Category Archives: Utility Regulation

Board Cannot Ignore Injurious Affection Losses

By: Nigel Bankes

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Case Commented On: Koch v Altalink Management Ltd, 2016 ABQB 678 (CanLII)

This case involves WATL (the Western Alberta Transmission Line) and parcels of land owned by the Kochs that will be bisected by the line. The principal point of law involved relates to the injurious affection suffered by the lands retained by the Kochs (i.e. these are Koch lands which lie outside the area of the right of way acquired by Altalink). It is a standard principle of compensation law that such losses should be recoverable. However, in this case, Altalink, in an argument accepted by the majority of the Surface Rights Board panel hearing the case, took the position that the Kochs had bought the lands at a price that was already discounted from its original market value by the prospect of WATL being constructed. Accordingly, the Kochs had suffered no injurious affection losses and were therefore not entitled to any compensation under this head of damages. On this theory the party that had suffered the loss was the vendor to the Kochs and to compensate the Kochs for injurious affection would to award them a windfall. The minority would have awarded injurious affection damages of $125,780. The Kochs appealed. Continue reading →

Arbitrations Added to the PPA Soup

By: Nigel Bankes

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Case Commented On: TransCanada Energy Ltd v Balancing Pool, 2016 ABQB 658 (CanLII)

The power purchase arrangements (PPA) dispute in the Province continues to evolve along a number of different tracks. As noted in a previous post, the negotiation track seems to be producing some positive results with a number of tentative settlements announced. As a second track, ENMAX has its application to determine the effective date of termination of the Battle River PPA (this application is discussed at para 5 of the current decision). This application had been adjourned sine die but ENMAX has recently applied to have the application set down for a hearing. As a third track, the Province, through the Attorney General (AG), continues to maintain its judicial review application. The decision that is the subject of this post reveals a fourth track, that of arbitration actions commenced by some of the PPA buyers (although perhaps some of these arbitrations might be withdrawn under the terms of the tentative settlements referenced above). This decision of Chief Justice Neil Wittmann deals with whether or not the arbitrations were properly commenced (i.e. had a dispute crystallized?) and the interaction between the judicial and arbitral tracks. Continue reading →

The Regulatory Treatment of Stranded Assets in Alberta

By: Nigel Bankes

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Case Commented On: Fortis Alberta Inc v Alberta (Utilities Commission), 2015 ABCA 295

The Court of Appeal has now handed down its unanimous decision on the appeal of the Alberta Utilities Commission’s (AUC) decision known as the Utility Asset Disposition (UAD) Decision in which the AUC endeavoured to provide guidance to both electric and natural gas utilities as to the implications of the Supreme Court of Canada’s majority decision in Stores Block, ATCO Gas and Pipeline Ltd v Alberta (Energy and Utilities Board), 2006 SCC 4. I posted on the AUC’s decision here. The Court, in a reserved judgment written by Justice Myra Paperny (Justices Rowbotham and Watson concurring), declined to interfere with the AUC’s decision. In its judgment, the Court of Appeal emphasized that Stores Block and its progeny (see below) were still good law in Alberta. Furthermore, even though other jurisdictions had been able to distinguish Stores Block based upon the language of their utility statutes, or to confine it to its particular facts and circumstances, that was not possible in Alberta. Indeed, the jurisprudential record suggested (Fortis at para 74) that the Court of Appeal in Alberta had not taken a narrow and restrictive approach to Stores Block but had instead “applied the principles set out in that case more broadly”. As a result (Fortis at para 76):

The Commission, and this Court, are bound by Stores Block and the subsequent decisions from this Court. Only legislative amendment, reconsideration, or a reversal of Stores Block by the Supreme Court of Canada can change that.

For ease of reference the Stores Block progeny are as follows: ATCO Gas & Pipelines Ltd v Alberta (Energy & Utilities Board), 2008 ABCA 200 (CanLII), 433 AR 183 (Carbon), ATCO Gas & Pipelines Ltd v Alberta (Energy & Utilities Board), 2009 ABCA 171 (CanLII), 454 AR 176 (Harvest Hills), ATCO Gas & Pipelines Ltd v Alberta (Utilities Commission), 2009 ABCA 246 (CanLII), 464 AR 275 (Salt Caverns I), ATCO Gas & Pipelines Ltd v Alberta (Utilities Commission), 2014 ABCA 28 (CanLII), 566 AR 323 (Salt Caverns II).

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Methodological Pluralism: Canadian Utility Law Does Not Prescribe any Particular Prudent Expenditure or Prudent Investment Test that a Regulator Must Apply

By: Nigel Bankes

PDF Version: Methodological Pluralism: Canadian Utility Law Does Not Prescribe any Particular Prudent Expenditure or Prudent Investment Test that a Regulator Must Apply

Case Commented On: Ontario (Energy Board) v Ontario Power Generation Inc., 2015 SCC 44, (OPG) and ATCO Gas and Pipelines Ltd v Alberta (Utilities Commission), 2015 SCC 45 (ATCO)

The last two weeks of September 2015 saw the release of three important court decisions dealing with utility regulation, two from the Supreme Court of Canada, the OPG case and the ATCO case, and one from Alberta’s Court of Appeal, the Utility Asset Disposition case (UAD): Fortis Alberta Inc v Alberta (Utilities Commission), 2015 ABCA 295. The two Supreme Court cases (which were heard together) deal with a utility’s opportunity to recover operating costs and the application of prudency tests to those costs. Justice Rothstein is the principal author of both judgments. The ATCO case is unanimous while Justice Abella offers a dissent in the OPG Case. The UAD case deals with what I have previously referred to as the continuing fall-out from the majority decision of the Supreme Court in Stores Block (ATCO Gas and Pipelines Ltd. v Alberta (Energy and Utilities Board), 2006 SCC 4, [2006] 1 S.C.R. 140).

This post summarizes the holdings in the ATCO and OPG decisions and then offers some preliminary comments on their implications. The post begins with some general observations on utility regulation statutes. I will aim to do a separate post on the UAD case.

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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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