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    Court of Appeal of Alberta decision: WCSB Power Alberta Limited Partnership v Alberta Utilities Commission, 2022 ABCA 177.


    May 23, 2022 - Financial Law Reporter

     

      Edmonton: Court of Appeal of Alberta has issued the following decision on (2022-05-12):

      In the Court of Appeal of Alberta

      Citation: WCSB Power Alberta Limited Partnership v Alberta Utilities Commission, 2022 ABCA 177

      Date: 20220512

      Docket: 2101-0186AC;

      2101-0187AC;

      2101-0277AC

      Registry: Calgary

      #2101-0186AC

      Between:

      WCSB Power Alberta Limited Partnership

      Applicant

      - and -

      Alberta Utilities Commission, Alberta Direct Connect Consumers Association, Alberta Electric System Operator, Alberta Federation of Rural Electrification Associations, AltaLink Management Ltd., ATCO Electric Ltd., Aura Power Renewables Ltd., Bluearth Renewables Inc., Canadian Natural Resources Limited, Canadian Solar Solution Inc., Capstone Infrastructure Corporation, Community Generation Working Group, Capital Power Corporation, Consumers' Coalition of Alberta, DCG Consortium, Desiderata Energy Consulting Inc., Dual Use Customers, Elemental Energy Renewable Inc., ENMAX Power Corporation, EPCOR Distribution & Transmission Inc., EQUS Rural Electrification Association Ltd., FortisAlberta Inc., Industrial Power Consumer Association of Alberta, Irricana Power Generation, Kalina Distributed Power, Lakeland Rural Electrification Association Limited, Lionstooth Energy, Michichi Solar GP Inc., Nat-1 GP Inc., Northstone Power Corporation, Office of the Utilities Consumer Advocate, Siemens Energy Canada Limited, Switch Power Corporation, Taber Solar 1 Inc. and Taber Solar 2 Inc., Tourmaline Oil Corp., Transalta Corporation, and Urica Asset Optimization

      Respondents

      #2101-0187AC

      And Between:

      Kalina Distributed Power Limited, Lionstooth Energy Inc.,

      Signalta Resources Limited, and Campus Energy Partners

      Applicants

      - and -

      Alberta Utilities Commission, FortisAlberta Inc., ATCO Electric Ltd.,

      and ENMAX Power Corporation

      Respondents

      #2101-0277AC

      And Between:

      Kalina Distributed Power Limited, Lionstooth Energy Inc.,

      Signalta Resources Limited, and Campus Energy Partners LP

      Applicants

      - and -

      Alberta Utilities Commission, FortisAlberta Inc., ATCO Electric Ltd.,

      ENMAX Power Corporation, and Alberta Electric System Operator

      Respondents

      _______________________________________________________

      Reasons for Decision of

      The Honourable Justice Jack Watson

      _______________________________________________________

      Applications for Permission to Appeal

      _______________________________________________________

      Reasons for Decision of

      The Honourable Justice Jack Watson

      _______________________________________________________

      I. Introduction

      [1] There are three related applications for permission to appeal before me under section 29 of the Alberta Utilities Commission Act, SA 2007, c A-37.2 ("AUCA"). Two applications arise from the decision of the Alberta Utilities Commission (AUC) dated June 7, 2021, entitled "Distribution-Connected Generation Credit Module for Fortis's 2022 Phase II Distribution Tariff Application", being AUC Decision 26090-D01-2021 ("Decision 26090"). The third application arises from a further AUC decision dated October 14, 2021, entitled "Applications for Review of Decision 26090-D01-2021 Distribution-Connected Generation Credit Module for Fortis's 2022 Phase II Distribution Tariff Application" being AUC Decision 26660-D02-2021 ("Decision 26660").

      [2] The context of the applications is Alberta's architecture of (a) utilities that generate electricity, (b) utilities that transmit electricity to distribution systems, and (c) distribution systems that provide the electricity to end users. Some utilities that generate electricity are called "distribution connected generators" (DCGs) because they are connected to the distribution systems but not in the same way as most other generators which use the transmission systems.

      [3] The Alberta Electric System Operator ("AESO") plays a crucial role in the transmission element of the architecture. It has significant statutory responsibility and authority of its own governing some 26,000 km of transmission lines over 660,000 square km in Alberta. The system has interties with British Columbia, Saskatchewan and Manitoba. Under the Transmission Regulation, Alta Reg 86/2007 and ss 16, 17 and 33 of the Electric Utilities Act, RSA 2000, c E 5.1 ("EUA") the AESO is to act in a "in a timely manner that is fair and responsible to provide for the safe, reliable and economic operation of the interconnected electric system and to promote a fair, efficient and openly competitive electricity market for electricity". As noted below, one applicant for permission impugns the approach taken by the AESO in carrying out its responsibility, and says the AUC erred in relying on the AESO policies and practices.

      [4] A principal function of the AUC is to determine tariffs under Division 2 of the EUA whereby distributors (amongst other utilities) may recover their prudent costs of operation, plus a reasonable return on their capital investment. Under s 121(2)(a) and (b) of the EUA, the AUC "must ensure that" (a) the "tariff is just and reasonable" and (b) the "tariff is not unduly preferential, arbitrarily or unjustly discriminatory or inconsistent with or in contravention of" the EUA, other enactments, or any law.

      [5] The broader context of that point is that different pieces of legislation forming part of a complex regulatory and service scheme should be read harmoniously so that they all work as intended: FortisAlberta Inc v Alberta (Utilities Commission), 2020 ABCA 271 at para 53, [2020] AJ No 769 (QL):

      53 No one disputes that different pieces of legislation forming part of a complex regulatory and service scheme should be read harmoniously so that they all work as intended. Here, the Rural Utilities Act, the Public Utilities Act, and the Electric Utilities Act together with the 3R Regulation should be read harmoniously not only internally but in relation to each other: compare Reference Re Broadcasting Regulatory Policy CRTC 2010-167 and Broadcasting Order CRTC 2010-168, 2012 SCC 68 at paras 11-39, [2012] 3 SCR 489; Levis (City) v. Fraternite des policiers de Levis Inc., 2007 SCC 14 at para 47, [2007] 1 SCR 591; Pointe-Claire (City) v. Quebec (Labour Court), 1997 CanLII 390 (SCC), [1997] 1 SCR 1015 at para 61; compare also United States Forest Service v Cowpasture River Preservation Association, 590 US (2020). Fortis cites Canadian National Railway v Canada (Attorney General), 2014 SCC 40 at para 36, [2014] 2 SCR 135."

