Permission to Appeal Application – Application Denied
In this decision, the Alberta Court of Appeal (“ABCA”) considered ATCO Electric Ltd.’s (“ATCO”) applications for Permission to Appeal certain aspects of the following AUC decisions:
(a) Decision 20272-D01-2016 regarding ATCO’s 2015-2017 General Tariff Application (the “2016 GTA Decision”); and
(b) Decision 22094-D01-2017 regarding ATCO’s application for review of the 2016 GTA Decision (the “2017 Review Decision”).
For the reasons summarized below, the ABCA dismissed ATCO’s applications for permission to appeal the AUC decisions.
Disallowed Transmission Line Insurance Costs
In ATCO’s 2015-2017 General Tariff Application (“GTA”), ATCO requested to include in its general revenue requirement the costs of insurance premiums for its transmission lines in Alberta (the “Transmission Line Insurance Costs”). In the 2016 GTA Decision, the AUC rejected the inclusion of the Transmission Line Insurance Costs, based on its findings that:
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the Transmission Line Insurance Costs did not constitute prudent current period operating costs;
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the charges represented costs associated with guarding against losses from the extraordinary retirement of its facilities; and
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such costs were not allowable because to do so would effectively provide the utility and its shareholders with asymmetrical access to the benefits, but not the attendant risks, of asset ownership.
In its permission to appeal application, ATCO submitted that insurance was required following the AUC’s denial of ATCO’s proposal to use the reserve for injuries and damages (“RID”) account (as had previously been allowed). ATCO had proposed to use the RID account to cover the costs associated with damages to and destruction of its electric distribution assets caused by the fire in the Slave Lake area of Alberta. ATCO submitted that the insurance was intended to protect its shareholders in the event of an “extraordinary” loss to shareholder-owned assets, specifically the electrical transmission lines.
Alleged Grounds for Appeal
ATCO alleged that the AUC erred in law and/or jurisdiction by:
(a) interpreting the Electric Utilities Act (the “EUA”), such that ATCO would not have a reasonable opportunity to recover the prudently incurred costs of providing transmission service, with the result that it would produce rates which were not just and reasonable;
(b) unreasonably rejecting certain costs relating to the severance of employees in 2015, contrary to the evidence before it and the AUC’s own findings when it found such costs to have been reasonable in the circumstances;
(c) failing to approve certain actual 2015 Capital Maintenance Costs and Rate Base Additions, in the absence of any evidence suggesting such costs had been unreasonably incurred; and
(d) with respect to the 2017 Review Decision, dismissing ATCO’s application for review and variance regarding the denial of the opportunity to recover prudently incurred Transmission Line Insurance Costs.
Test for Leave
Appeals from AUC decisions are governed by section 29 of the Alberta Utilities Commission Act (the “AUCA”), which provides that an appeal lies from a decision or order of the AUC to the Court of Appeal on a question of jurisdiction or on a question of law.
To succeed on a leave application, an applicant must demonstrate that the question of law or jurisdiction raises a “serious, arguable point”. The ABCA explained that subsumed in the “serious, arguable point” test are the following factors:
(a) whether the point on appeal is of significance to the practice;
(b) whether the point raised is of significance to the action itself;
(c) whether the appeal is prima facie meritorious;
(d) whether the appeal will unduly hinder the progress of the action; and
(e) the standard for appellant review that will be applied should leave be granted.
ABCA Reasons for Dismissing Application
The ABCA found that:
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its determination whether to grant permission to appeal devolved down to whether the appeals were prima facie meritorious; and
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integral to this consideration was the standard of review.
Standard of Review
The standard of review to be employed when reviewing a decision of the AUC, when applying its expertise to set rates, is reasonableness: ATCO Gas and Pipelines v Alberta (Utilities Commission) at para 27. To overcome the standard of review, an appellant needs to demonstrate that its interpretation “must be the only permissible interpretation.”
The ABCA found that:
(a) the AUC’s findings that the cost of the insurance premiums was not prudent under the circumstances, were not unreasonable;
(b) the AUC having made that determination was not then obliged to determine whether the actual amount(s) of the premiums were prudent; and
(c) therefore, the AUC’s decisions were a reasonable interpretation in light of the relevant legislation and jurisprudence.
Decision
The ABCA concluded that ATCO’s submissions raised neither a question of jurisdiction nor law, and accordingly, dismissed its applications.
