Canada: Alberta's Balancing Pool Confirms Right To Terminate Keephills Power Purchase Agreement

Following ENMAX Energy Corporation's (ENMAX) successful application to obtain a mandatory injunction against the Balancing Pool of Alberta (as reported in our November 2017 Blakes Bulletin: Alberta Court of Queen's Bench Grants Mandatory Injunction Against Balancing Pool), the Balancing Pool has performed its assessment and verified and accepted ENMAX's notice terminating the Keephills power purchase agreement (PPA) (Keephills Termination Notice), effective May 5, 2016, the date ENMAX terminated the PPA.

Another ENMAX affiliate had previously terminated the Battle River PPA effective January 1, 2016 and the Balancing Pool performed its assessment, verification and acceptance of that termination within about four weeks. Internal documents obtained from the Balancing Pool demonstrated that it typically took four to six weeks to complete an assessment and verification of a claimed PPA termination.

Even though ENMAX sent the Keephills Termination Notice in early May, 2016, the Balancing Pool failed or otherwise refused to conduct its statutory obligations to assess it. Specifically, in September 2016, the Balancing Pool advised ENMAX that no assessment nor verification of any additional PPA terminations (aside from the Battle River PPA) would occur pending the outcome of an action commenced by the Attorney General of Alberta (AG) in July 2016 seeking to impugn certain legislation. The Balancing Pool claimed that, pending the AG action, it was not prudent to undertake an assessment or verification of the Keephills Termination Notice. That position was flatly rejected by the court in ENMAX Energy Corporation v. Balancing Pool (ENMAX).

Based upon the recent court decision in ENMAX PPA Management Inc. v. Balancing Pool, Justice Jeffrey held that the effective date of a PPA termination is the date the PPA buyer elects after a change in law could reasonably be expected to render continued performance of the PPA unprofitable or more unprofitable. In ENMAX, Justice Horner relied upon Justice Jeffrey's decision and found that the effective date of the termination of the Keephills PPA was May 5, 2016. As a result, by operation of, among other things, the PPA and the decisions noted, it is clear that the effective date of the Keephills Termination Notice was May 5, 2016. The Balancing Pool has since confirmed with ENMAX that it agrees to May 5, 2016 as the effective date of termination.

Section 96(3) of the Electric Utilities Act (EUA), provides that once a PPA is terminated, it is deemed to have been sold to the Balancing Pool and is to be held by the Balancing Pool in the capacity of a buyer for all purposes of the EUA, the regulations and the relevant PPA. As a result, the Balancing Pool, effective May 5, 2016, assumed the liabilities and obligations of ENMAX in accordance with those provisions.

While ENMAX had been performing offer and dispatch services on behalf of the Balancing Pool as agent subsequent to the Keephills Termination Notice, the Balancing Pool has now assumed offer and dispatch control effective December 7, 2017.

Blakes has acted on behalf of ENMAX throughout these proceedings.

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