      See also ATCO Gas & Pipelines Ltd v Alberta (Energy & Utilities Board), 2006 SCC 4 at para 49, [2006] 1 SCR 140.

      [6] It was given to me in argument and by the materials filed that Distribution Connected Generation Credits have been place as part of the distribution tariff for at least some of the electrical distribution utilities for some 20 years. DCG credits relate to amounts paid by those distribution utilities for the power supplied to them by the DCGs. DCG credits have been the focus of increased attention in various proceedings in recent years while DCG operations appear to have been increasing (according to Decision 26090).

      [7] Parenthetically I would observe that it is not difficult to enthuse over the possibility of increasing numbers of DCG operations providing both local power for communities and contributing to the larger grid. For example, on the website TheFutureEconomy.ca it was said to have been published, on May 13, 2021, that "Indigenous communities are already highly involved in the energy sector, owning over 197 energy projects producing over a MegaWatt of power each." A contributor to the website, Eryn Stewart also writes "Apart from Crown and private utilities, Indigenous communities and enterprises are the largest single asset owner of clean energy assets." The applicants also urged me to consider that the DCG credits contributed to development of systems for "green energy". Alberta may be uniquely positioned to progress in these ways.

      [8] But I must also remind myself that Alberta has expert specialist bodies, including the AUC and AESO, who are charged with the responsibility of present and future development. These bodies are not oblivious to the worldwide transition in the energy sector which is expected to enormously increase the need, the demand, and the usage, of electrical power in this province.

      [9] In the end, Decision 26090 essentially phases out DCG credits for reasons explained by the AUC which have regard, inter alia, to the practices and policies of the AESO: see below.

      [10] To further understand the system: there are Transmission Facility Owners, such as AltaLink Management Ltd ("AltaLink") and Distribution Facility Owners, such as FortisAlberta Inc ("Fortis") whose application for a "Distribution Tariff" was the initial platform in which Decision 26090 came to be made by the AUC. Other role players in the electrical system architecture are utilities such as ATCO Electric Ltd ("ATCO"), ENMAX Power Corporation ("ENMAX") and EPCOR Distribution and Transmission Inc ("EPCOR") which are both TFO and DFO actors.

      [11] DCG Credits were Option M of the Fortis tariff. During the hearing before me, it was suggested by ATCO that the hearing that led to Decision 26090 was understood to be not merely a module of a tariff approval application by Fortis under Division 2 of the EUA (notably under s 121 of the EUA) but that it also had elements of a more general policy proceeding under s 8(2) of the AUCA. The generality of the approach of the AUC was said to be signaled in various ways. One way was that ordinarily, under s 121(4) of the EUA, there is an onus on the proponent of a tariff to make it out: "The burden of proof to show that a tariff is just and reasonable is on the person seeking approval of the tariff." Nevertheless, the AUC in its Decision 26090 says:

      20. There is no applicant in this proceeding. Rather, the Commission determined that the issue of whether DCG credits should be maintained in Fortis's distribution tariff should be considered in a separate module of Fortis's Phase II application, and the scope of the proceeding was extended to include the distribution tariffs of ATCO Electric and ENMAX. In this proceeding, the Commission sought factual information and submissions on whether DCG credits should be maintained in the distribution tariff of a utility. The Commission's decision, therefore, will not turn on whether any particular party met the required onus or not, but rather whether the Commission is satisfied on all the evidence and argument that DCG credits should be maintained in the distribution tariffs of ATCO Electric, ENMAX and Fortis.

      This approach of generalization of the subject matter by the AUC, along with AUC's permission for, or introduction of, evidence and materials from other hearings by the AUC wherein DCG credits were considered was challenged before me by the applicants for permission whereas it was effectively endorsed by ATCO during the hearing before me.

      [12] In the end, I do not need to opine whether AUC can blend its role and capacities under s 8(2) and s 121 of the EUA in such a manner. As pointed out in Atco Gas & Pipelines, at para 74, citing one edition of Professor Sullivan's text:

      In practice, however, purposive analysis makes the powers conferred on administrative bodies almost infinitely elastic. Narrowly drawn powers can be understood to include "by necessary implication" all that is needed to enable the official or agency to achieve the purpose for which the power was granted. Conversely, broadly drawn powers are understood to include only what is rationally related to the purpose of the power. In this way the scope of the power expands or contracts as needed, in keeping with the purpose.

      [13] Accordingly, my decision herein should not be interpreted as saying anything about whether the harmonious reading of the AUC enabling legislation permits such a combined approach by an AUC panel. The applicants are not challenging this process itself on statutory construction or vires grounds. Their position is that the process as it unfolded was unfair to them as participants in it.

      II. Participants

      [14] The complexity of these proceedings makes it also useful at the outset to identify significant participants in the proceedings below. This description of participants of itself further manifests the extensive degree of interest in the subject matter of these applications.

      [15] One permission application as to Decision 26090 was made on Court File 2101-0187AC by Kalina Distributed Power Limited ("Kalina") and three other entities including Lionstooth Energy Inc ("Lionstooth"). This grouping is referred to herein as "KLSC". The named respondents to Kalina's motion were the AUC, Fortis, ATCO, ENMAX and the AESO. ATCO and the AESO made submissions on the application. Before me, the AUC, quite properly, largely took the role of being available to answer questions as well as filing limited written submissions: compare FortisAlberta, 2020 ABCA 271 at paras 72-73.

