. These savings will ultimately flow through to Alberta’s electricity consumers by lowering the Balancing Pool Allocation charge on monthly electricity bills.

Furthermore, it is the Balancing Pool’s view that having offer control in the hands private market participants is more conducive to supporting a sustainable FEOC market than having the Balancing Pool continue to offer the generation into the wholesale market.

Q: Why was the Battle River 5 PPA not terminated at the same time as the Sundance PPAs?

In late 2015/early 2016, the various Buyers elected to return their respective PPAs to the Balancing Pool under the terms of the arrangements. In mid-2016, the Government of Alberta contested these terminations through litigation against the parties involved, but by late-2016, the litigations were substantially settled and the terminations accepted with all but one Buyer. As a result, only two PPAs remained subject to the lawsuit: specifically the Battle River 5 and Keephills PPAs.

Although the Balancing Pool had accepted the return of Battle River 5 PPA from the PPA Buyer, the Balancing Pool took the position that it could not make a determination on the return of the Keephills PPA until after a decision had been rendered in the Government of Alberta’s lawsuit. In the summer of 2017, the PPA Buyer filed an injunction in the Court of Queen’s Bench in which it asked the court to direct the Balancing Pool to complete and issue its determination on return of the Keephills PPA, which the Balancing Pool was subsequently ordered to do. Based on the court’s ruling, the Balancing Pool accepted the return of the Keephills PPA on December 6, 2017 and determined the Government of Alberta’s lawsuit was not an impediment to any actions related to the termination of the PPAs, including termination of the Battle River 5 PPA.

On March 8, 2018, the Government of Alberta reached a settlement agreement with ENMAX PPA Management, the Buyer of the Battle River 5 PPA and Keephills PPA, bringing a conclusion to the Attorney General of Alberta’s application with the Alberta Court of Queen’s Bench.

Q: What is the effective date of the termination?

The termination of the Battle River 5 PPA took effect at midnight on September 30, 2018.

Q: What is the anticipated impact on electricity prices?

Electricity prices are the outcome of the competitive forces governing Alberta’s wholesale electricity market and, as such, are subject to uncertainty. The Balancing Pool worked with an external market forecasting consultant to generate market price forecasts as part of the termination analysis and these forecasts suggested prices may increase modestly by $8 per MWh following the terminations, with prices remaining far below historical averages and below the cost of building new generation in the market.

Q: Will the units underlying the PPAs be shut down?

When a PPA expires or is terminated, the underlying units may continue to operate in the power market. Following the effective date of a termination, the underlying units would be subject to the same market forces as any other merchant generating facility and the decision of whether or not to continue to run the units will rest entirely with the owner of the underlying units.

Q: Is the Battle River 5 PPA termination related to or affected by the province’s plan to phase-out coal fired generation?

 The PPA termination is unrelated to the coal phase-out and the Balancing Pool has no role in the phase-out. The last of the PPAs expire at the end of 2020 while the coal phase-out does not take effect until 2030.

Q: What will the Balancing Pool do with the remaining PPAs?

The Balancing Pool currently retains offer control of the Genesee, Keephills and Sheerness PPAs and will continue to manage these remaining PPAs in a transparent and commercial manner to support Alberta’s competitive electricity market.