The University of Calgary

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1 Decision Preferential Sharing of Records between the University of Calgary and URICA Energy Real Time Ltd. December 19, 2014

2 The Alberta Utilities Commission Decision : Preferential Sharing of Records between the University of Calgary and URICA Energy Real Time Ltd. Application No Proceeding No December 19, 2014 Published by The Alberta Utilities Commission Fifth Avenue Place, Fourth Floor, 425 First Street S.W. Calgary, Alberta T2P 3L8 Telephone: Fax: Website:

3 Contents 1 Introduction and background Relevant statutory and regulatory provisions Discussion and findings Fair, efficient and openly competitive operation of the market... 4 Commission findings Reasonably necessary Terms and conditions Order... 8 Appendix 1 Proceeding participants... 9 Appendix 2 Abbreviations AUC Decision (December 19, 2014) i

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5 The Alberta Utilities Commission Calgary, Alberta Preferential Sharing of Records between the University of Calgary and URICA Energy Real Time Ltd. Decision Application No Proceeding No Introduction and background 1. On November 5, 2014, the University of Calgary filed an application 1 with the Alberta Utilities Commission (AUC or the Commission) pursuant to Section 3 of the Fair, Efficient and Open Competition Regulation requesting an order from the Commission permitting the sharing of records not available to the public between the University of Calgary (U of C) and URICA Energy Real Time Ltd. (URICA). 2. The U of C owns and operates a 12 megawatt cogeneration facility (UOC1) 2 whose primary purpose is to provide heat to the various buildings on the U of C campus as well as to provide electricity to campus buildings. The U of C has entered into commercial arrangements with URICA to assist in the management of UOC1. 3. On July 15, 2014, the Commission issued Decision that permitted the sharing of records between the U of C and URICA in relation to the output of the generation unit identified as UOC1. Decision permitted the sharing of records from July 15, 2014 until the earlier of October 31, 2014 or the termination of the commercial agreement between the U of C and URICA. 4. URICA is an independent energy services and consulting firm that offers, among other things, energy dispatch services and ancillary services marketing services to independent power generators and load consuming entities. URICA presently acts as agent for other clients to market their generation or load capacity into the Alberta operating reserves market that is operated by the Alberta Electric System Operator (AESO). The U of C stated that URICA has the required resources and expertise to assist the U of C in marketing the capacity of UOC1 into the Alberta energy and operating reserves markets operated by the AESO The agreement between the U of C and URICA appoints URICA as the U of C s agent to assist, among other things, in the participation of UOC1 in the Alberta energy and ancillary service markets operated by the AESO Application No The application letter refers to UOC1 as being a 13 megawatt generating unit. The applicant submitted that the 13 megawatt figure is a best estimate of the capacity of UOC1, but clarified that the generator is configured to only be able to send a maximum of 12 megawatts to the Alberta power pool (necessitating that all UOC1generation above 12 megawatts must be consumed on-site or behind the fence ). A 12 megawatt capacity for UOC1 is also specified in the commercial arrangement between the University of Calgary and URICA Energy Real Time Ltd. that was filed with this application. As such, this application considers the sharing of a maximum output of 12 megawatts between the University of Calgary and URICA Energy Real Time Ltd. Exhibit 2.00, Preferential Sharing of Records Application registered November 5, 2014, page 2. Ibid. AUC Decision (December 19, 2014) 1