      [16] A related application for permission to appeal from Decision 26660 was made on Court File No 2101-0277AC by KLSC with the same respondents. Decision 26660 was based on what is called a 'Review and Variance' application by KLSC to the AUC under section 10 of the AUCA as well of another joint review application by BluEarth Renewables Inc and Elemental Energy Renewables Inc (jointly "BluEarth"). In Decision 26660, the AUC explained that under Section 5(1)(a) of its Rule 16 it could review its Decision 29060 for "an error of fact, or mixed fact and law where the legal principle is not readily extricable, which is material to the decision and exists on a balance of probabilities".

      [17] That KLSC 'R&V' application was said to have been opposed by AltaLink. The review application by BluEarth was supported by RWE Canada Ltd. and by the Canadian Renewable Energy Association. The BluEarth review application was said to have been opposed by the AESO, ATCO, the Consumers' Coalition of Alberta, TransAlta Corporation, and the Office of the Utilities Consumer Advocate. The BluEarth application is not relevant here.

      [18] As it happens, the first permission application in time in this Court was also against Decision 26090 on Court File 2101-0186AC by WCSB Power Alberta Limited Partnership ("WCSB"). That application was amended before the hearing and after the first KLSC application was filed. The respondents to that application as filed by WCSB include the AUC, ENMAX, ATCO, Fortis, and the AESO, but also include a large and comprehensive list of potentially interested parties such as consumer advocacy organizations and other participants in the electrical power systems of Alberta. Those respondents include the members of KLSC.

      [19] One such named respondent to the WCSB application is Urica Asset Optimization ("Urica"). Urica is singled out here because WCSB's position before me was that the views of Urica's counsel at the AUC hearing leading up to Decision 26090 were representative of WCSB's concerns. Urica is not an applicant before me seeking permission to appeal from Decision 26090. Another respondent to single out is AltaLink which filed and made submissions before me and took part in the proceedings leading to both Decisions 26090 and 26660. Most of the respondents on the WCSB application did not elect to make oral submissions before me as to the WCSB application.

      [20] The AESO, AltaLink, ATCO, Fortis, Kalina, Lionstooth and Urica as well as other respondents to the WCSB application (although not all of them) are listed as having taken part in the hearing leading to Decision 26090. Since the KLSC submissions are aimed in part at allegations about the composition of the AUC decider panels, it is also pertinent to note that the panel of the AUC as to Decision 26090 consisted of C. Dahl Rees, Chair, and D.A. Larder QC, Vice-Chair. The panel of the AUC as to Decision 26660 consisted of Kristi Sebalj, Chair, D.A. Larder QC, Vice-Chair and Cairns Price, Commission Member. The participation of Mr Larder, in both proceedings, figures in the KLSC submissions.

      [21] At the hearing before me, submissions were first made as to the WCSB application and then later as to the KLSC applications. Although that is the order in which submissions were made, my reasons below start with the KLSC applications.

      III. Legal Context of the Applications

      [22] The authority of a single judge of this Court under s 29 of the AUCA is to decide whether there are questions of law or jurisdiction upon which permission to appeal to the Court should be granted by the judge. Issues of fact, mixed fact and law, and policy, are not subject to appeal under s 29. In AltaLink Management Ltd v Alberta (Utilities Commission), 2022 ABCA 18, [2022] AJ No 70 (QL), Slatter JA wrote:

      13 The test for granting permission to appeal has been noted to engage various factors: Wood Buffalo (Regional Municipality) v Alberta (Energy and Utilities Board), 2007 ABCA 192 at para. 5, 80 Alta LR (4th) 229, 417 AR 222. Some of those frequently in play are:

      a. whether the question of law is of general importance, or only of interest to the immediate parties;

      b. whether the point raised is of significance to the action itself, or is merely interlocutory, or may not affect the ultimate outcome of the action;

      c. whether the appeal raises a serious, arguable point of law;

      d. in the case of ongoing proceedings, whether an appeal would unduly hinder the progress of the action.

      Which of those factors will be engaged in any particular application depends on the circumstances. The test frequently comes down to an overall consideration of whether there is an issue of law of sufficient importance to justify a further appeal. Sometimes the question is not so much whether the Commission was right or wrong, but whether the issues are sufficiently important that the Court of Appeal should say whether it was right or wrong. While it is not the role of the judge considering the application for permission to appeal to decide the merits, the issue should be more than merely theoretically arguable.

      14 A collateral issue is often the standard of review that will be applied by the Court. In this context, that may require an examination of exactly how Minister of Citizenship and Immigration v Vavilov, 2019 SCC 65 applies to regulatory appeals of this type. [Emphasis added]

      See also at ATCO Electric Ltd v. Alberta (Utilities Commission), 2022 ABCA 73 at para 20, [2022] AJ No 276 (QL) and FortisAlberta, at para 32

      [23] KLSC and WCSB submitted, and nobody seemed to dispute, that there are no ongoing proceedings which permission would afflict. On the other hand, the situation described by Slatter JA in his decision in AltaLink is revealing as to the existence of ongoing debates respecting the "customer contribution policy" of the AESO. The AUC decisions covered by the decision in AltaLink, as it happens, were roughly contemporaneous with the decisions here. The principal controversy in AltaLink concerned an AUC decision that "neither Distribution Facility Owners nor Transmission Facility Owners would be entitled to earn a capital return on future AESO Contributions" although those payments would be treated as "operating expenses": see paras 9-10 of AltaLink. Slatter JA granted permission to appeal on specific questions related to the AUC decision in that case.

      [24] A theme of the submissions of both WCSB and KLSC before me also related to policy considerations respecting whether the customer contributions exacted under the tariffs granted to the distribution utilities should continue to include the DCG credits because those credits are justified by the financial support thus given to the DCG operators. Before the AUC, KLSC contended, unsuccessfully in Decision 26090, that the evidence on balance supported a finding that the DCG operations were a net positive for consumers and the DCG credits helped to further that advantage. WCSB would expand that discussion by adding arguments that, having regard to the pressing need to reduce greenhouse gas emissions and generally to protect the environment, any cost to consumers from the DCGs' involvement should be considered to be acceptable as being just and reasonable entries to the tariffs under s 121(2) of the EUA even if they were not offset by other savings / benefits for consumers and in fact cost consumers more. There was a disagreement before about how much the "more" might be for consumers.

