On January 20, 2015, the Alberta Utilities Commission (“AUC” or the “Commission”)) released Decision 790-D02-2015, Milner Power Inc. and ATCO Power Ltd. Re: Complaints regarding the ISO Transmission Loss Factor Rule and Loss Factor Methodology, Phase 2 Module A, which can be accessed here (click here for decision).

In previous decisions, AUC 2012-104 (found here) and AUC 2014-110 (found here​), the AUC determined and confirmed that the Independent System Operator (“ISO”)’s Line Loss Rule was unjust, unreasonable, unduly preferential, arbitrarily and unjustly discriminatory on the basis that the rule disadvantaged generators that are loss savers and does not properly charge loss creators for their losses.  The AUC determined in those decisions that the Line Loss Rule was ultimately inconsistent with the Electric Utilities Act (“EUA”) and the Transmission Regulation made thereunder.

In this most recent Milner Power decision, the AUC determined that it has the jurisdiction to grant tariff-based relief as a remedy for its previous findings with respect to the Line Loss Rule.  The AUC determined that such relief may involve retrospective adjustments to the ISO tariff going back to when the Line Loss Rule first came into force, being January 1, 2006.

In reaching that decision, the AUC and the parties to this application considered two primary issues: a) how to deal with changes to the EUA and the Transmission Regulations since the inception of the Line Loss Rule and whether previous iterations of the legislation would provide Milner Power and the other applicants with the tariff-based relief they sought; and b) whether the AUC had the jurisdiction to make retroactive rate changes.

With respect to the first issue, after thorough consideration of the changes to the EUA and the Transmission Regulationfrom January 1, 2006 to the date of this Decision and the legislative intent behind the changes to that legislation, the Commission determined that the changes were not of such a nature as to deprive Milner Power and the other applicants from the tariff-based relief they sought.  The Commission determined that, while complex, the scheme of ratemaking and rulemaking under the EUA (both in its current and previous iterations) provide no conflict to the Commission’s jurisdiction to ensure that rates are just and reasonable, and that changes resulting from successful complaints with respect to ISO rules are able to be effected.

With respect to the second issue, the Commission noted several binding decisions from the Supreme Court of Canada that held that a regulatory authority can exercise its authority to retroactively set rates, particularly in circumstances where the ratemaking takes place vis-à-vis a negative disallowance scheme.  In such circumstances, the Commission approves rates and rules until such time as a complainant raises an issue, and the Commission is afforded the opportunity to examine the rate or rule more closely.  In these circumstances, the initial decision of the Commission would be considered interim in a sense, and the Commission determined that it was well within its jurisdiction to retroactively deal with rates, particularly where new information leads to the finding that the rates were unjust or unreasonable.

Moving forward, the Commission will now be required to undertake the difficult task of determining the method and quantification of working out the tariff-based relief that the complainants are entitled to as a result of this decision.