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ATCO Utilities Faces Scrutiny: Lower Prices, But Is It Genuine?

Updated: Dec 12, 2024



In a recent twist, ATCO, is seeking to delay a hearing on remedies for gas and electricity rates that the Alberta Utilities Commission (AUC) has deemed neither reasonable nor justified.


In a letter sent to the AUC late last month, ATCO Utilities expressed disagreement with the commission’s ruling, arguing that it’s premature to proceed until the appeal processes are complete. Melanie Bayley, president of ATCO Electric, stated, “The decision seemed to change the rules after the fact. We disagree that rates weren’t fair and justified.”


ATCO Gas, serving 1.3 million customers (about 82% of Alberta homes and businesses), and ATCO Electric, delivering power to approximately 230,000 customers in north and east-central Alberta, are under the spotlight. The scrutiny began in June 2023, when Alberta’s Utilities Consumer Advocate requested the AUC to investigate profits made by ATCO in 2021 and 2022.


Under a series of five-year agreements with the regulator, Alberta utilities are permitted to make a rate of profit within an agreed-upon range. If profits exceed this range, the utility must prove they resulted from increased efficiency or productivity. Failure to do so may lead to a reopening of the deal and possible adjustments for under- or overpayment.


The AUC’s May ruling found that ATCO Electric and ATCO Gas recorded profit margins in 2021 and 2022 that were up to 26% above the threshold that may trigger a review. The commission also noted the companies benefited from reduced capital and operations expenditures, which they couldn’t adequately explain.


The AUC calculated that ATCO Electric had $387 million in capital budget savings over 2018-22 that couldn’t be linked to any service improvements. Similarly, ATCO Gas had $252 million in savings during the same period, with an additional $21 million in operational savings for 2022. “The result is rates that were not just and reasonable in those years because customers were required to pay rates without receiving the benefit of more efficient utility service,” the commission wrote. “Customers paid more than what was reasonably required for the provision of safe and reliable utility service.”


ATCO disputes these figures, and the amounts are under review. Bayley explained that the savings came from various initiatives such as organizational realignment, prioritization of projects and maintenance, meter replacement, equipment standardization, and income tax deductions. However, the AUC deemed these explanations as “high level, unsubstantiated and insufficient in proportion to the otherwise unquantified or unexplained cost savings.”


Interestingly, Bayley claimed that all savings were passed on to consumers in a subsequent agreement with the AUC, starting in 2023. “Consumers today are paying much lower rates,” she said. But is this reduction in prices a genuine effort to benefit consumers, or merely a strategic move after being caught legally?


ATCO has asked the commission to reconsider its ruling and has also sought leave from the Alberta Court of Appeal to appeal the decision. Bayley argues that the commission’s ruling retroactively changed the requirements of the ratemaking plan, creating significant uncertainty for utilities and investors. “It’s just common sense that you know the rules before you operate under them,” she added.


The AUC is set to begin the second phase of its investigation, considering remedies that may include refunds to ATCO Utilities’ customers related to the quantum of savings. ATCO, however, argues that this phase should be paused until its appeals are heard, citing potential regulatory inefficiency and unnecessary expenditure of time and resources.


Several groups, including the Utilities Consumer Advocate, the City of Calgary, the Industrial Power Consumers of Alberta, and the Consumers Coalition of Alberta, have registered their intention to participate in the hearing on possible remedies.


The commission is expected to deliver a decision on its review by August 1. Meanwhile, the Court of Appeal could take until 2025 to decide whether to hear ATCO’s request for a review.


Stay tuned for more updates on this unfolding story and what it means for consumers in Alberta.


THE TEAM

Alberta's Most Experienced Energy Retailers

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