      [25] Applying Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65, 441 DLR (4th) 1, it is my view that findings of fact by the AUC would not only not be within the scope of permission for appeal under s 29 of the EUA as Slatter JA said, but they would in any event be reviewed for palpable and overriding error if a factual point arose to be considered relevant to a true question of law or jurisdiction.

      [26] The parties before me were not ad idem as to whether the grounds raised on the applications might be thought to raise questions of law or jurisdiction or issues of fact or mixed fact and law. More important, principal points raised by KLSC and WSCB concern procedural and adjudicative fairness and the principles of natural justice. Consequently, a variety of standards of review are engaged by the applications here.

      [27] As background to this point, I note that the distinction between exercises of discretion as to procedure and rulings as to admissibility of evidence were recently discussed in R v Samaniego, 2022 SCC 9, [2022] SCJ No 9 (QL) discussing, albeit in the criminal law context. There, the difference between 'case management' (characterized in the concurrence in Samaniego as "loosely defined and opaque") and evidentiary rulings which turn on fact-based application on specific rules of law was informative. The exercise of discretion would generally be given the deferential standard of review for abuse of discretion, but such exercises of discretion can be challengeable to the point of amounting to a question of law where the exercise of discretion cannot be reasonably grounded in the record said to support it. Ruling on admissibility of evidence would (subject to legislation, which is important here) generally involve extricable questions of law and be reviewed for correctness.

      [28] Compared to all of this, complaints about denial of procedural and adjudicative fairness and the principles of natural justice are different lines of inquiry from mill run judicial review as one is not reviewing a decision as much as one is evaluating the process leading to the decision. That said, fairness may be put into question as to rulings or exercises of discretion so those rulings or exercises of discretion will come under the magnifying lens: see eg Moreau-Berube v New-Brunswick (Judicial Council), 2002 SCC 11 at para 74; [2002] 1 SCR 249.

      IV. KLSC Applications

      [29] What follows is only an outline of KLSC's position without any determination of the weight of the KLSC submissions. Inasmuch as I have concluded that I should grant permission to KLSC on part of their specified grounds I refrain from reciting chapter and verse or providing evaluative commentary. This is intended as an overview only.

      KLSC Arguments

      [30] KLSC had no problem with standing, as compared with WCSB as discussed below. KLSC introduced themselves as forward looking operations for innovative and sustainable development of electrical power resources for Alberta. KLSC explained Decision 26090 to mean that elimination of DCG credits to Fortis, ATCO, and ENMAX, albeit on a gradual sliding scale basis over time, would affect the members of KLSC adversely and seriously and was bad policy. By themselves, those considerations would not justify permission to appeal but are context.

      [31] EPCOR and other distribution utilities tariff provisions were not in the same position as Fortis, ATCO and ENMAX. Decision 26090 explains, at para 10, about EPCOR's tariff that its tariff entry Rate SAS-DGEN was not "conventionally considered to be a DCG credit and therefore was not directly at issue in this proceeding". The AUC, however, later in its decision under Part 3.3.1 entitled "Level playing field considerations for generation" said this:

      57 First, DCG credits are not available to all forms of generation, including all forms of distributed generation. Alberta's wholesale electricity market is premised on generation competing on a level playing field to ensure lowest cost outcomes. Providing certain DCG with a revenue stream through the distribution tariff that is separate from the wholesale market, is not available to all forms of generation (i.e., only to DCG and not TCG), and is not available on all distribution systems (i.e., not EPCOR's), distorts the level playing field and interferes with achieving efficient market outcomes. As the AESO explained, this distortion leads to inefficient outcomes in two respects: (i) the energy market is impacted by the DCG's operations to maximize generation output at times when the DCG will maximize its credit value, potentially displacing otherwise lower cost generation; and (ii) the market is impacted through the distortion DCG credit revenue sends to the investment signal for DCG, affecting the market's ability to truly find the efficient generation mix aligned with long-run equilibrium. These distortions in market efficiency are the hidden costs of DCG credits referred to in Section 3.1. (footnotes omitted)

      [32] Put another way, albeit simplistically, and only for purposes of this permission application, I found myself left to understand that by virtue of the manner of hook up of the distribution-connected generators to those distribution utilities, what are called DFOs (distribution utilities) will have reduced transmission system charges to pay to AESO but will pay a comparable amount to the DCGs. The DCG payments are then passed on by those DFOs to their consumers under the DCG credit arrangements of their tariffs if approved by the AUC.

      [33] For its part, AESO recovers a notional loss of revenue for itself arising from the notional reduction of electricity transmission on its lines and through its stations to the DFOs which occurs by reason of the DCG supply. This, I gather, is accomplished by the AESO through a balancing process - Decision 26090 referred to it as "the true-up mechanisms" of AESO at para 47 - which ultimately is levied on the DFOs, included in the DFO tariffs and then charged on to the consumers. As explained by Decision 26090:

      60 Section 47(b) of the Transmission Regulation sets out the locational-based price signals for generating units that the Commission must consider in the AESO's tariff application. These include local interconnection costs, a financial contribution toward transmission system upgrades (also known as generating unit owner's contribution), and line losses levied through Rate STS of the AESO tariff. These locational price signals are applied to all generating units which connect to the transmission system across the province.

      61 In contrast, DCG receives a connection to the transmission system through the distribution utility's electric distribution system. The distribution utility is the entity that contracts for system access service with the AESO and is subject to costs of the transmission system, as well as charges or credits under Rate STS. In order to support a level playing field between TCG and DCG, the Commission considers that Rate STS and the other locational-based price signals identified in Section 47(b) of the Transmission Regulation should be flowed through to DCG, if the electricity generated by the DCG enters the transmission system at the distribution utility's point of delivery (i.e., substation).

