ATCO Electric fined $3M for unearned rate increases, overstating its costs

Transmission lines transport electricity to the grid from the coal-fired Sheerness Generating Station, co-owned by TransAlta and ATCO, near Sheerness, Alberta on June 15, 2016. THE CANADIAN PRESS IMAGES/Larry MacDougal

EDITOR’S NOTE: A previous version of this story misstated the number of nights ATCO paid for in terms of accommodations at the Beaver River site. It has since been corrected and we regret the error.

A prominent Alberta company has agreed to pay $3 million in fines for misleading the province’s utilities watchdog about its costs in two separate projects.

ATCO Electric has also agreed to refund $4 million in recompense for unearned rate increases, a deal that now goes before the Alberta Utilities Commission for approval.

“ATCO Electric admits that it has contravened the Electric Utilities Act,” says an agreed statement of facts released by the commission.

The contraventions concern two transactions between 2013 and 2017. Both involve ATCO misrepresenting its expenses, which are used by the commission to set utility rates.

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In one, the Calgary-based company included capital costs in its rate applications for 2015 to 2017 that it didn’t pay until April 2018.

That meant Alberta consumers began paying a rate increase in 2015 to compensate ATCO for a tab the company hadn’t yet covered, giving it three years of profit.

“Enforcement staff’s view is that it was inappropriate for ATCO Electric to earn a return on the (reported cost), funded by Alberta ratepayers, for a period of three years before ATCO Electric expended those funds,” says the statement.

It says an ATCO manager pointed out in 2018 that the commission was likely to raise questions about the cost item.

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In the second instance, the company inflated the cost of accommodation at a construction site. The statement says ATCO overstated the number of rooms it was paying for through its purchase of a work camp at Beaver River in east-central Alberta.

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While ATCO claimed it had paid for the equivalent of 56,356 nights, the statement says the real number was 35,805, with the remaining 20,551 being non-revenue rooms.

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“ATCO Electric acknowledges that ATCO Electric did not meet its duty of candour in respect of the Beaver River Camp issue,” the statement says.

The commission must now decide whether the settlement reached by ATCO and the investigators is in the public interest.

“The commission works hard to ensure that only legitimate costs are reflected in the rate that people have to pay,” said commission spokesman Geoff Scotton. “People do have to pay the legitimate costs, but only the legitimate costs.”

The commission made another finding against ATCO last year.

In April 2023, the commission said ATCO Electric must refund about $16 million to the Alberta Electric System Operator, as well as pay a $31-million fine, over costs that the company tried to recover from the construction of a power line through Jasper National Park.

The commission noted ATCO’s practices have improved since then.

“ATCO and ATCO Electric have made significant changes to ATCO Electric’s compliance program since the Jasper enforcement decision and continue to make improvements,” the statement says.

It notes that the recent contraventions came to light after an internal whistleblower raised concerns. ATCO then hired Deloitte to conduct a probe and its results were turned over to the commission’s investigators.

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“ATCO conducted thorough and timely investigations … of each of the issues raised by the (whistleblower).”

Still, Jim Wachowich of the advocacy group Consumers’ Coalition of Alberta said the company’s next rate application will bear watching. He said he’ll be evaluating whether ATCO lives up to the promises it made after the Jasper decision and how completely it discloses costs.

“(We’ll look at) how focused, deliberate and intentional are they in their disclosures when we ask questions about costs,” he said.

In a statement, ATCO spokesman Kurt Kadatz said the company is committed to ethical practices.

“ATCO is co-operating with the AUC to ensure these matters are reviewed and addressed and we are committed to implementing any necessary corrective measures. We remain committed to ensuring our policies and actions are best in class and beyond reproach.”

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