6 6. On November 17, 2014, the Commission issued a notice of application regarding the application made by the U of C. 5 In the notice of application, the Commission advised that the parties granted standing in the proceeding were limited to the U of C and the Market Surveillance Administrator (MSA) in accordance with Section 3(5) of the Fair, Efficient and Open Competition Regulation. The notice of application established a process and schedule for the MSA to determine whether it would intervene in the proceeding and to advise the Commission whether it required an evidentiary process. Pursuant to Section 3(6) the MSA chose not to participate in this proceeding. Accordingly, the record for Proceeding No closed on November 5, 2014, the day the application was registered with the Commission. 7. A glossary of abbreviations used in this decision may be found in Appendix In reaching the determinations contained within this decision, the Commission has considered all relevant materials comprising the record of this proceeding. Accordingly, references in this decision to specific parts of the record are intended to assist the reader in understanding the Commission s reasoning relating to a particular matter and should not be taken as an indication that the Commission did not consider all relevant portions of the record with respect to that matter. 2 Relevant statutory and regulatory provisions 9. The relevant statutory provisions respecting the sharing by market participants of records that are not available to the public are found in the Fair, Efficient and Open Competition Regulation, the Alberta Utilities Commission Act, SA 2007, C. A-37.2 and the Electric Utilities Act, SA 2003, c. E-5.1, under which this regulation was enacted. 10. Section 5 of the Electric Utilities Act lists some of its purposes as follows: (b) to provide for a competitive power pool so that an efficient market for electricity based on fair and open competition can develop, where all persons wishing to exchange electric energy through the power pool may do so on non-discriminatory terms ; (c) to provide for rules so that an efficient market for electricity based on fair and open competition can develop in which neither the market nor the structure of the Alberta electric industry is distorted by unfair advantages of government-owned participants or any other participant; (e) to enable customers to choose from a range of services in the Alberta electric industry, including a flow-through of pool price and other options developed by a competitive market, and to receive satisfactory service; (h) to provide for a framework so that the Alberta electric industry can, where necessary, be effectively regulated in a manner that minimizes the cost of regulation and provides incentives for efficiency. 5 Exhibit 1.01, Notice of Application, November 17, AUC Decision (December 19, 2014)

7 11. The Electric Utilities Act further states in Section 6 that [m]arket participants are to conduct themselves in a manner that supports the fair, efficient and openly competitive operation of the market. 12. The Fair, Efficient and Open Competition Regulation clarifies what conduct is allowed and forbidden on the part of various market participants. 13. Specifically, Section 3(1) of the Fair, Efficient and Open Competition Regulation establishes that a market participant shall not share records that are not available to the public relating to any past, current or future price and quantity offer made to the power pool or for the provision of ancillary services. Section 3(2) of the Fair, Efficient and Open Competition Regulation establishes instances where records that are not available to the public may be shared. Section 3(3) of the Fair, Efficient and Open Competition Regulation allows the Commission to issue an order permitting the sharing of records, stating: (3) The Commission may, on application by a market participant that is otherwise prohibited from sharing records referred to under subsection (1), issue an order permitting the sharing of those records on any terms and conditions the Commission considers appropriate where the market participant establishes that (a) the records will not be used for any purpose that does not support the fair, efficient and openly competitive operation of the electricity market, including the conduct referred to in section 2, and (b) the sharing of the records is reasonably necessary for the market participant to carry out its business. 14. Section 2 of the Fair, Efficient and Open Competition Regulation identifies conduct by a market participant that does not support the fair, efficient and openly competitive operation of the market. Relevant to the sharing of records, prohibited conduct would include: (h) restricting or preventing competition, a competitive response or market entry by another person, including (i) a market participant directly or indirectly colluding, conspiring, combining, agreeing or arranging with another market participant to restrict or prevent competition, (j) manipulating market prices, including any price index, away from a competitive market outcome; 15. The sharing by market participants of their non-public records has the potential to allow collusion and price-fixing by these participants, especially if the participants have a substantial market share or market power. Such collusion is harmful to the marketplace as a whole, especially consumers. It is, therefore, incumbent upon the Commission to scrutinize carefully record-sharing agreements in order to maintain the competitive environment that the Electric Utilities Act so ardently emphasizes as its goal. 16. Additionally, the Electric Utilities Act stresses that any regulatory framework should minimize the costs of regulation and allow for efficiencies. AUC Decision (December 19, 2014) 3

