Alberta Power (2000) Ltd. v. The Queen

Alberta Power (2000) Ltd. v. The Queen
Court (s) Database
Tax Court of Canada Judgments
Date
2009-08-21
Neutral citation
2009 TCC 412
File numbers
2007-277(IT)G
Judges and Taxing Officers
Eugene P. Rossiter
Subjects
Income Tax Act
Decision Content
Docket: 2007-277(IT)G
BETWEEN:
ALBERTA POWER (2000) LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
____________________________________________________________________
Appeal heard on March 2, 2009, at Calgary, Alberta
By: The Honourable E.P. Rossiter, Associate Chief Justice
Appearances:
Counsel for the Appellant:
Al Meghji and
Gerald Grenon
Counsel for the Respondent:
William L. Softley and
Kim Palichuk
____________________________________________________________________
JUDGMENT
The appeal from the reassessment made under the Income Tax Act for the 2001 taxation year is allowed, and the reassessment is referred back to the Minister of National Revenue for reconsideration and reassessment in accordance with the attached Reasons for Judgment.
Costs are awarded to the Appellant.
Signed at Ottawa, Canada, this 21st day of August, 2009.
“E.P. Rossiter”
E.P. Rossiter
Citation: 2009TCC412
Date: 20090821
Docket: 2007-277(IT)G
BETWEEN:
ALBERTA POWER (2000) LTD.,
Appellant,
and
HER MAJESTY THE QUEEN,
Respondent.
REASONS FOR JUDGMENT
E.P. Rossiter A.C.J.
Introduction
[1] In the late 1990s the Province of Alberta (“Alberta”) was moving from regulation of the electric energy sector to a deregulated environment. The Appellant was part of the ATCO Group (“ATCO”) that owned and operated coal-fired electrical generation plants. As part of the deregulation process, Power Purchase Arrangements (“PPA”) for each electrical producer’s facility were established by Alberta including a PPA for ATCO’s coal-fired plant known as the HR Milner Plant (“plant”). Each PPA was to be subject to auction but the PPA for the plant was pulled from its proposed auction by Alberta due to ATCO’s concern as to the economic viability of the plant under its PPA. A Negotiated Settlement Agreement (“NSA”) was concluded between ATCO and an Alberta authority (“Balancing Pool”). This NSA was effective December 20, 2000 and included an Operating Agreement (“OA”) for the plant with ATCO for a period of time. On termination of the PPA, a payment was made effective January 1, 2001 to the Appellant, a subsidiary of ATCO, of approximately $59.7 million, purportedly for the termination of the PPA with the beneficial ownership of the plant being transferred to the Alberta authority. On January 1, 2001, ATCO entered into an Agreement of Purchase and Sale for the plant with the Appellant and transferred the plant to the Appellant by way of a tax deferred reorganization pursuant to section 85 of the Income Tax Act (the “Act”). The PPA for the plant was terminated by Regulation on December 28, 2000 to be effective January 1, 2001. The plant was sold by the Alberta authority to a Third Party on October 30, 2003.
[2] The Appellant claimed the $59.7 million was a capital receipt which gave rise to proceeds of disposition on the basis that the plant and assets had been disposed of in the 2001 taxation year and as such was not profit to the Appellant. The Respondent rejected the position of the Appellant on the basis that the $59.7 million represented future profits surrendered and no beneficial interest was transferred to the Alberta authority, or in the alternative, the payment was a compulsory payment under subparagraph 12(1)(x)(iv) of the Act.
Facts
[3] ATCO was engaged in utility power generation among other enterprises in Alberta in the 1990s and owned and operated coal-fired generation plants including the plant. The plant was approximately twenty-five years old at the relevant time and had used an inferior quality of coal supply for years which was problematic in the plant operations leading to its continued economic viability being questionable by ATCO.
[4] In 1996 Alberta began the implementation of a plan to deregulate the electrical generation industry. Plants built pre-1995 had a different regime than plants built post-1995. The plants built pre-1995, of which the plant was one, were part of the Alberta regime which would result in total deregulation of different plants over a period of three to twenty years. To facilitate this gradual deregulation, Alberta caused PPAs to be established for each plant including a PPA for the plant. A PPA was a contract-like instrument between an owner of a power plant and a buyer. The owner makes the facility available to the buyer and all the output of the facility goes to the buyer. It allows the owner to recover the capital invested plus a return on the capital and certain other expenses. The buyer of the electricity, as a result, takes all of the risk on the price of the electricity.
