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Applications for Review of Decision 22986-D01-2018, Compliance Application to Decision 22011-D01-2017, ATCO Pipelines 2017-2018 General Rate Application (AUC Decision 23539-D01-2018)

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Review Application – Granted in part – Rule 016


In this decision, the AUC considered applications by ATCO Pipelines, a division of ATCO Gas and Pipelines Ltd. (“ATCO Pipelines”) and the Office of the Utilities Consumer Advocate (“UCA”) for review of Decision 22986-D01-2018 regarding ATCO’s compliance application to Decision 22011-D01-2017, 2017-2018 General Rate Application (the “Decision”).

The Decision addressed a compliance filing from ATCO Pipelines, in Proceeding 22986, in accordance with the findings and directions provided in Decision 22011-D01-2017, in relation to ATCO Pipelines’ 2017-2018 general rate application (the “GRA Decision”).

The AUC granted ATCO Pipelines’ review application. The AUC found that the UCA did not meet the test for review. However, the AUC determined that a review, on its own motion, was warranted in relation to the issue of ATCO Pipelines’ accumulated depreciation balances.

Review Process

The AUC considered the review applications in a single proceeding.

The review applications were filed pursuant to section 10 of the Alberta Utilities Commission Act (“AUCA”) and Rule 016: Review of Commission Decisions (“Rule 016”). The AUC set out the process for review under Rule 016, including the following:

  • The review process has two stages. In the first stage, a review panel must decide whether there are grounds to review the original decision. If the review panel decides that there are grounds to review the decision, it proceeds to the second stage of the review process where the AUC holds a hearing or other proceeding to decide whether to confirm, vary, or rescind the original decision.

  • Section 4(d) of Rule 016 requires an applicant to set out the grounds it is relying on in support of its application for a review.

  • Section 6(3) of Rule 016 describes the circumstances in which the AUC may grant a review when the applicant demonstrated an error of fact, law or jurisdiction, when previously unavailable facts material to the decision became available, or when circumstances material to the decision changed.

The AUC reiterated guidance it provided in previous decisions that the review process is not intended to provide a second opportunity for parties to reargue the issues in a proceeding, nor is it an opportunity to express concerns about a decision determining issues in a related proceeding.

ATCO Pipelines’ Review Application

The AUC granted ATCO Pipelines’ review application on the basis that the evidentiary foundation for certain of the hearing panel’s material findings of fact were not apparent on the face of the Decision.

Grounds for Review

In its application, ATCO Pipelines claimed that the hearing panel erred in directing ATCO Pipelines to remove its 2016 re-inspection costs from its 2017 opening rate base and the forecast 2017 and 2018 re-inspection capital expenditures from its 2017-2018 revenue requirements. Specifically, ATCO Pipelines asserted that the AUC erred in fact, law or jurisdiction as follows:

(a)     the hearing panel denied ATCO Pipelines an adequate opportunity to respond by way of evidence or an oral hearing to the positions being advanced by the interveners in argument;

(b)     the hearing panel unfairly imposed an expectation on ATCO Pipelines that it establish the reasonableness of its past conduct, by determining that the weld assessment and repair program (“WARP”) costs were not prudently incurred on the basis that better processes “could have been and should have been in place”;

(c)     the hearing panel denied 100 percent of the WARP costs in the absence of evidence on the record, in conflict with the standard or “periodic review and monitoring” that the hearing panel determined should be expected of ATCO Pipelines in respect of weld re-inspections; and

(d)     by denying 100 percent of the WARP costs but allowing ATCO Pipelines to recover any potential proceeding from legal action relating to the deficient inspections to the benefit of shareholders, the hearing panel fettered its ratemaking jurisdiction by delegating the determination of the prudence of the WARP costs to the Courts.

AUC Findings

The AUC review panel found the hearing panel erred in largely relying on argument put forth by interveners based on the actions taken by ATCO Pipelines subsequent to the discovery of the deficient weld inspections, as the basis for what actions ATCO Pipelines should have taken prior to discovering the deficiencies.

As a result, the AUC review panel found that ATCO Pipelines demonstrated that an error of fact, law or jurisdiction was apparent on the face of the decision. In recognizing this error, the AUC may vary or rescind the Decision as it related to the WARP re-inspection costs. Accordingly, ATCO Pipelines’ request for a review was allowed.

UCA Review Application

The UCA’s review application concerned findings in the Decision denying a request from the UCA to eliminate depreciation expense for a Supervisory Control and Data Acquisition (“SCADA”) asset account.

Alleged Errors by the UCA

ATCO Pipelines retired a SCADA asset from utility service in 2001, which was not recorded in its financial records. This resulted in continuing depreciation of the asset until 2006 when the error was discovered. ATCO Pipelines issued a one-time $1.584 million debit to accumulated depreciation and credit to depreciation expense on its books in 2012, to correct for the additional depreciation expense that had been collected from 2001-2006.

In its review application, the UCA asserted that the hearing panel erred in denying its request to eliminate the depreciation expense relating to the SCADA account. The UCA requested that the review panel find that the hearing panel committed an error of law and the AUC should deny recovery of the depreciation expense relating to the SCADA account over the current test period. In the alternative, the UCA submitted that the issue should be:

(a)     reconsidered as part of ATCO Pipelines’ next rate application, in the interests of efficiency; or

(b)     remitted to consideration at first instance, with a brief evidentiary phase providing the UCA with a procedurally fair process to address ATCO Pipelines’ case.

The AUC review panel was not convinced that the UCA demonstrated an error on the part of the hearing panel. Nonetheless, the review panel was satisfied that an AUC-initiated review of the issue of ATCO Pipelines’ accumulated depreciation balance, as it related to the findings of Decision 22011-D01-2017 and Decision 22986-D01-2018, was warranted.

During the course of the review applications proceeding, ATCO Pipelines provided additional information and further variance explanations regarding its accounting transactions within the SCADA and Communication Equipment accounts. The AUC review panel considered this to constitute previously unavailable material facts, which existed prior to the issuance of the decision in the original proceeding but which were not previously placed in evidence or identified in that proceeding or in the compliance proceeding. The review panel found that this new information could lead the AUC to materially vary its findings in Decision 22011-D01-2017 or Decision 22986-D01-2018, or both, with respect to accepting that ATCO Pipelines properly accounted for and reflected the retirement transactions in its accumulated depreciation account.

The AUC review panel found that this AUC initiated review, including any necessary adjustments as a result of the review, may be considered and addressed in ATCO Pipelines’ next GRA proceeding.

The review panel directed ATCO Pipelines to provide a complete reconciliation of the information in its 2019-2020 GRA.

Summary

In answering the preliminary question on the ATCO Pipelines review application, the AUC review panel found that ATCO Pipelines had demonstrated an error that was apparent on the face of the Decision and could lead the Commission to materially vary or rescind the Decision. Accordingly, the AUC allowed ATCO Pipelines’ application for a review of the findings in paragraphs 47-49 of the Decision.

The review panel said that it would issue process and scope directions for the second stage of the review process for that proceeding in due course.

In answering the preliminary question on the UCA’s application, the review panel found that the UCA had not demonstrated that an error was apparent on the face of the Decision, or existed on a balance of probabilities, that could lead the Commission to materially vary or rescind the Decision. However, the AUC initiated its own review of ATCO Pipelines’ depreciation account balances. The AUC directed that the matter of reviewing ATCO Pipelines’ depreciation account balances and any adjustment to ATCO Pipelines’ depreciation expense would be considered in the proceeding established to consider ATCO Pipelines’ 2019-2020 GRA.

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