Category Archives: Energy

The AER and the Values of Efficiency, Flexibility, Transparency and Participation: Best in Class?

By: Nigel Bankes

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Matter Commented On: AER Bulletin, 2015-05 and an amendment to the Oil and Gas Conservation Rules creating the concept of a “Subsurface Order”

On February 10, 2015 the Alberta Energy Regulator (AER) issued Bulletin 2015-05 announcing a change to the Oil and Gas Conservation Rules. This change authorizes the AER to issue something called a Subsurface Order:

11.104 Notwithstanding sections 3.050, 3.051, 3.060, 4.021, 4.030, 4.040, 7.025, 10.060, 11.010, 11.102 and 11.145, if the Regulator is satisfied that it is appropriate to do so, the Regulator may, on its own motion, issue a subsurface order that

(a) designates a zone in a specific geographic area, and

(b) prescribes requirements pertaining to spacing, target areas, multi-zone wells, allowables, production rates and other subsurface matters within that zone,

in which case if there is a conflict or inconsistency between the subsurface order and any of the sections referred to above, the subsurface order prevails to the extent of the conflict or inconsistency.

The Bulletin provides additional guidance as to how the AER will use this significant new power – which evidently allows it to suspend and vary the default rules relating to important issues such as spacing, target areas, allowables and production rates over broad geographic areas. The amendment likely has something to do with the AER’s experimentation with the play-based approach (see post welcoming that development here). The Bulletin does not specifically mention that initiative although it does indicate that the change is particularly directed at tight oil and gas resources.

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Providing an Effective Remedy for the ISO’s Unlawful Line Loss Rule

By: Nigel Bankes

PDF Version: Providing an Effective Remedy for the ISO’s Unlawful Line Loss Rule

Decision Commented On: AUC Decision 790-D02-2015, Milner Power Inc. and ATCO Power Ltd, Complaints re the ISO Transmission Loss Factor Rule and Loss Factor Methodology, Phase 2 Module A, January 20, 2015

In this decision the Alberta Utilities Commission (AUC) has decided that it has the jurisdiction to grant tariff-based relief in a case where a rule of the Independent System Operator (ISO) is found to be unlawful on the basis that it was unjust, unreasonable, unduly preferential, arbitrarily and unjustly discriminatory and inconsistent with various provisions of the Electric Utilities Act (EUA) (now SA 2003, c. E-5.1) and the Transmission Regulation (now Alta Reg 86/2007). Such relief may involve retrospective or retroactive adjustments to the ISO tariff going back to the date when the Rule first entered into force (January 1, 2006, Milner Power having originally filed its objection to the ISO Line Loss Rule in August 2005 before the rule came into force).

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How much discretion does a regulator have to limit the recovery of a utility’s legal costs?

By: Nigel Bankes

PDF Version: How much discretion does a regulator have to limit the recovery of a utility’s legal costs?

Case Commented On: ATCO Gas and Pipelines Ltd v Alberta (Utilities Commission), 2014 ABCA 397

In this case the Court of Appeal confirmed that the Alberta Utilities Commission (AUC) has some level of discretion as to the extent to which it allows a regulated utility to recover its prudently incurred legal costs from its customers when that utility participates in hearings called by the AUC to consider generic issues of interest to all regulated utilities and their customers and shareholders. One member of the Court (Justice Peter Martin) thought that the Commission went too far in denying recovery in relation to one set of costs and would have sent that matter back to the Commission.

The decision is interesting because it involves the intersection between an adjudicator’s discretion to allow for the recovery of legal costs and the general principle that a utility ought to have the opportunity to recover all of its prudently incurred operating costs (including the legal costs associated with rate setting) through the tariff approved by the regulator. A decision that recognizes that a utility has prudently incurred certain costs but which then denies the utility even the opportunity to recover those costs will generally be unsupportable: BC Electric Railway Company v Public Utilities Commission, [1960] SCR 837. In this case however there were special considerations and thus while the majority found the Commission’s decision both reasonable and correct, the decision is not likely of broad application – a point that Chief Justice Fraser herself seems to acknowledge at paras 70 – 73. In particular, and notwithstanding other and rather more sweeping statements from the Chief Justice (see, for example para 106, quoted below, and paras 110 – 111), it is not likely that the decision can be applied in the more routine situation in which a utility incurs legal costs as part of preparing and presenting its general rate application (GRA) to the AUC for it to set just and reasonable rates. The AUC may still scrutinize those legal costs on prudence grounds (and see here in particular Justice Martin at para 171) to ensure that the utility is not gold-plating its costs (e.g. where it chooses to retain expensive outside counsel to undertake a task that could be more economically dealt with in-house) but it likely cannot say (even on a reasonableness standard of review) that the legal costs associated with preparing and presenting a GRA are not recoverable.

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A Revised Aboriginal Consultation Direction issued to the Alberta Energy Regulator

By: Giorilyn Bruno and Nigel Bankes

PDF Version: A Revised Aboriginal Consultation Direction issued to the Alberta Energy Regulator

Direction and Decision Commented On: Energy Ministerial Order 105/2014 /  Environment and Sustainable Resource Development Ministerial Order 53/2014; Prosper Petroleum Ltd., 2014 ABAER 013

On October 31, 2014, the Minister of Energy and the Minister of Environment and Sustainable Resource Development (ESRD) by Order issued a revised Aboriginal Consultation Direction to the Alberta Energy Regulator (AER). The main purpose of this Direction is “to ensure that the AER considers and makes decisions in respect of energy applications in a manner that is consistent with the work of the Government of Alberta” in meeting its consultation obligations associated with the existing rights of Aboriginal people (Direction at 2). This is the second Ministerial Order issued under s. 67 of the Responsible Energy Development Act, SA 2012, c R-17.3 (REDA) and it repeals the previous one. In April we posted a blog commenting on the first Order (available here). This post provides an overview of the changes introduced by the new Direction, comments on its scope, and identifies some of the issues that have yet to be addressed.

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Alberta Utilities Commission Approves the Proposed Sale of AltaLink’s Transmission Assets to the Berkshire Hathaway Group

By: Nigel Bankes

PDF Version: Alberta Utilities Commission Approves the Proposed Sale of AltaLink’s Transmission Assets to the Berkshire Hathaway Group

Decision Commented On: AUC Decision 2014-326, AltaLink Investment Management Ltd. and SNC Lavalin Transmission Ltd et al, November 28, 2014

AltaLink owns significant transmission assets in Alberta. AltaLink in turn is owned by SNC Lavalin. SNC Lavalin wanted to divest itself of these assets and found a wiling purchaser in the form of the US based Berkshire Hathaway Group. The transaction however requires the approval of federal foreign investment and competition authorities (already in place) and of the Alberta Utilities Commission (AUC).

The AUC ‘s approval is required under the terms of s.102 of the Public Utilities Act, RSA 2000, c. P-45 (PUA) which provides as follows:

Unless authorized to do so by an order of the Commission, the owner of a public utility designated under section 101(1) shall not sell or make or permit to be made on its books a transfer of any share of its capital stock to a corporation, however incorporated, if the sale or transfer, in itself or in connection with previous sales or transfers, would result in the vesting in that corporation of more than 50% of the outstanding capital stock of the owner of the public utility.

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