[5] Each PPA was to be sold by auction. A Balancing Pool was established by Alberta for the purpose of collecting proceeds from a sale of the PPA at auction and if a PPA was not sold at auction, then the Balancing Pool acted as the PPA buyer. Normally, at the end of a PPA, the utility had a choice - it could decommission the plant and the costs would be covered by the Balancing Pool or they could operate the plant and all the revenues and expenses would go to the utility and all the decommissioning costs would be that of the utility. Under the PPA there was no provision for early termination except if the plant was destroyed then ATCO would only get its net book value. The PPA for the plant was removed from auction after ATCO expressed strong concerns about the economic viability of the plant under the PPA. ATCO was concerned that the plant could not be economically viable under the PPA because of its poor quality of coal supply which was not recognized by the PPA and the questionable financial stability of the coal supplier for the plant (Smokey River), which was in receivership at the time. ATCO considered decommissioning the plant altogether and put pressure on Alberta to amend the PPA to address their concerns or they could close the plant.
[6] Alberta arranged for an Alberta authority (“Balancing Pool”) under statute, which enacted the deregulation scheme, to enter into negotiations with ATCO to keep the plant operational for at least the short term, two to three years. The Balancing Pool undertook the negotiations on its own behalf and on behalf of consumers. The negotiations for the Balancing Pool were lead by Dale Hildebrand who was representing a group of consumers. These consumer groups included industrial institutions, municipal, governmental and residential consumers. These Alberta consumer groups or others, test applications before Alberta utility regulators and were not the actual utility regulator itself. The Department of Energy in Alberta had worked with the consumer groups in the deregulation process and Mr. Hildebrand took the lead in the negotiations with ATCO on behalf of the consumer groups. He had a background in energy generation and extensive experience with PPAs and PPA pricing. He had assisted Alberta in selecting a consultant to develop the PPAs and was part of an independent assessment team that developed the PPAs. He was also involved in the test of the PPAs before the utility board. He also assisted some buyers in analyzing the PPAs prior to their auction. He had never worked for the Appellant previously having primarily worked on the other sides of cases in regulatory proceedings dealing with ATCO. The negotiations between Mr. Hildebrand on behalf of the Balancing Pool and a Victor Post, a Vice-President of ATCO, on behalf of ATCO, resulted in the NSA and OA for the plant.
[7] In the course of negotiations ATCO tried to convince the Balancing Pool to go along with their suggestion for the decommissioning of the plant because of its poor future economic viability. The Balancing Pool was concerned that the plant might be closed in the short term which would result in lower supplies of electrical energy and higher cost of electrical energy to consumers. The Balancing Pool also had concerns that the PPA failed to recognize the capacity limitations of the Plant and its operational problems.
[8] Both negotiators, Mr. Hildebrand and Mr. Post, confirmed that there was no discussion at any time whatsoever about ATCO recovering loss of future profits and that discussions were only about the compensation to ATCO for return of their capital investment, or what is known in part as stranded costs. No calculations were conducted nor was any information exchanged by anyone for ATCO or the Balancing Pool in relation to loss of profits or loss of future stream of profits, nor was it ever considered by either party as an item to be recovered in the NSA by ATCO.
[9] In the OA there was concern with respect to the staff retention. The Balancing Pool wanted the plant to be run for a period of time and then auctioned off. The key to the operation of the plant was employees as they were a key asset and therefore there were certain payments to be made to them to ensure that they stayed at the plant. As a member of the operations committee, Mr. Hildebrand would receive a prepared report from ATCO at every meeting advising as to what transpired in the meantime. The report would include information such as costs, energy production, operational issues, health and safety, et cetera, and there was the committee, which managed the facilities and gave directions to ATCO on the operations of the facilities. The committee directed ATCO to operate the plant on 125 megawatts, not at its capacity of 145 megawatts and also directed ATCO as to how much capital was to be spent on the plant.
