ENMAX PPA Management Inc. v. Balancing Pool

Alberta’s Court of Queen’s Bench finds in favour of ENMAX in its termination of the Battle River Power Purchase Arrangement

Power Purchase Arrangements (PPAs) were the instruments under which the Province of Alberta deregulated the electricity market in 2000. Under that regime, successful bidders who acquired PPAs, known as Buyers, were entitled to the electricity generated from a power plant. The power plant continued to be owned by the historic power plant owner. The deregulated electricity market has proceeded with PPAs for approximately 17 years.

In 2015, the Government of Alberta announced that it was imposing, as part of its Climate Change Plan, additional taxes relating to carbon emissions generated by large industrial facilities including electricity generation plants. Under the terms of the PPAs, those increased taxes and charges flow through to the Buyers effective January 1, 2016. The taxes and charges were material and essentially doubled from that date, with further increases effective January 1, 2017. All the PPAs contain a provision by which Buyers could terminate their respective PPAs in the event that such a “Change in Law” rendered the PPAs unprofitable or more unprofitable over the balance of the PPAs.

All the Alberta PPA Buyers terminated their PPAs as a result of the substantially increased taxes. In June 2016, the current Government of Alberta commenced an action against all of the former PPA Buyers alleging that a portion of the section under which the PPA terminations were allowed to occur was void and ultra vires.

A number of proceedings related to those PPA terminations have been heard by the Court of Queen’s Bench of Alberta.

One application arose when the Balancing Pool argued that the effective date of the termination of the Battle River PPA was about six months later than ENMAX elected to terminate on January 1, 2016. In a decision rendered by Justice P. R. Jeffrey of the Court of Queen’s Bench, the judge agreed with ENMAX’s position and held that the effective date of any PPA termination was when each Buyer so elected, and not a later date as claimed by the Balancing Pool. That decision was not appealed. 

Another application related to the Keephills PPA, in which ENMAX was the former Buyer. The Balancing Pool refused to accept or reject ENMAX’s termination on May 5, 2016, while ENMAX claimed the Balancing Pool was statutorily obligated to assess the termination. The Balancing Pool refused, due to the Government of Alberta action. ENMAX successfully applied for injunctive relief, and the decision sets an important precedent for obtaining a mandatory injunction.

Dalton W. McGrath, Q.C., FCIArb, Michael O’Brien and Geoff Adair of Blake, Cassels & Graydon LLP were counsel for ENMAX PPA Management Inc. and ENMAX Energy Corporation.

Roger Smith, Lara Mason and Bernette Ho of Norton Rose Fulbright Canada LLP acted for Balancing Pool.

Lexpert Copyrights © Thomson Reuters Canada Limited