Investigators with the Alberta Public Utilities Commission are asking the regulator to investigate what they say is illegal behavior by one of the province’s largest and most prominent local businesses.
They allege that ATCO Electric deliberately overpaid a British Columbia First Nation by millions for work on a new transmission line in order to secure lucrative contracts that provide construction camps for the Trans Mountain Expansion pipeline project.
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ATCO then tried to pass that overpayment to Alberta consumers, says a public document from the commission’s enforcement branch on its website.
The document also alleges that the company’s management knew the deal was questionable and tried to cover its tracks.
“ATCO Electric has violated (its) fundamental duty of honesty and openness with its regulator, the duty on which the entire regulatory system is based to function efficiently and effectively,” says the document filed on November 29.
Company president Melanie Bayley says ATCO, a $ 22 billion global company based in Calgary with recognized expertise in power transmission and logistics, went astray.
“There is no question that there were mistakes here,” he told The Canadian Press on Tuesday.
But he said the problem has its roots in an attempt to build capacity among the Simpcw First Nation in Barriere, BC.
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The document says the commission’s investigation focused on information provided by a company whistleblower about transactions between Simpcw and two ATCO subsidiaries. It says ATCO Electric signed a contract with a company controlled by Simpcw to work on a transmission line the company was building in Jasper, Alta., In 2018.
Investigators say the value of that single-source no-bid contract was at least 30 percent higher than its market value, adding more than $ 12 million to its cost. That amount was later added to ATCO’s request for an increase in the rates it charges consumers, the document says.
Simpcw took the money and outsourced the work, as the document ATCO suspected it would do says.
Commission investigators allege in the document that ATCO Electric issued the overpriced contract because it believed it would be crucial to a deal for another ATCO subsidiary, ATCO Structures and Logistics. That company had signed a joint venture with Simpcw and helps run three camps for the TMX project in traditional Simpcw territory, a contract that the document says is worth up to $ 100 million.
“To give effect to the joint venture agreement and ensure financial benefits for (ATCO Structures and Logistics) … ATCO Electric exclusively acquired the mat services for the Jasper interconnection project,” the document says.
“ATCO Electric admits that Simpcw ‘threatened to withdraw from the (Joint Venture Agreement) if ATCO Electric did not award them the contract.’ This, in turn, would result in (ATCO) losing the camp contracts for the Trans Mountain Pipeline expansion project. “
Investigators continue in the document to allege that ATCO’s senior staff knew the contract violated the company’s own code of conduct and provincial law, which prohibits regulated companies from making large deals with a single supplier. Investigators allege that the discussions reached up to the top levels of management at ATCO Electric.
However, ATCO Electric issued the contract to Simpcw under another process that did not require competitive bids, the document says. Investigators say the move was explained in an email to senior management that is not subject to disclosure requirements.
“This approach was deliberately taken … in the belief that this strategy would reduce the risk that the (Commission) might uncover the full facts in regulatory proceedings,” the document says.
The document says that Simpcw was of the opinion that the joint venture agreement between ATCO Structures and Logistics obligated all ATCO subsidiaries to offer Simpcw the exclusive right to provide contracts related to electricity transmission and distribution services.
Law enforcement personnel do not allege that Simpcw or its related entities have engaged in wrongdoing with respect to this matter.
A request for comment from the band’s director and administrator was not responded to.
The company said in a press release that the reasons for its “errors are complex, occurred over a period of five years and are not solely attributable to a single person or team.”
In the interview, Bayley defended the Simpcw contract price premium as a way to help the First Nation build capacity in a new area of business.
“There was a payment that was higher than market rates, but it is important that we understand the context in which companies like ATCO engage with First Nations contractors,” he said.
However, he characterized the decision to pass that cost on to consumers as one of the company’s mistakes.
Bayley said ATCO has completed an internal investigation. And the company has proposed a number of solutions, including eliminating nearly $ 11 million from its request for a rate increase. ATCO is also tightening its First Nations recruitment procedures.
All parties must act carefully as businesses, First Nations and regulators determine how indigenous communities can participate in economic opportunities on their lands, Bayley said.
“There is a balance to be struck here around the obligation of reconciling companies to support indigenous communities. That requires going the extra mile.
“But perhaps the lesson is in how that obligation gets into regulators’ rules.”
Commission spokesman Geoff Scotton said the agency will consider what to do with the investigation’s findings.
“A commission panel will review the application and decide what the next steps in the process will be,” he said. “They can look for information from elsewhere.”
Investigators are asking ATCO to refund money it received from rate increases due to the contract overpricing and other penalties. Those penalties can be as high as $ 1 million per day per violation.
© 2021 The Canadian Press
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