Brian G. Millen assisted Vic Post in the course of negotiations. He was familiar with the negotiations and confirmed all aspects of Post’s evidence with respect to what the intent was of the parties in relation to the transaction and further prepared schedules to be part of the NSA showing the allocation of the proceeds and how the calculations are done. Both parties understood that they were selling the plant and ATCO was recovering its own invested capital. He also confirmed that the calculations were not consistent with treating the monies being paid as future lost profits. In fact, based on calculations presented, they were totally inconsistent with the suggestion that ATCO was recovering lost profits because the amount recovered was considered to be in excess of the lost profits, which could have been available.
[10] On behalf of the Balancing Pool and consumers group, Mr. Hildebrand had negotiated and agreed, all along, that ATCO would receive its capital investment and decommissioning costs, and that ultimately the decommissioning costs would be paid by the Balancing Pool. The $59.7 million was a return of net capital investment to be paid to ATCO. As a regulated utility, ATCO was given the right to operate the plant in a certain way. In exchange, they were allowed to invest in capital expenditures once approved by the Alberta Utility Board and in return the consumers would receive their services at cost. The electrical rates were fixed by the utility board by looking at the investor’s investment, operating expenses, return of capital investment and income tax implications. The Alberta Utility Board decides, after reviewing these considerations, as to what was appropriate and then set the rate of return and calculated the total revenue required. The investor receives a) its investment; b) return on capital investment if the capital investment was based upon depreciation rates over the operational life of the equipment; c) its operating expenses; and d) the income tax implications of the above. According to Hildebrand, the $59.7 million was not intended to be a payment for loss of future profits. There was no calculation done on this basis at any time and profits were totally irrelevant. The rates were based upon cost, not upon the future price or revenue. The consumers wanted to capture the residual value, that is, once the asset is taken out of regulation it would be owned by the consumers and therefore any value of the asset in the future was the residual value, i.e. generation of money or sales proceeds. The $59.7 million would not have been paid to ATCO if the residual value had stayed with them.
[11] In negotiations, the Balancing Pool was concerned with ensuring the residual value of the plant rested with them and that any credit which might arise in CCA to the benefit of ATCO in the transfer of beneficial interest to the Balancing Pool also go to the Balancing Pool and not remain with ATCO. The CCA pools were greater than the book value and therefore there would be a tax credit to ATCO and there had to be a provision in the NSA that this was part of the residual benefits and it was to flow to the Balancing Pool. In the course of negotiations, it was agreed to by ATCO, that the CCA credit would be paid by ATCO as they received the tax benefit, over a period of time to the Balancing Pool.
[12] Under the NSA, ATCO was to receive its outstanding capital investment of $59.7 million which was the net book value of the plant and its assets. It was the intent of both parties to conclude the NSA on the basis of net book value to ATCO.
[13] The collective effect of the NSA concluded by Hildebrand and Post was as follows:
1. The PPA would be terminated by a 2000 Regulation, effective January 1, 2001;
2. The legal title to the plant would remain with ATCO while all the beneficial interest in the plant would be transferred to the Balancing Pool on January 1, 2001, including any entitlement of ATCO to a credit on the plant CCA.
3. ATCO would operate the plant for a limited period of time under direction of a sales committee made up of five people – four chosen by the Balancing Pool and one from ATCO, with the ATCO representative not having a vote on the plant operational issues. ATCO would be paid an annual management fee for its operation of the plant.
4. On the termination of the PPA on January 1, 2001, the Balancing Pool would pay the Appellant the sum of $59.7 million.
5. If the plant was not sold within a certain period of time, ATCO would have the option of decommissioning the plant within a certain period of time (one year) and if ATCO did decommission the plant within that period of time then the decommissioning costs would be paid by the Balancing Pool. If the plant was not decommissioned within the specified period of time, and ATCO continued to operate the plant, then ATCO would be responsible for any decommissioning costs that the plant incurred in the future.
6. The Balancing Pool would receive all the proceeds of the sale of the plant to a third party.
[14] On January 1, 2001 ATCO transferred the plant to the Appellant by way of a deferred reorganization pursuant to section 85 of the Act and under the NSA the Appellant received $59.7 million from the Balancing Pool “as compensation for the early termination of the PPA”.