8 17. With that in mind, the Commission must look to any record-sharing agreement under the twin lenses established by Section 5 of the Electric Utilities Act and Section 3(3) of the Fair, Efficient and Open Competition Regulation. 3 Discussion and findings 3.1 Fair, efficient and openly competitive operation of the market 18. The U of C submitted that it has no affiliates, and that the UOC1 generator is the only generation asset controlled by the U of C. The U of C clarified that UOC1 represents an offer control of less than one per cent of the Alberta energy market, and 1.38 per cent of the operating reserves market The U of C further submitted that URICA and its associates currently represent zero per cent offer control of the energy market and up to 10.2 per cent of the operating reserves market. 7 Should UOC1 be managed by URICA, the U of C submitted that URICA s total offer control of the energy market and operating reserves market would not be in excess of the 30 per cent limitation set out in Section 5(5) of the Fair, Efficient and Open Competition Regulation A senior officer of the University of Calgary provided a written representation that indicated that any records that the U of C preferentially shared with URICA would not be used for any purpose that does not support the fair, efficient and openly competitive operation of the electricity market The U of C also filed a representation from a senior officer at URICA to confirm that any records that URICA preferentially receives from the U of C will not be used by URICA for any purpose that does not support the fair, efficient and openly competitive operation of the electricity market. The representation also stated that there exists a formal compliance program at URICA and its affiliates that all employees and officers must read and with which they must comply, and that all officers and employees of URICA and its affiliates must submit signed acknowledgements that they will comply with the compliance program and the Fair, Efficient and Open Competition Regulation Information on various aspects of URICA s internal compliance program was outlined as follows: (a) there exists a functional segregation of duties at URICA to create a foundation for impartiality where long term strategy is developed by senior staff, and operational management is carried out by real time personnel based on real time data within the previously established guidelines; Exhibit 2.00, Preferential Sharing of Records Application registered November 5, 2014, pages 1 and 3. Exhibit 4.00, URICA preferential sharing of records letter registered November 5, 2014, page 3. Exhibit 2.00, Preferential Sharing of Records Application registered November 5, 2014, page 3. Exhibit 3.00, University of Calgary preferential sharing of records letter registered November 5, 2014, page 1. Exhibit 4.00, URICA preferential sharing of records letter registered November 5, 2014, page 1. Ibid, page 2. 4 AUC Decision (December 19, 2014)

9 (b) account managers at URICA do not have access to all, or other accounts, and can only access information specific to their accounts; 12 (c) a compliance plan at URICA specifying that any confidential information and records will be available to only those who are authorized and required to hold that information, and that officers of URICA and its affiliates must read and submit signed acknowledgements that they understand and will comply with the compliance plan and the Fair, Efficient and Open Competition Regulation; 13 and (d) an information confidentiality policy that states that URICA is committed to keeping client information private and confidential, and that URICA identifies the confidentiality of client information as the backbone of its business model to maintain impartial treatment of each URICA client. 14 Commission findings 23. In determining whether the records shared will not be used for any purpose that does not support the fair, efficient and openly competitive operation of the electricity market, the Commission has considered the following: (a) URICA s formal program for internal compliance to manage the price and quantity offers associated with UOC1 and URICA s commitment to comply with all provisions and requirements of the Fair, Efficient and Open Competition Regulation; (b) the functional segregation of duties at URICA between long term strategy and real time operational management; (c) the controls over client confidentiality at URICA and the assurances from URICA that there will be impartial and confidential treatment of each client; (d) the size of UOC1 as well as the degree of offer control that the U of C and URICA have in the Alberta energy and operating reserve markets; and (e) the representations from the U of C and URICA that the records in respect of UOC1 to be preferentially shared will not be used for any purpose that does not support the fair, efficient and openly competitive operation of the market, and that the Fair, Efficient and Open Competition Regulation will be complied with. 24. The Commission accepts and will rely on the representations of URICA regarding its program and existing plans for internal compliance to manage confidential information contemplated by the Fair, Efficient and Open Competition Regulation as sufficient assurances that no confidential information will be shared between the U of C and URICA for the purposes of price-fixing, price-manipulation or any other conduct proscribed by the Fair, Efficient and Open Competition Regulation. The Commission is further satisfied that the current arrangements should prevent the parties from tacitly colluding by revealing any non-public information to each other that may give them an unfair advantage in the market Exhibit 4.00, URICA preferential sharing of records letter registered November 5, 2014, page 1. Ibid. Exhibit 2.00, Preferential Sharing of Records Application registered November 5, 2014, page 2. AUC Decision (December 19, 2014) 5

