PPA Buyer Terminations

In late 2015 and early 2016, the Balancing Pool received formal notice from a number of PPA Buyers of their intention to terminate their respective PPAs. The table below summarizes the PPA terminations received by the Balancing Pool for that period:

According to the Balancing Pool Regulation, the Balancing Pool is required to conduct an investigation to assess and verify the legitimacy of the terminations.  The Balancing Pool immediately assumes the responsibility for making Capacity and Energy Payments to the facility owners of the generating units associated with the terminated PPAs.

The Balancing Pool’s obligations as described above are articulated in Sections 96 and 97 of Alberta’s Electric Utilities Act:

96(1) A power purchase arrangement continues to have effect in accordance with its terms and conditions, subject to this Act and the regulations.

(2) A power purchase arrangement held by the balancing pool administrator immediately before the coming into force of this section continues to be held by the Balancing Pool in the capacity of a buyer for all purposes of this Act, the regulations and the power purchase arrangement.

(3) A power purchase arrangement, other than a power purchase arrangement held by the Balancing Pool, that is terminated other than under section 15.2 of the power purchase arrangement[1]

     (a) is deemed to have been sold to the Balancing Pool, and

     (b) is to be held by the Balancing Pool in the capacity of a buyer for all purposes of this Act, the regulations and the power purchase arrangement.

97 The Balancing Pool may, notwithstanding the terms and conditions of a power purchase arrangement held by the Balancing Pool under section 96(2) and (3), terminate the power purchase arrangement if the Balancing Pool

     (a) consults with representatives of customers and the Minister about the reasonableness of the termination,

     (b) gives to the owner of the generating unit to which the power purchase arrangement applies 6 months’ notice, or any shorter period agreed to by the owner, of its intention to terminate, and

     (c) pays the owner or ensures that the owner receives an amount equal to the remaining closing net book value of the generating unit, determined in accordance with the power purchase arrangement, as if the generating unit had been destroyed, less any insurance proceeds.

Under Section 1(d)(ii) the Balancing Pool Regulation, an “extraordinary event” is an event that  results in (A) the termination of an arrangement in accordance with its terms and conditions and (B) the Balancing Pool is required to become party to the PPA.

Under Section 2(1)(g) of the Balancing Pool Regulation, on receipt of notice in respect of an extraordinary event from a party to an arrangement or otherwise, the Balancing Pool must carry out the following powers and duties in accordance with the Act, the regulations and any PPA:

i) conduct any investigation the Balancing Pool determines appropriate, and

ii) participate to the extent determined appropriate by the Balancing Pool in any dispute resolution process between parties to the arrangement;

According to Section 2(1)(h) when clause (g) applies, the Balancing Pool must:

i) agree with the parties to the arrangement that the extraordinary event has occurred and that there is a need for a payment to be made to or by the Balancing Pool, or

ii) assess and verify the occurrence of the extraordinary event and the need for any payment to be made by or to a party under the provisions of the arrangement, and participate in any dispute resolution proceedings under an arrangement.

Section 2(1)(i) requires that, on receipt of notice under clause (g), the Balancing Pool begin making payments as set out in an arrangement until all matters arising pursuant to clauses (g) and (h) are agreed to or resolved.

Accordingly, on January 27, 2016 the Balancing Pool verified the Battle River 5 termination and confirmed with ENMAX PPA Management its right to terminate the Battle River 5 PPA pursuant to Article 4.3(j) thereof.

On July 25, 2016, the Attorney General of Alberta filed an application with the Alberta Court of Queen’s Bench seeking declarations relating to the validity of certain provisions of the Battle River 5 PPA, Sundance A PPA, Sundance B PPA, Sundance C PPA, Sheerness PPA and Keephills PPA. The Attorney General also sought judicial review of the Balancing Pool’s decision to accept the termination of the Battle River 5 PPA by ENMAX PPA Management Inc. The Balancing Pool, the Alberta Utilities Commission, ENMAX PPA Management Inc. and other parties with interests in the PPAs were named as respondents.

On November 24, 2016 the Government of Alberta reached settlement agreements with the PPA Buyers of the Sundance A, Sundance B, Sundance C, and Sheerness PPAs. As a result of these settlement agreements, the Balancing Pool has assumed the role and responsibilities of PPA Buyer under the PPAs in accordance with the Electric Utilities Act.

On July 4, 2017 the Balancing Pool initiated a consultation process with representatives of consumers regarding the reasonableness of terminating the Sundance A, Sundance B and Sundance C PPAs.

 

[1] Section 15.2 is in reference to termination due to unit destruction.