[15] Under the terms of the PPA, ATCO was concerned about the required output of the plant over a period of time and the penalties it would have to incur if it failed to meet output targets set out in the PPAs; ATCO did not feel the plant would be profitable over the period of time specified in the PPA.
[16] The plant was sold to a third party by the Balancing Pool in October, 2003. All the proceeds of the sale of the plant became the property of the Balancing Pool. Between January 1, 2001 and the date of the sale to the third party, all the benefits, advantages and responsibilities of ownership of the plant rested with the Balancing Pool except the legal title which rested with ATCO. The legal title rested with ATCO during this interim period for three reasons:
1. The negotiations between ATCO and the Balancing Pool were rushed and there was not enough time to transfer all the permits and licenses of a legal owner to the Balancing Pool;
2. It was the plan all along to find a third party purchaser and it was not worth the cost and effort to have the title to the plant transferred and then transfer it to a third party because it was anticipated that the sale of the plant would occur much earlier than it eventually did to a third party; and
3. There was concern as to whether or not the Balancing Pool might not have been in a position to take ownership of the power plant under its terms of reference.
[17] When the plant was sold, the Appellant was a party to the sales agreement as vendor given that it held the legal title, but all other interests of the property had been held by the Balancing Pool.
[18] The NSA contained a number of particularly relevant articles, including:
1. Article 4(a)(i):
This agreement and the parties’ obligations hereunder shall be subject to:
…
(a) The making of regulations effective and in force January 1, 2001 which provide for the termination of the PPA; allow the BPA to execute this agreement for and on behalf of the power pool and allowed BPA to exercise such rights and authorities and assume such obligations and liabilities as given to or imposed on it for and on behalf of the power pool council pursuant to this agreement and allow the payments contemplated by this agreement to be made out of the Balancing Pool in accordance with the terms of this agreement …
2. Article 5(b):
ATCO Electric shall receive payment of the termination compensation from the Balancing Pool as compensation for early termination of the PPA the lump sum amount shall be payable on January 1, 2001 …
3. Article 5(d):
ATCO Electric agrees that amounts equal to the tax benefit accruing to ATCO Electric arrive from CCA pool surpluses attributable to the Plant shall be paid annually for the years 2001 to 2020, inclusive, to the Balancing Pool by ATCO Electric within ten days of its receipt …
[19] Schedule “A” of the NSA was entitled “Compensation for Early Termination of the PPA” and it states in part as follows:
Compensation from the Balancing Pool of “book value” for early termination shall be based on a lump sum amount plus actual amounts, the 2000 capital cost additions and the 2000 year end coal inventory as shown below.
The lump sum amount of approximately $59.7 million was made up of approximately $54.8 million for the closing net book value of the plant assets, $2.1 million for the closing net book value for the corporate general administrative assets, and a variety of adjustments in respect to inventory with a further adjustment for decommissioning provision. There was no reference in Schedule A to monies for future profits surrendered; only references were made to net book values.
[20] Schedule G to the NSA was entitled “ATCO Electric Ltd., H.R. Milner U.C.C./Tax Calculation Allocation of Proceeds”. Schedule G showed how the undepreciated capital cost was allocated given the purchase price and the applicable percentages to the applicable classes.
[21] In the NSA determination of “compensation” was defined to mean the sum of the lump sum amount and any additional amount (lump sum amount referring to the $59.7 million).
[22] The NSA also referred to the OA as Schedule “B” to the NSA with Schedule “B” being incorporated into and forming part of the NSA.
[23] In the OA preamble, ATCO was described as the owner of the plant.