10 25. Based on the statements and representations of the parties, the Commission finds that the U of C has established that the records to be shared preferentially are not likely to be used for any purpose that does not support the fair, efficient and openly competitive operation of the Alberta electricity market, including the conduct referred to in Section 2 of the Fair, Efficient and Open Competition Regulation. 3.2 Reasonably necessary 26. The U of C provided a representation from a senior officer that the sharing of records to be shared preferentially described in the application is reasonably necessary for URICA to assist the U of C in managing UOC The U of C advised that URICA has the required resources and expertise to assist the U of C in marketing the capacity of UOC1 into the AESO s energy and operating reserves markets. The U of C also indicated that in order for URICA to perform these services on its behalf, the U of C would need to provide information pertaining to the energy price and quantity offers of UOC1 to URICA, adding that URICA would be prohibited from changing any of these offers. 16 Commission findings 28. The Commission accepts the statements of the U of C regarding the nature of the U of C records that will be shared and the purpose in sharing the records. The Commission accepts and will rely on the representation provided by a senior officer of the U of C that the proposed sharing of information is reasonably necessary for the U of C to carry out its business. 29. For the above reasons, the Commission finds that the U of C has established that the sharing of the records as described in the U of C application is reasonably necessary for the U of C to carry out its business. 3.3 Terms and conditions 30. Section 3(3) of the Fair, Efficient and Open Competition Regulation authorizes the Commission to issue an order permitting the sharing of records on any terms and conditions that the Commission considers appropriate. 31. The U of C submitted that the term of the request is from November 1, 2014 to October 31, 2017, which is in alignment with the term of U of C s agreement with URICA Accordingly, the Commission permits the U of C to share records referred to in Section 3(1) of the Fair, Efficient and Open Competition Regulation with URICA from the date of this decision until the earlier of October 31, 2017 or the termination of the commercial agreement, subject to the following terms and conditions: (a) the order only applies to the University of Calgary for the 12 megawatt natural gas-fired cogeneration unit, UOC1; (b) the order only applies to the sharing of information between the University of Calgary and URICA Energy Real Time Ltd. relating to price, quantity, and availability Exhibit 3.00, University of Calgary preferential sharing of records letter registered November 5, 2014, page 1. Exhibit 2.00, Preferential Sharing of Records Application registered November 5, 2014, page 2. Ibid, page 1. 6 AUC Decision (December 19, 2014)

11 information for UOC1 with respect to offers in the Alberta electricity and ancillary services markets; (c) the University of Calgary must notify the Commission of the termination of the commercial arrangements between the University of Calgary and URICA Energy Real Time Ltd.; and (d) the University of Calgary must notify the Commission of any material changes to the information contained within its application that may effect the compliance of the University of Calgary or URICA Energy Real Time Ltd. with the Fair, Efficient and Open Competition Regulation. AUC Decision (December 19, 2014) 7

12 4 Order 33. It is hereby ordered that, pursuant to the provisions of Section 3 of the Fair, Efficient and Open Competition Regulation, the University of Calgary be permitted to share records referred to in Section 3(1) of the Fair, Efficient and Open Competition Regulation with URICA Energy Real Time Ltd. from the date of this decision until the earlier of October 31, 2017 or the termination of the commercial agreement between the University of Calgary and URICA Energy Real Time Ltd., subject to the following terms and conditions: (a) the order only applies to the University of Calgary for the 12 megawatt natural gas-fired cogeneration unit, UOC1; (b) the order only applies to the sharing of information between the University of Calgary and URICA Energy Real Time Ltd. relating to price, quantity, and availability information for UOC1 with respect to offers in the Alberta electricity and ancillary services markets; (c) the University of Calgary must notify the Commission of the termination of the commercial arrangements between the University of Calgary and URICA Energy Real Time Ltd.; and (d) the University of Calgary must notify the Commission of any material changes to the information contained within its application that may effect the compliance of the University of Calgary or URICA Energy Real Time Ltd. with the Fair, Efficient and Open Competition Regulation. Dated on December 19, The Alberta Utilities Commission (original signed by) Tudor Beattie, QC Panel Chair (original signed by) Bill Lyttle Commission Member (original signed by) Henry van Egteren Commission Member 8 AUC Decision (December 19, 2014)

13 Appendix 1 Proceeding participants Name of organization (abbreviation) counsel or representative (U of C) Murray Sloan Bart Becker Alberta Utilities Commission Commission Panel Tudor Beattie, QC, Panel Chair Bill Lyttle, Commission Member Henry van Egteren, Commission Member Commission Staff John Petch, QC (Commission Counsel) Kenneth Wyllie (Research Analyst, Markets) AUC Decision (December 19, 2014) 9

14 Appendix 2 Abbreviations Abbreviation AESO AUC or the Commission MSA U of C UOC1 URICA Name in Full Alberta Electric System Operator Alberta Utilities Commission Market Surveillance Administrator University of Calgary U of C Generator a 12 megawatt cogeneration facility that is owned by the University of Calgary URICA Energy Real Time Ltd. 10 AUC Decision (December 19, 2014)