Regulatory Law Chambers logo

Dalziel Enterprises Ltd. – Payment in Lieu of Notice Charge Complaint with FortisAlberta Inc. (AUC Decision 22796-D01-2018)

Download Report

Complaint Application – Terms & Conditions – Payment in Lieu of Notice Charge


In this decision, the AUC considered a complaint filed by Dalziel Enterprises Ltd. (“DEL”) against FortisAlberta Inc. (“Fortis”). In its complaint, DEL asked the AUC for relief from the payment in lieu of notice (“PILON”) provisions in Fortis’ Customer Terms and Conditions of Electric Distribution Service (“T&Cs”).

For the reasons summarized below, the AUC determined that Fortis’ T&Cs, including the PILON provisions, applied to DEL and that the PILON provisions were applied to DEL in a manner consistent with the AUC’s original approval of the T&Cs. The AUC therefore dismissed DEL’s complaint.

Background

DEL operated a hay processing plant in Innisfail, Alberta on land leased from Red Deer County. DEL began receiving electricity services from Fortis’ predecessor in July 2000.

In mid-August 2016, DEL requested adjustments to reduce its peak demand. DEL received a review of minimum (ROM) proposal from Fortis that offered two options to reduce the expected peak demand from 330 kilowatts (kW) to 11 kW and to change the rate assigned to the service from Rate 61 (general service) to Rate 41 (small general service):

• Option 1: Immediate reduction of the monthly minimum demand with a PILON: distribution customer exit charges of $ 12,652.58 ($ 4,981.83 for transmission and $ 7,068.25 for distribution, plus $ 602.50 Goods and Services Tax); or

• Option 2: No cost with a 7-month notice period. The service would continue to bill on a monthly minimum demand of 220 kW until the notice period expires.

DEL verbally requested to disconnect its service through its competitive retailer, ENMAX Energy Corporation (“ENMAX”). Fortis issued a termination of service proposal letter to DEL, which offered two options to disconnect and terminate distribution charges permanently:

• Option 1: Immediate termination with a PILON of $ 13,073.45 ($ 5,112.24 for transmission and $ 7,338.66 for distribution, plus $ 622.55 Goods and Services Tax); or

• Option 2: No cost with a 7-month notice period. The service would continue to bill on a monthly minimum demand of 220 kW until the notice period expires.

Both the ROM and the termination of service proposal required DEL to indicate its acceptance of an option by providing a signature. DEL did not sign either.

In September 2016, ENMAX notified Fortis and EPCOR Energy that it was deselecting the site because it had moved or would be moving to another site. Fortis reported that this was Fortis’ first notice that DEL had reportedly vacated the site. On October 3, 2016, the site was dropped by ENMAX and returned to EPCOR Energy (the regulated rate provider). On October 14, 2016, EPCOR Energy sent Fortis a disconnected on October 17, 2016.

The Complaint

DEL’s complaint requested relief from the application of the PILON provisions contained in Fortis’ T&Cs. Under the T&Cs, a PILON is charged if a customer gives less than the required notice to reduce demand or to terminate service.

Applicability of Fortis’ T&Cs

The AUC first considered whether Fortis’ T&Cs, including the PILON provisions, applied to DEL. For the reasons summarized below, the AUC found that the T&Cs, including the PILON provisions, applied to DEL.

The AUC explained that to determine that question, it considered the applicable statutory framework that applied to Fortis’ AUC approved tariff. The AUC explained that:

(a) The Electric Utilities Act (“EUA”) and its regulations establish a comprehensive regulatory scheme governing the electricity market and the provision of electricity in Alberta;

(b) As an owner of an electric distribution system under the EUA, Fortis had a duty to provide electric distribution service under Section 105 of the EUA;

(c) in return, Fortis may recover its prudent costs from eligible customers in accordance with an AUC approved tariff; and

(d) the AUC approved the T&Cs, including the PILON provisions at issue, in Decision 2014-018.

The AUC rejected DEL’s arguments that the PILON provisions did not apply because its “original contract” did not contain a PILON provision and that an amendment to that original agreement would require the consent of both parties.

The AUC noted its previous holdings that the terms and conditions between a public utility and its customers are not voluntary contracts, but “legally imposed regulations that bind the utility to provide a service at just and reasonable rates to all who require and demand them.”

The AUC found that consistent with the statutory scheme and the principles of public utilities law above, the relationship between Fortis and its customers results from legislative regulation and is not a voluntary one. Therefore, explicit consent from individual customers to changes to terms and conditions of service was not required.

In this case, the AUC found that DEL was a Fortis customer and therefore subject to the T&Cs, including the PILON provisions. This conclusion was based on its findings that:

(a) DEL began purchasing electricity for its own use in 2000, and continued to purchase electricity until DEL sought to disconnect in late August 2016;

(b) therefore, DEL was Fortis’ customer, within the EUA’s definition of customer (person purchasing electricity for the person’s own use), which Fortis also incorporated by reference into the T&Cs at the time DEL disconnected from the site in 2016; and

(c) by operation of the legislative framework and principles of public utilities law, the agreement between DEL and Fortis was therefore governed, in part, by the T&Cs.

Applicability of PILON Charges

The AUC explained that the current PILON provisions were approved through a formal regulatory process in Decision 2014-018. As such, application of the approved T&Cs should not be viewed as unfair, unreasonable or unforeseen, in the absence of evidence establishing that they were applied in a manner not contemplated in the AUC’s original approval.

DEL submitted that when its 15-year contract with Fortis expired on December 31, 2015, TransAlta and Fortis had fully recovered their investment in the service, and therefore no PILON charges were owed to Fortis.

The AUC rejected this argument, finding that PILON charges and a utility’s recovery of its initial investment are distinguishable, as had been expressly acknowledged by the AUC in previous decisions considering PILON.

DEL also argued that should the AUC determine that PILON charges are due to Fortis, the transmission portion of the PILON charges should be waived. However, DEL did not provide a reason for its request to waive the transmission portion of the PILON charges.

The AUC found that there was no basis in this case, in the T&Cs or otherwise, to waive the PILON charges.

For the above reasons, the AUC found that DEL failed to show that the T&Cs were being applied by Fortis in a manner that is unfair, unreasonable, unforeseen or not contemplated in the AUC’s original approval.

Related Posts