[24] The OA contained a number of articles which are particularly relevant. Article 2.5(a):
Upon termination of this agreement, except for … ATCO may continue with the ongoing operation of the Plants for its own use effective from and after the date of termination of this agreement in which case it shall be entitled to receive all revenues and shall assume all liabilities and obligations resulting from the operation thereof …
Article 3.1:
During the term of this agreement, all revenue from the operation and ownership of the Plant and the Licensed Facilities shall be paid into the Balancing Pool. …
Article 3.2(a):
During the Term of this Agreement, ATCO Electric shall be entitled to receive payment from the Balancing Pool of all reasonably and necessarily incurred costs associated with the operation of the Plan, provided such costs are approved by the Operations Committee …
Article 4.1:
An Operations Committee shall be established consisting of four representatives of the BPA and one representative of ATCO Electric. The Parties shall appoint their respective representative(s) to the Operations Committee forthwith upon execution hereof. ATCO Electric and the BPA agree that two of the representatives appointed by the BPA shall be designated by the Consumers.
Article 7(a):
(a) ATCO Electric shall operate the Plant from and including January 1, 2001, under the terms of the operating agreement.
(b) The operating agreement shall be executed concurrently with the execution of this agreement.
Article 7.1:
ATCO Electric shall received additional payment of the Management Fee from the Balancing Pool. …
Article 9.2:
During the Term, ATCO Electric shall have legal title to the Plant and License Facilities subject to a beneficial interest in the Plant and Licensed Facilities in favour of the Power Pool for the full benefit and advantage of the Consumers.
[25] For the process of the sale of the plant to a third party, a sales committee was established to market the plant, made up of five persons, one from ATCO and four from the Balancing Pool. Only the members representing the consumers’ interest (Balancing Pool) had a voting right. ATCO sat on the committee without a vote because:
1. The consumers wanted ATCO’s assistance in selling the plant and providing assistance to the prospective buyers in doing their due diligence.
2. ATCO was concerned about the potential of residual liability in the plant therefore they wanted some input in the selection of a buyer. They did not want liability if the plant was decommissioned or if there was environmental liability and wanted to ensure that the purchaser would give ATCO an indemnity that they would not be responsible for any of the potential liabilities.
[26] On the sale to the third party, the Balancing Pool gave an indemnification to the Appellant because the third party did not have the financial wherewithal to provide an indemnity. On the sale of the plant the Appellant received nothing from the proceeds of the sale except a fee of $200,000 for assisting to facilitate the sale.
[27] Under the OA, an operations committee was to oversee the business and operations of the plant and to consider, evaluate and form a business strategy for the continued operation of the plant and licensed facilities in order to minimize costs and maximize the availability and benefits to the consumers. This committee also to give direction to ATCO with respect to the management of the plant, considered and approved any recommendations of ATCO based on ongoing operations of the plant and licensed facilities, and it also directed the Appellant to take or refrain from taking any action regarding the plant and licensed facility.
[28] As managers of the plant, the Appellant received a base fee of $750,000 made up of a minimum fee of $500,000 plus additional compensation if certain operational targets were met (a base fee plus incentives).
Issues
[29] 1. Was the lump sum payment of $59.7 million paid by the Balancing Pool to the Appellant a capital receipt or income receipt under section 9
of the Act?
2. Alternatively, if the payment was not income received under section 9 of the Act, was the payment a compulsory payment under subparagraph 12(1)(x)(iv) of the Act?
3. If the $59.7 million is a receipt under section 9 of the Act, under what year is the amount taxable, 2000 or 2001?
4. There were additional issues as to whether the current expenditures of $6,002,362 were properly deducted in computing the Appellant’s profit for 2001; whether the adjusted current expenditures of $1,335,540 were properly deductible in computing the Appellant’s profit for 2001 and finally whether the adjusted current dismantling expenditures of $225,888 were properly deductible in computing the Appellant’s profits for the years. On these latter issues, there was agreement between the Appellant and Respondent, that of the $7,565,720 of repair and maintenance expenses, $4,539,430 were currently deductible in the 2001 taxation year and the remaining $3,026,288 were properly treated as additions to the undepreciated capital cost of the Appellant’s capital cost allowance pools. This agreement will be reflected in the order coming from this particular Judgment.
