Notice Re: Court of Queen's Bench Proceedings MSA v. ENMAX

January 25, 2008

NOTICE TO: MARKET PARTICIPANTS

Re: Court of Queen’s Bench Proceedings

Market Surveillance Administrator v. ENMAX Energy Corporation and ENMAX Energy Marketing Inc.

The Alberta Court of Queen’s Bench has now issued a second ruling in the proceedings between the Market Surveillance Administrator (“MSA”) and the ENMAX parties, 2008 ABQB 54. In the view of the MSA it is another important decision, and one which will assist market participants in understanding the latitude that the MSA has for its inquiries during an investigation and the cooperation expected of market participants.

The latest ruling relates to a Court application brought by the MSA to compel answers to questions posed and refused during interviews of certain employees of the ENMAX parties in relation to an ongoing MSA investigation. The other party, referred to as “G.H.I.” in order to maintain privacy during the proceedings, is a witness who is no longer employed by the ENMAX parties but who was an employee during the relevant time.

In a decision filed January 24, 2008, the Honourable Mr. Justice A.D. Macleod directed that answers be given to all of the questions objected to, and that the MSA can therefore re-interview the witnesses to ask its original questions and follow up questions. Further, in making public the Reasons for Judgment and filed Court documents, Mr. Justice Macleod upheld the right of the public to have access to the Court proceeding, something which the ENMAX parties had objected to.

The decision noted the broad mandate of the MSA and that it will necessarily possess considerable expertise in carrying out its functions. Following from that reasoning, Mr. Justice Macleod held that once the Court is satisfied that there are reasonable and probable grounds to believe that access to the employees is necessary for the MSA to carry out its investigation, the Court then only need be satisfied that the questions are reasonable in the context of that investigation. The Court held that the threshold test was satisfied here and ordered all questions to be answered.

Mr. Justice Macleod went on to deal with the appropriateness of allowing public access to the proceedings.

The January 24, 2008 decision follows upon a related decision which was issued July 5, 2007, also by the Honourable Mr. Justice A.D. Macleod. That decision affirmed the right of the MSA to engage the Court process in support of efforts by the MSA to compel answers to reasonable inquiries. Further, the Court confirmed that the process would be known to the public, and would not remain confidential. The ENMAX parties had taken opposing views on those matters.

The full text of each decision is available to be reviewed on the MSA website - see Notice: Court of Queen's Bench Proceeding (July) www.albertamsa.ca/667.html and Reasons for Judgment January 24, 2008 and can also be found on the Alberta Courts website http://www.albertacourts.ab.ca/go.aspx?tabid=1 .

Background

The MSA was established under the Alberta Electric Utilities Act, and currently receives its mandate under the Alberta Utilities Commission Act.

The MSA has a broad mandate, including monitoring the conduct of market participants and electricity exchanges on the tie lines connecting the interconnected electric system in Alberta with electric systems outside Alberta.

During 2005, through written communications as well as direct discussions, the MSA spoke to the issue of using imports or exports to manipulate price in the Alberta market beyond a range which would result from competitive outcomes. In the view of the MSA such conduct would constitute a breach of s. 6 of the Alberta Electric Utilities Act (“Act”).

On September 28, 2005, the MSA observed certain importing behaviour involving ENMAX Energy Corporation and ENMAX Energy Marketing Inc. (“ENMAX”) which raised concerns for the MSA in relation to the legislated standard and MSA guidance. As a result, the MSA launched an investigation into the conduct.

As part of its investigation the MSA interviewed a number of ENMAX employees. During the course of the interviews, the employees were advised not to answer a number of questions by the legal counsel for ENMAX. In response, on February 15, 2007 the MSA applied to the Court of Queen’s Bench for an order compelling the employees of ENMAX to answer the questions.

In the initial Court proceedings in February and March, 2007 ENMAX contested the ability of the MSA to seek the Court’s assistance in the matter. ENMAX brought a cross application and asserted that the Act did not allow the MSA to ask the Court to compel answers. ENMAX also sought to have the Court proceedings remain confidential, notwithstanding the longstanding principle that judicial proceedings should be open to the public. The appropriateness of the questions sought by the MSA to be answered was an issue left for a subsequent Court proceeding.

Those initial proceedings led to the decision of Mr. Justice Macleod issued July 5, 2007, referenced above, which resolved in favour of the MSA’s right to engage the Court process in furtherance of its inquiries and the right of the public to be aware of the proceedings. The Court then scheduled a hearing to deal with the questions for which anwers were refused. Those subsequent proceedings, which occurred in September and October, 2007, are the subject of the decision of Mr. Justice Macleod filed January 24, 2008, also referenced above.

It is appropriate to highlight parts of the decision here.

Mr. Justice Macleod held that, based upon the evidence before him, he had little trouble in concluding that there were reasonable and probable grounds to believe that access to ENMAX’s premises and employees is necessary for the MSA to carry out the investigation. Having determined that, it is unnecessary to determine whether each question posed to the employees is itself necessary. The Court need only ask whether the inquiry is reasonable within the meaning of s. 55(1) of the Act, which set out the right of the MSA to make reasonable inquiries and the obligation of employees to co-operate reasonably with the MSA. Accordingly, the decision ordered that all of the MSA’s questions should be answered.

Mr. Justice Macleod also set out his view that “the public interest is not served by an order which would shield any future proceedings in this matter from public scrutiny. These issues are of public importance, and not only does the public have the right to know about these issues, public access to court proceedings serves a very useful function”.

The decision went on to state that “the utility of allowing public access to this proceeding far outweighs any possibility of disclosing what might otherwise be confidential but for these proceedings. Indeed, I heard nothing in the course of argument which would cause me any significant concern if it were made public. Furthermore, I think the public is entitled to scrutinize the debates between the MSA and ENMAX as to whether or not the extent of this investigation is in the public interest and as to whether the respondents have had the benefit of due process. Accordingly, these reasons will be made public along with the filed documents”.

Next Steps

In accordance with the January 24, 2008 Court decision, the MSA is seeking to schedule interviews of the relevant witnesses at the earliest possible moment, toward completing the investigation. The MSA will provide further information about the investigation and any subsequent Court proceedings as appropriate, in accordance with its mandate.

Again, while it is unfortunate that the investigation has suffered significant delays, the MSA is very pleased with the decisions rendered by the Court. The decisions will help the MSA to carry out its mandate, and should also help guide the actions of market participants, such that investigations will generally be able to proceed in a more direct and efficient fashion. It is the preference of the MSA to resolve procedural and other such matters through dialogue with the relevant parties, but the MSA will engage the judicial process where necessary. At the end of the day, the MSA will do what is required to effectively carry out its mandate on behalf of all Albertans.

Please feel free to contact us with questions about the matters discussed in this notice.

Yours truly,

“Original signed”

W.W. (Wayne) Silk
Vice-President, Chief Operating Officer

Created: 1/25/2008