The province's Market Surveillance Administrator alleges that TransAlta Corp. (TSX:TA) shut down power plants in 2010 and 2011 during periods when demand for electricity was high.
It's alleged the shutdowns led to consumers paying too much for electricity — a total of up to $16 million.
TransAlta denies the claim.
Rob Spragins, the province's utilities consumer advocate, applied for standing at Alberta Utilities Commission hearings in December into the allegations, but the request was turned down this month.
In his submission, Spragins argued that without the advocate's input, the hearing would not be perceived as fair and open and his office would not be able to provide important evidence.
The commission ruled the Market Surveillance Administrator has the burden and sole responsibility of proving the allegations of misconduct. It suggested it may allow the advocate to have a say later.
It said the hearings will have a technical phase to determine if TransAlta engaged in uncompetitive conduct. If the company were found guilty, a second phase would consider what would be an appropriate penalty.
Spragins said he isn't concerned about being left out of the first phase as long as he can make submissions if there is a second phase.
"What that says to me is that they have left the door open for us to participate in what would be the second part of the proceeding. That is one of the things that we are trying to clarify now," he said.
"Certainly in the second part, that is where we have a great interest in terms of being able to submit evidence about what the appropriate penalty should be if that is what the commission finds."
The advocate represents about 780,000 residential, farm and small business consumers in the province who buy electricity under regulated rates. The Alberta government created the office in 2003 to represent the interests of electricity and natural gas consumers.
The advocate's mandate is to ensure that consumers have the information and protection they need to make informed choices in the province's deregulated electricity and natural gas markets.
Spragins was appointed to his job by the government in November 2011 after working nine years with the Market Surveillance Administrator.
He said the advocate's office supports the administrator's application and wants a remedy to deter anti-competitive conduct. He suggested that should include refunds to consumers if the allegation is proven.
"This is a very serious allegation and I would say that this is probably certainly the most serious thing that the Market Surveillance Administrator has brought forward to date," he said.
"I would hope that consumers don't lose faith in the market because of this particular situation."
TransAlta has said it has done nothing wrong and added it is looking forward to having its side of the dispute heard at the commission hearings.
The Calgary-based corporation says it is committed to Alberta's competitive electricity market and wants fair, clear and consistent rules for all companies.
"In terms of the market harm that they allege, we disagree with what they have alleged in their complaint," said Stacey Hatcher, a TransAlta spokeswoman.
The Alberta Utilities Commission says it has the power to deal with misconduct in energy markets and can impose substantial financial penalties.
In its ruling dismissing the advocate's application to take part in the hearing, the commission tries to reassure the public.
"The commission wishes to assure the utilities consumer advocate and all interested persons that Proceeding No. 3110 will be conducted in a fair, open and transparent manner in accordance with the commission's governing legislation."