Pleadings & Parties’ Positions
[30] The Appellant filed an Amended Notice of Appeal on October 14, 2008 requesting the following relevant relief (save and except the relief which relates to the items agreed to). The Appellant requested that the appeal be allowed, with costs, and the reassessment for the taxation year ending December 31, 2001 be referred back to the Minister for reconsideration and reassessment on the following basis:
(i) that the Lump Sum Payment in the amount of $59,737,728 under the NSA was a capital receipt and not profit; or alternatively, even if profit, was not properly included the Appellant’s income in the 2001 taxation year;
…
41.In Addition to the relief set out above, the Appellant requests that consequential to any adjustments made in respect of the items in the above paragraphs that the Appellant be permitted to recalculate its capital cost allowance, capital cost allowance recapture, resource allowance and earned depletion allowance, and manufacturing and processing profits deduction for the taxation year.
42. In addition to the relief set out above, the Appellant requests that it be allowed to claim any unused permissive deductions, including but not limited to, CCA, CEC, non-capital losses from other years, net capital losses from other years and investment tax credits and such amounts as may be determined.
[31] The Respondent filed an Amended Reply on October 27, 2008 and separate and apart from what was agreed upon, related the following with respect to the ground relied upon and relief sought:
21. He submits that the receipt of $59M is properly treated as income and included in the Appellant’s income in the 2001 taxation year in that:
a) the N.S.A. does not represent a sale purchase agreement for the Milner Plant. Rather, the $59M payment under the N.S.A. is payment of the termination compensation from the B.P. as compensation for early termination of the Milner Plan P.P.A. and represents future profits surrendered;
b) furthermore, under the N.S.A. there was no transfer of beneficial ownership in the Milner Plant within the meaning of paragraph 248(1)(e) of the Act. Nor was there a sale of the Milner Plan to B.P. for purposes of the Sale of Goods Act.
22. In the alternative, he states that the B.P. was required to compensate ATCO when the Milner Plan PPA was terminated, pursuant to the provisions of Regulation 170/99; 106/2000; and 331/2000. As such, the amount of $59M constitutes a compulsory payment that is taxable under paragraph 12(l)(x)(iv) of the Act, and is properly included in the Appellant’s income in the 2001 taxation year in that ATCO received the $59M from a public authority as reimbursement for an amount that was included in the cost of property, or an outlay or expense, that was the Milner Plant and related properties.
[32] The position of the Appellant is that ATCO did not want to continue with the PPA; they wanted the PPA terminated and they wanted compensation for their investment in the plant and commenced negotiations in this regard. Negotiations were concluded with the result that all profits and losses from the plant (before the plant was sold to a third party by the Balancing Pool) went to the Balancing Pool. ATCO operated the plant pending the plant’s sale and the proceeds paid to ATCO by the Balancing Pool were the proceeds of disposition of the plant and not income under s. 9 of the Act. The Appellant further argues that if the Appellant is in error, then the $59.7 million paid under the NSA was income in 2000 and not in 2001. Under the accrual accounting principle, the amount was properly taxable in 2000 and not 2001. The Appellant disputes that there was no transfer of the beneficial ownership. Further the Appellant also says that there was not a compulsory payment under paragraph 12(1)(x) of the Act.
[33] The Respondent’s position basically is that the amount paid to ATCO is compensation for a stream of lost future profits and therefore income under section 9 of the Act and further, that a beneficial interest was not and could not be transferred to the Balancing Pool because it did not have the capacity to hold such a beneficial interest and, in the alternative, the payment was a compulsory payment under subparagraph 12(1)(x)(iv) of the Act.
Applicable Statutes and Regulations
[34] There are numerous statutory and regulatory provisions which are relevant to the issues before the Court.
[35] Section 9 of the Act states:
9.(1) Subject to this Part, a taxpayer’s income for a taxation year from a business or property is the taxpayer’s profit from that business or property for the year.
(2) Subject to section 31, a taxpayer’s loss for a taxation year from a business or property is the amount of the taxpayer’s loss, if any, for the taxation year from that source computed by applying the provisions of this Act respecting computation of income from that source with such modifications as the circumstances require.
(3) In this Act, “income from a property” does not include any capital gain from the disposition of that property and “loss from a property” does not include any capital loss from the disposition of that property.