      62 EPCOR distinguished between DTS-based DCG credits and STS-based DCG credits. EPCOR's approved tariff flows through the STS charges or credits to DCG, but does not credit DCG for any temporary reductions in DTS charges. In view of the level playing field considerations discussed above, the Commission finds that there is merit in retaining the respective utility tariff provisions that are related to the flow through of STS charges or credits to DCG. This finding is consistent with the fact that DTS charges are the price intended for load customers in connecting to, and receiving service from, the transmission system, whereas STS charges or credits are the price intended for generating units, whether they be TCG or DCG. [Emphasis added, footnotes omitted]

      [34] To be blunt, this explanation is rather arcane but the basic idea seems plain enough. Decision 26090 summarized its overall conclusion as follows:

      1 The Alberta Utilities Commission has determined that the existing distribution-connected generation (DCG) credit mechanism within ATCO Electric Ltd., ENMAX Power Corporation and FortisAlberta Inc.'s respective tariffs will be discontinued. The provision of the DCG credit mechanism does not support just and reasonable ratemaking because it unnecessarily increases the payments ratepayers make for transmission service, and these additional payments are not offset by a proven quantifiable benefit to the ratepayers. Furthermore, the provision of the DCG credit mechanism is not just and reasonable because it promotes an unlevel playing field between generators, resulting in distortionary harm to the wholesale electricity market, which is also a detriment to ratepayers.[footnote omitted]

      [35] Decision 26090 explained that AUC had found itself addressing this policy topic in the Fortis tariff proceeding because an earlier Distribution System Inquiry had explored in depth the issue of DCG credits, and the issue of those had also arisen in two earlier regulatory proceedings, but the circumstances there did not provide an appropriate means for a sufficient assessment. In consequence, the AUC separated this module from the Fortis tariff proceeding and issued a Notice, dated November 17, 2020, which said, inter alia:

      ... the Commission expects that its determinations in this proceeding (the DCG Credit Module for Fortis's 2022 Phase II distribution tariff application) will affect ATCO Electric, ENMAX, and Fortis, as well as their customers, and the owners and operators of DCG units that receive benefit from DCG credit mechanisms set out in each of those utilities' distribution tariffs.

      [36] KLSC complains that use of the word "benefit" in this letter was a mischaracterization of the position of DCGS. KLSC said this set the process of this Fortis module onto the wrong track. KLSC also submits that the letter, dated November 17, 2020, went on to state that it expected parties to provide evidence as to the following questions:

      (i) Should the Commission continue to approve the existing DCG credit mechanism in Fortis, ATCO Electric and ENMAX's respective distribution tariffs?

      (ii) Should consideration be given to adjusting the existing DCG credit mechanism? If so, based on what criteria and for what purpose?

      [37] Decision 26090 states at para 12 that in the end it covered four questions, including the above two and two more:

      (iii) If these credits are to be retained as presently constituted or in an alternative form, comment on level-playing field considerations between DCG and transmission connected generation (TCG).

      (iv) If DCG credits are adjusted or eliminated, what issues should be examined, including the scope and timing of any adjustments?

      [38] KLSC complains that Question (iv) arose in a mid-proceeding letter, dated January 20, 2021, and that in context this was part of an unfair process which had been geared to a pre-determined outcome to dispose of the DCG credits.

      [39] KLSC similarly complains that the AUC also decided to take into consideration evidence and materials that it selected from the earlier Inquiry Proceeding, notably two Information Request responses (out of many) as well as taking in materials after the parties had filed their evidence. Once again, KLSC views these steps with suspicion about being part of an unfolding of a process towards a pre-determined outcome.

      [40] KLSC also complains that Question (iii) was not a proper topic for the Fortis proceeding, because the Fortis proceeding was explained by the AUC repeatedly in Decision 26090 as being connected to s 121(2)(a) of the EUA, referring to whether the Fortis tariff would be "just and reasonable". KLSC says that although the AUC makes one reference to s 121(2)(b) in Decision 26090, none of its discussion really links its final decision to whether inclusion of the DCG credits results in a tariff that was "unduly preferential, arbitrarily or unjustly discriminatory or inconsistent with or in contravention of" the EUA, other enactments or law within the scope of s 121(2)(b).

      [41] Relatedly, KLSC submits that reasoning about a "level playing field" as mentioned in Question (iii) and about interference with "efficient market outcomes" and causes "distortions" was outside the conceptual framework of "just and reasonable" and introduced policy considerations that KLSC was in no position to address.

      [42] Further still, KLSC submits that significant analytical and evidential basis for of these policy considerations was drawn from the earlier proceedings to which it was not a party. While KLSC is quoted in Decision 26090 for its attempts to make a case to support the DCG credits, it suggests that it was often on its back foot as the proceedings unfolded. The AESO involvement was significant in rebutting the KLSC position - for example at para 64 of Decision 26090 the AUC nodded to the approach of the AESO that "[b]ecause the AESO has no influence where DCG locate or how they operate, the AESO does not take them into account when it plans the transmission system."

      [43] KLSC also complains that despite reference to s 121(2)(a), Decision 26090 (as quoted above) declined to assign a burden of proof to Fortis under s 121(4) respecting the Option M element of its tariff. I was left to understand by KLSC that Fortis, in a sense, was willing to throw Option M under the bus. KLSC suggested that this left KLSC in the predicament of being unable to identify and quantify rate impacts of a tariff amendment on its ratepayers and to provide the sort of quantitative evidence to answer the seeming concerns of the AUC about what the rate impacts were from the DCG credits situation.

