A slip of the hand in a computer spreadsheet for bidding on electricity transmission contracts in New York will cost TransAlta Corp. $24-million (U.S.), wiping out 10 per cent of the company's profit this year.
The error, although costly, was bizarrely simple. Someone preparing the electronic file of bids that TransAlta submitted at the end of April misaligned the rows of information in the spreadsheet. High bids intended for certain transmission paths were instead made for lower-demand routes -- meaning that TransAlta overpaid for transmission contracts, as well as buying more capacity than it intended in certain cases.
"It was literally a cut-and-paste error in an Excel spreadsheet that we did not detect when we did our final sorting and ranking of bids prior to submission," said Steve Snyder, TransAlta's president.
TransAlta has known about the error for more than a month, but said it could not discuss the problem before now because such a revelation would have harmed its competitive situation.
The problem was first identified on April 25, when the sealed bids for May contracts in the New York power market were opened, and the winning offers assessed. TransAlta was shocked to learn that it had won a slew of contracts it did not need, at prices it had not intended to pay.
But under the rules of the New York Independent System Operator, bids cannot be changed after they are submitted, even in the event of human blunder.
The company said in a call with analysts and the press yesterday that the mistaken bids were an "isolated error" and that it had already conducted an internal review, as well as calling in an outside party to make its own assessment.
The company acknowledged that a "small speculative position" accounted for some of the contracts for which it overpaid.
Mr. Snyder said TransAlta plans to continue to bid for transmission congestion contracts, but said the practice might be ended.
The pretax charge, equal to 11 cents (Canadian) a share, will be taken in the second quarter, which ends June 30. Before the charge was announced, analysts expected the company to report a second-quarter profit of 18 cents a share, and an annual profit of $1.11 a share, according to Thomson Financial/First Call.
TransAlta said it will work actively to make up for the $24-million (U.S.) loss in the remainder of the year, but will not take short-term actions that will imperil growth prospects in 2004.
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