[36] Subparagraph 12(1)(x)(iv) of the Act states as follows:
(iv) as a refund, reimbursement, contribution or allowance or as assistance, whether as a grant, subsidy, forgivable loan, deduction from tax, allowance or any other form of assistance, in respect of
(A) an amount included in, or deducted as, the cost of property, or
(B) an outlay or expense,
to the extent that the party amount
…
[37] Paragraphs 1(1)(c) and (f) of the Electric Utilities Act, R.S.A. 2000 c.E-5 (“EUA”) Balancing Pool Regulation)Regulation 169/99 states:
…
(c) “balancing pool administrator” means the person or persons appointment under section 2(1)(c);
…
(f) “Council” means the Power Pool Council;
[38] Subsections 2(1), 3(1) section 4, subsection 5(1), sections 6 and 7 of the EUA, reads as follows:
2(1) The Council shall, before December 31, 1999,
(a) establish a separate financial account or accounts to be known
as the balancing pool,
(b) establish the rules of the balancing pool, and
(c) appoint a qualified person or persons to act as the balancing
pool administrator.
…
3(1) The balancing pool administrator must carry out its powers and duties in the name of the Council and all powers and duties carried out by the balancing pool administrator or a person referred to in subsection (2) are deemed to have been carried out on behalf of the Council.
…
4 The balancing pool administrator shall carry out the following powers and duties in accordance with the Act, the regulations and the rules of the balancing pool;
(a) sign contracts, agreements and other instruments in respect of the balancing pool;
(b) make and maintain banking arrangements in respect of the balancing pool;
(c) borrow money from any person or enter into overdraft or line of credit arrangements with a bank, treasury branch, credit union, loan corporation or trust corporation for the purpose of meeting obligations of the balancing pool as they become due, and give security for the loan, overdraft or line of credit;
(d) draw, make, accept, endorse, execute or issue promissory notes, bills of exchange or other negotiable instruments in respect of the balancing pool;
(e) hire employees, consultants and advisors required in connection with the administration of the balancing pool and the performance of the powers and duties of the Council and the balancing pool administrator and determine the duties, terms of engagement and remuneration of the employees, consultants and advisors;
(f) determine the amount of any obligation or expenditure payable out of the balancing pool under section 7(1)(h);
(g) carry out any other duties that are necessary to administer the balancing pool.
5(1) The balancing pool administrator shall carry out the following powers and duties in accordance with the Act, the regulations, the rules of the balancing pool and any arrangement:
(a) oversee the payment into the balancing pool of the amounts referred to in section 6;
(b) oversee the payment out of the balancing pool of the amounts referred to in section 7;
(c) determine the amounts of any balancing pool credits and balancing pool charges;
(d) allocate balancing pool credits directly to customers or indirectly to customers through
(i)retailers
(ii)wire service providers,
(iii) the power pool administrator;
(e) levy balancing pool charges directly against customers or against customers through
(i)retailers
(ii)wire service providers,
(iii) the power pool administrator;
(f) offer for sale to the public an arrangement held by the balancing pool administrator as a party to the arrangement;
(g) offer for sale to the public any derivatives created by the balancing pool administrator pursuant to the Power Purchase Arrangements Regulation (AR 170/99);
(h) exercise any powers and perform any duties that accrue to the balancing pool administrator as a party to an arrangement or to the balancing pool under an arrangement;
(i) exercise or assign to a third party the right to exchange electric energy through the power pool that arises as a result of the balancing pool administrator being a party to an arrangement;
(j) on receipt of notice in respect of an extraordinary event from a party to an arrangement or otherwise, assess and verify the occurrence of the extraordinary event and the need for any payment to be made into or out of the balancing pool by or to a party under the provisions of the arrangement, and participate in any dispute resolution proceedings under an arrangement pursuant to subsection (3);
(k) where clause (j) applies, commence making payments set out in the arrangement until the matters in question under clause (j) have been resolved, whether by agreement or in dispute resolution proceedings under subsection (3);
(l) make, defend, settle and withdraw claims and counterclaims against the balancing pool relating to an arrangement that the balancing pool administrator holds as a party to the arrangement;
(m) make, defend, settle and withdraw claims and counterclaims against retailers, wire service providers, customers and any other persons relating to the payment of balancing pool credits or charge.
….