      [44] In sum, I would reorganize and restate the submissions of KLSC said to constitute grounds for permission to appeal as follows (being not precisely the language of KLSC in writing and including the effect of oral submissions for KLSC):

      1 The AUC erred in law in concluding that no party in this proceeding had to assume the onus of proof with respect to whether the Distribution Utilities' DCG Credit tariff provisions were just and reasonable. Although the AUC suggested in Decision 26090 that it determined the facts at large without a burden on anyone, its reasons revealed that it placed a practical / evidential burden on the KLSC parties to prove a quantifiable benefit to ratepayers when KLSC was not in the position of such as Fortis to meet such a burden.

      2 The AUC erred in law when it considered larger policy issues such as a level playing field involving features of alleged market distortion and negatives for "efficient market outcomes" in its application of s 121(2)(a) of the EUA. Relatedly, the AUC erred in law when it directed the parties to provide submissions and evidence with respect to such larger policy considerations and when it extended itself into consideration of imported evidential materials from prior AUC proceedings and deployed them adversely to the position of KLSC.

      3 The AUC failed to give procedural and adjudicative fairness and comply with the principles of natural justice in various manners, including the foregoing. It will be open to KLSC to discuss the process from the Notice letter, dated November 17, 2020, up to and including the AUC decision as to remedy.

      [45] It is necessary to note that KLSC characterizes the decision of the AUC as having been "pre-determined" which was "bias" and was unfair and should be considered void. I deal with this aspect of the KLSC argument separately below.

      [46] As to its permission motion as to Decision 26660, KLSC asserts that, amongst other things, it had raised this question of pre-determination and unfairness / denial of natural justice before the AUC in its application leading to Decision 26660. In Decision 26660 the AUC incorporated some elements of the KLSC position into its discussion of unreasonableness of the earlier decision under its Section 5(1)(a) of Rule 16. More directly as to fairness, Decision 26660 includes this:

      47 The DCG Applicants provided submissions in their review application alleging that the process for the original proceeding was procedurally unfair. This was because the hearing panel, in the process it followed: pre-supposed elimination of the DCG credit; prejudicially described the DCG credit as a "benefit" at an early process step; selectively filed evidence on the record from an earlier non-adjudicated inquiry proceeding without explaining why and after parties had already filed evidence submissions; and expanded the scope of the proceeding to ask parties to provide evidence that would only be required if the DCG credit tariff provisions were eliminated.

      48 The review panel finds that the DCG Applicants have not raised procedural fairness grounds as part of their review application. This is because: (i) as noted by AltaLink and TransAlta, the procedural fairness submissions are not located under the "errors/grounds"section of their review application; and (ii) the DCG Applicants clarified in their reply submission that they had filed an application for permission to appeal with the Court of Appeal of Alberta setting out errors of law and procedural fairness grounds, and that they did not address the legal errors and procedural fairness issues to be determined by the Court in their reply submission.35 Accordingly, the review panel makes no findings regarding the procedural fairness submissions. [footnotes omitted]

      [47] In Decision 26660, the AUC, at para 49, added that it had "previously characterized errors in process as errors in law, and Rule 016 specifies that no review is available on errors of law. Accordingly, the review panel would also dismiss the DCG Applicants' application to review on this ground, had it been raised, on this basis." Taking the AUC at its word in this respect, which is entirely appropriate, there would seem to have been little point in KLSC seeking a dress rehearsal of its fairness arguments before the AUC Review Panel.

      [48] Responding to Decision 26660, KLSC launched its second application for permission, setting out a series of points, which I would distill down to claims of reasonable apprehension of bias based upon the "nemo judex" principle and particularly pointing to the involvement of Mr Larder as a member of the AUC Review Panel. I also address this topic below.

      [49] The position for KLSC on its various points in Para [44] above is disputed by the respondents. They do not concede that questions of law are really involved. They submit that when all is said and done, the applications merely reflect KlSC's dissatisfaction with how the AUC carried out its thorough investigation of the issues and reached its impeccable conclusion on the evidence that the DCG credit arrangements for ATCO, Fortis and ENMAX produced an inappropriate levy on consumers as well as distorting the electricity marketplace. AESO, for instance, says Decision 26090 is supportable under ss 16 and 17 of the AUCA as cited in FortisAlberta v Alberta (Utilities Commission), 2015 ABCA 295 at paras 171-172, [2015] AJ No 1005 (QL):

      171 The legislature has entrusted the Commission with a policy-laden role, which includes a strong public interest mandate: see, for example, ss 16(1) and 17(1) of the Alberta Utilities Commission Act. Its mandate includes the creation of a balanced and predictable application of principles to the relationship between revenues, expenses and assets (both depreciable and non-depreciable) of utilities on the one hand, and the reasonable expectations of the ratepayers who receive and pay for services on the other. The treatment of stranded assets is, at its foundation, a policy issue informed by public interest considerations. The Commission's policy choice, as expressed in the UAD decision, is a legitimate and defensible one, and well within its legislated power.

      172 One must also bear in mind that the questions raised have political and economic aspects. Courts are poorly positioned to opine on such matters. Judicial review considers the scope or breadth of jurisdiction, but by legislative design the selection of a policy choice from among a range of options lies with the Commission empowered and mandated to make that selection.

      See also ATCO Gas & Pipelines 2006 SCC 4 at para 60.

      [50] For its part, ATCO argues that when AUC stated in Decision 26090 that it would not decide on the basis "whether any particular party met the required onus or not, but rather whether the Commission is satisfied on all the evidence and argument that DCG credits should be maintained in the distribution tariffs" it was merely stating frankly what it was doing: compare Alberta (Utilities Consumer Advocate) v Alberta (Utilities Commission), 2021 ABCA 336 at paras 20-21, [2021] AJ No 1348 (QL).

      [51] Deciders are not entitled to "sit on the fence" in civil and administrative law situations. In Re: B (Children), [2008] UKHL 35 at paras 31-32, [2008] 4 All ER 1, Lady Hale remarked about a case where a judge expressed the view that on the evidence he could only "guess" what happened. She observed:

      31 My Lords, if the judiciary in this country regularly found themselves in this state of mind, our civil and family justice systems would rapidly grind to a halt. In this country we do not require documentary proof. We rely heavily on oral evidence, especially from those who were present when the alleged events took place. Day after day, up and down the country, on issues large and small, judges are making up their minds whom to believe. They are guided by many things, including the inherent probabilities, any contemporaneous documentation or records, any circumstantial evidence tending to support one account rather than the other, and their overall impression of the characters and motivations of the witnesses. The task is a difficult one. It must be performed without prejudice and preconceived ideas. But it is the task which we are paid to perform to the best of our ability.

      32 In our legal system, if a judge finds it more likely than not that something did take place, then it is treated as having taken place. If he finds it more likely than not that it did not take place, then it is treated as not having taken place. He is not allowed to sit on the fence. He has to find for one side or the other. Sometimes the burden of proof will come to his rescue: the party with the burden of showing that something took place will not have satisfied him that it did. But generally speaking a judge is able to make up his mind where the truth lies without needing to rely upon the burden of proof." [Emphasis added]

      [52] That said, KLSC has argued that the AUC did more than decide after sorting through the evidence and that it effectively put an unfair and unreachable burden on KLSC and the DCG parties as to whether the DCG credits were made up for elsewhere in the system, when the necessary information was not, says KLSC (and WCSB) readily accessible to them.

      [53] ATCO also argues that there was nothing wrong with the AUC considering factors that might be more linked to s 121(2)(b) than s 121(2)(a) of the EUA when rendering Decision 26090.

      [54] In a sense the respondents submit that the AUC, executing its statutory responsibilities, was entitled to find an impact on consumers that was not just and reasonable and was entitled to also find that a 'good purpose' unlevel playing field and market distortion is still an unlevel playing field and a market distortion which likewise invalidated continuing with the DCG credits.

      Permission Decision

      [55] The application of KLSC for permission to appeal Decision 26090 is granted on the three questions set out in para [44] above. I will say nothing more about whether KLSC has a strong argument on any of them. One person's thin argument is another person's condensed argument. But I find the observation of Slatter JA in AltaLink quoted above compelling where he said: "Sometimes the question is not so much whether the Commission was right or wrong, but whether the issues are sufficiently important that the Court of Appeal should say whether it was right or wrong."

      [56] In addition, I would remind KLSC that it will also fall to KLSC to show to the panel how any alleged errors of law and fairness in fact prejudiced KLSC in the end result, and whether a re-hearing of the matter would be warranted.

      [57] The latter statement about actual prejudice is necessary to be made. That is because I do not consider it arguable that there was "bias" on the part of the AUC and that its Decision 26090 would be void for such a reason. Also, I deny permission to appeal the Decision 26660. These related conclusions require explanation.

      [58] As exemplified by reasoning in Yukon Francophone School Board, Education Area #23 v Yukon (Attorney General), 2015 SCC 25 at paras 59-62, [2015] 2 SCR 282, it is appropriate to recognize that indicia of 'attitude' or 'opinion' do not immediately or automatically trigger a finding of bias. In Yukon Francophone School Board, the Supreme Court of Canada found the Court of Appeal did not err in the result by concluding that there was a reasonable apprehension of bias on the part of the judge involved. But the Court went on to explain that mere membership in advocacy organizations on the subject matter was not of itself proof of bias.

      [59] The AUC is in a different position from superior court judges, which distinction was partly described in Ocean Port Hotel Limited v BC (The General Manager, Liquor Control and Licensing Branch) 2001 SCC 52, [2002] 2 SCR 781. Tribunals like the AUC do not require the Constitutional distinction from the executive required for superior court judges. This does not mean that there might not be institutional bias in how the tribunal is structured: compare 2747-3174 Quebec Inc. v Quebec (Regie des permis d'alcool), 1996 CanLII 153 (SCC), [1996] 3 SCR 919. But no one has suggested institutional bias here.

      [60] More relevantly, specialized expert tribunal deciders like the AUC are expected to have and to deploy their knowledge and expertise in the subject matter while being respectful of their legislated instructions, purposes and remit. Knowledge and expertise are part of the reasons such tribunals are created and are populated as they are in the first place. As noted by Fruman JA in Epcor Generation Inc v Alberta (Energy & Utilities Board), 2003 ABCA 374 at para 23, 346 AR 281:

      23 EPCOR's submission that the Board erred in disregarding or rejecting evidence raises issues of fact, not law or jurisdiction. The Board is free to accept or reject evidence presented by the parties and, as an expert tribunal, it is entitled to use its expertise to arrive at different conclusions than the parties. Indeed, the highly technical nature of the disputed evidence demonstrates why evaluation of such evidence properly falls within the Board's purview.

      See also Deloitte Touche LLP v Institute of Chartered Accountants (Alberta), 2008 ABCA 162, 433 AR 41 at para. 16 (albeit on the topic of the needs of self-governing professions); Macdonald v. Mineral Springs Hospital, 2008 ABCA 273 at para 36, 437 AR. 7; Ironside v. Alberta (Securities Commission), 2009 ABCA 134 at para 52, 454 AR 285; Canadian National Railway Company v Richardson International Limited, 2015 FCA 180 (CanLII), [2015] FCJ No 974 (QL), 476 NR 83.

      [61] Such deciders can be expected (hopefully) to possess knowledge of common industrial practices and of terms of technical art as well as of the vernacular of the discourse, and to be awareness of ebbs and flows of social circumstances relevant to the debate. This is not the same as having case-specific information about individual participants and their involvement in a unique proceeding. The deciders are assumed to bring generalized knowledge and expertise to bear on issues that arise before them for determination. By comparison superior court judges might be expected to be innocent of, or to disregard, such extrinsic knowledge, and they have a presumption of integrity applicable to doing so: Wewaykum Indian Band v Canada, 2003 SCC 45, [2003] 2 SCR 259. That is quite a different situation from that of the specialized expert tribunal deciders.