6 The following amounts must be paid into the balancing pool
(a) any payment, fee, charge or other amount that is required by the Act or the regulations to be paid into the balancing pool;
(b) any payment, fee, charge or other amount that is required by an arrangement to be paid into the balancing pool, including any payment that is required to be made as a result of the occurrence of an extraordinary event or as the result of the resolution of a dispute referred to in section 5(3);
(c) any balancing pool charge payable, directly or indirectly, by a customer pursuant to billing;
(d) any money borrowed for the purpose of meeting the obligations of the balancing pool;
(e) any principal, income, dividend or other amount received in connection with investments made pursuant to section 8;
(f) any amount received by the balancing pool administrator in respect of an arrangement held by the balancing pool administrator as a party to the arrangement;
(g) any fine imposed by the Council in accordance with section 9.5(1)(c) of the Act;
(h) any amount approved by the Board as payable into the balancing pool for any period prior to an arrangement taking effect;
(i) any other amount received in the course of the administration of the balancing pool, except an amount that is specified by the Minister as not being payable into the balancing pool.
7(1) The following amounts must be paid out of the balancing pool:
(a) any payment, fee, charge or other amount that is required by the Act or the regulations to be paid out of the balancing pool;
(b) any payment, fee, charge or other amount that is required by an arrangement to be paid out of the balancing pool, including any payment that is required to be made as a result of the occurrence of an extraordinary event or as the result of the resolution of a dispute referred to in section 5(3);
(c) any balancing pool credit owing, directly or indirectly, to a customer pursuant to billing.
(d) any principal or interest to be paid or repaid in connection with an amount borrowed for the purpose of meeting the obligations of the balancing pool;
(e) money payable as the purchase price for investments made pursuant to section 8;
(f) any amount payable by the balancing pool administrator in respect of an arrangement held by the balancing pool administrator as a party to the arrangement;
(g) any amount approved by the Board as payable out of the balancing pool for any period prior to an arrangement taking effect;
(h) any other obligation or expenditure incurred in the course of the administration of the balancing pool, except those that are specified by the Minister as not being payable out of the balancing pool.
(2) For the purposes of subsection (1)(h), no amount may be paid out of the balancing pool relating to obligations or expenditures incurred in the course of the administration of the power pool.
(3) Nothing in the Act, the regulations or an arrangement is to be construed so as
(a) to relieve an insurer from its obligations under a policy of insurance, or
(b) to require an amount otherwise recoverable under a policy of insurance to be paid out of the balancing pool.
[39] Paragraphs 8(1), 8(2), 8(4)(c) of the EUA Power Purchase Arrangements Regulation (Regulation 170/99) state:
8(1) Where
(a) no acceptable bids are received for a power purchase arrangement at an auction (other than a power purchase arrangement referred to in section 26 of the General Units Regulation (AR 72/99)),
(b) a power purchase arrangement is converted to a financial instrument under section 45.94(2)(b) of the Act, or
(c) a power purchase arrangement is sold to a purchaser at an auction and the power purchase arrangement terminates other than pursuant to section 15.2 of the power purchase arrangement,
the power purchase arrangement
(d) is deemed to have been sold to the balancing pool administrator at an auction, and
(e) is to be held by the balancing pool administrator in the capacity of a purchaser for all purposes of the Act, the regulations made under the act and the power purchase arrangement.
(2) Where subsection (1) applies, the balancing pool administrator shall immediately become entitled to the rights and be bound by the obligations of a purchaser and, from that time, the power purchase arrangement has effect in accordance with its terms and conditions, as amended from time to time in accordance with the arrangement, subject to the following:
(a) sections 4.3(j), 7.3, 14.6, 15.3, 15.4 and 17.4 of the power purchase arrangement are deemed to be deleted;
(b) sections L3.1, L3.2(a), (c), (e) and (f), L3.4, L3.5 and L4.1 of Schedule L of the power purchase arrangement are deemed to be deleted;
(c) section 14.4 of the power purchase arrangement is deemed to be replaced with the following:
14.4 During any period in which the Owner’s obligation to perform or comply with an obligation under this arrangement is suspended, the Monthly Capacity Payment shall be the same amount as the Provisional Capacity Payment, notwithstanding any other provision of this arrangement.
…
(4) Where subjection (l) applies, the balancing pool administrator may, notwithstanding the terms