      [62] This reality for administrative tribunals was implicitly recognized as a factor in deciding the fairness of decision making in Baker v Canada (Minister of Citizenship and Immigration), 1999 CanLII 699 (SCC), [1999] 2 SCR 817. Committee for Justice and Liberty v Canada (National Energy Board), 1976 CanLII 2 (SCC), [1978] 1 SCR 369, which in turn reached back to Szilard v Szasz, 1954 CanLII 4 (SCC), [1955] SCR 3 at pp 6-7 which involved a specific person who had been part of a study group dealing with a specific pipeline (Canadian Arctic) then up for consideration by a quasi-judicial tribunal of which that person had now become a significant decider / member.

      [63] That form of case and instance specific participation in a decision-making process is not the same thing as the decider having available knowledge and expertise of a generalized nature (even if creating an inclination of the decider to an overview perspective) by a polycentric tribunal decider with an express legislative duty to be concerned about those matters. Put simply, the Legislature has instructed the AUC to be sensitive to electricity service costs passed on to consumers. That cannot be bias.

      [64] Because the party before such a decider does not necessarily know all that the decider might know in that respect does not necessarily mean the party lacks the ability to respond to it. KLSC had to appreciate that a debate as to DCG credits was to occur under the letter dated November 17, 2020. KLSC does not suggest that it did not understand this. It complains about the process and evidence respecting DCG credits and generally, but that is a discussion of process fairness, not of predisposition or bias. Obviously, the AUC was not issuing the letter dated November 17, 2020, for its academic interest or its own amusement. Nor can it be said that the multiple-day hearing, even with the escalation of inquiries by the AUC was a pretence or a farce. That does not exclude the possibility that the proceedings of the AUC were unfair; it is just that even procedural unfairness does not prove bias by prejudgment.

      [65] As Gonthier J wrote in IWA v. Consolidated-Bathurst Packaging Ltd, 1990 CanLII 132 (SCC), [1990] 1 SCR 282, at pp. 323-24: "the rules of natural justice do not have a fixed content irrespective of the nature of the tribunal and of the institutional constraints it faces". This view can be dated back to Russell v Duke of Norfolk, [1949] 1 All ER 109 at p 118:

      There are, in my view, no words which are of universal application to every kind of inquiry and every kind of domestic tribunal. The requirements of natural justice must depend on the circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the subject-matter that is being dealt with, and so forth.

      [66] In those circumstances where a decider can be expected to have specialized knowledge or expertise about the subject matter, the fact that the decider has such knowledge or expertise should not automatically lead to a conclusion that any decision reached by that decider can be reasonably apprehended to be the product of bias. The relationship between fairness and the processes of a decider were described in Imperial Oil Ltd v Quebec (Minister of Environment), 2003 SCC 58 at para 31, [2003] 2 SCR 624:

      31 The appellant's reasoning thus treats the Minister, for all intents and purposes, like a member of the judiciary, whose personal interest in a case would make him apparently biased in the eyes of an objective and properly informed third party. This line of argument overlooks the contextual nature of the content of the duty of impartiality which, like that of all of the rules of procedural fairness, may vary in order to reflect the context of a decision-maker's activities and the nature of its functions (Baker, supra, at para. 21; Knight v. Indian Head School Division No. 19, 1990 CanLII 138 (SCC), [1990] 1 S.C.R. 653, at p. 682, per L'Heureux-Dube J.; IWA v. Consolidated-Bathurst Packaging Ltd., 1990 CanLII 132 (SCC), [1990] 1 S.C.R. 282, at pp. 323-24, per Gonthier J.; Newfoundland Telephone Co. v. Newfoundland (Board of Commissioners of Public Utilities), 1992 CanLII 84 (SCC), [1992] 1 S.C.R. 623, at p. 636, per Cory J.). These variations in the actual content of the principles of natural justice acknowledge the great diversity in the situations of administrative decision-makers and in the roles they play, as intended by legislatures (Ocean Port Hotel Ltd. v. British Columbia (General Manager, Liquor Control and Licensing Branch), [2001] 2 S.C.R. 781, 2001 SCC 52, at para. 24, per McLachlin C.J.). The categories of administrative bodies involved range from administrative tribunals whose adjudicative functions are very similar to those of the courts, such as grievance arbitrators in labour law, to bodies that perform multiple tasks and whose adjudicative functions are merely one aspect of broad duties and powers that sometimes include regulation-making [page647] power. ...

      [67] Although the jurisdiction of the AUC under s 8(2) is not a direct subject of this case, the very existence of that inquisitorial role as well as other language of the AUCA and EUA support the position that the role of the AUC is polycentric and that the Legislature expects the AUC to pay attention, inter alia, to whether the ratepayers of Alberta are being subjected to just and reasonable tariffs. The relationship of the AUC to parties such as KLSC involves a duty to provide procedural and adjudicative fairness and natural justice, but not a duty to be tabula rasa at the decision phase.

      [68] If the decider had previously been an adversary to a party in the specific matter, an apprehension of bias might be objectively reasonable: compare Leeson v General Council of Medical Education and Registration (1889) 43 Ch D 366 at 384 ("if he is an accuser he must not be a judge"); R v Sussex Justices; Ex parte McCarthy [1924] 1 KB 256; In re Murchison, 349 US 133/136 (1955). Evidence of prejudgment associated with animus against a party is a long distance from merely having training, experience and legislative instruction inclining the decider to a point of view.

      [69] Benjamin Cardozo wrote in The Nature of the Judicial Process (1921) at p 168 that judges do not stand "on chill and distant heights" and cannot be expected to leave their identities at the court room door. But "[w]hat they can be expected to do, however, is remain, in fact and in appearance, open in spite of them." KLSC offered inferences from events that went against their position, but those inferences do not prove a closed mind.

      [70] When an allegation of reasonable apprehension of bias based on prejudgment is made, the claimant should, in my view, point to events in the record of proceedings which demonstrate that the decider had more than an incorrect or misconceived perspective at the outset. KLSC and its supporting evidence on this element of their argument speak from the subjective point of view of a party who feels aggrieved and views the circumstances in a skeptical fashion. It is not the perspective of an aggrieved party

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