Appeal Water Utility Rates – Municipal Government Act – Water Utility – Complaint Application
In this decision, the AUC considered a complaint by Imperial Enterprises Inc. (“Imperial”) regarding an increase in water rates by the Town of Devon (“Devon”).
The AUC found that the Devon improperly imposed the increased water rates and, therefore disallowed those increased rates.
Background and Details of Appeal
Devon provides water utility services to residents and businesses within its municipal boundaries. The Devon town council sets water rates.
Imperial sells bulk water to its customers. Imperial sources its bulk water supplies from water supplied by Devon.
Devon raised the bulk water commodity rates charged to Imperial to $3.25/m3 from $1.47/m3 for the first 5,000 m3 of water and to $4.50/m3 for all volumes over 5,000 m3.
On July 4, 2017, Imperial filed a formal complaint with the AUC appealing the increase in water rates charged to Imperial by Devon (the “Appeal”).
The Appeal asserted that:
(a) Devon raised the bulk water commodity rates without notice to or consultation with Imperial;
(b) in doing so, Devon put into effect a new, specific rate structure that affected Imperial and no other similar business; and
(c) by putting “two classes of rates” in effect, Devon made Imperial’s business of selling bulk water uncompetitive and more difficult in terms of setting competitive and consistent rates for its customers.
The AUC found that the principal arguments raised by Imperial in the Appeal could generally be characterized as alleging that:
(a) the increased rates were improperly imposed; and
(b) the increased rates are discriminatory because Devon has, in essence, created “two classes of rates” and/or “a two-tiered system of rates to similar users” without justification.
Legislative Scheme
The AUC’s authority to consider an appeal of water rates imposed by a municipality is set out in Section 43 of the Municipal Government Act (the “MGA”):
Appeal
43(1) A person who uses, receives or pays for a municipal utility service may appeal a service charge, rate or toll made in respect of it to the Alberta Utilities Commission, but may not challenge the public utility rate structure itself.
(2) If the Alberta Utilities Commission is satisfied that the person’s service charge, rate or toll
(a) does not conform to the public utility rate structure established by the municipality,
(b) has been improperly imposed, or
(c) is discriminatory,
the Commission may order the charge, rate or toll to be wholly or partly varied, adjusted or disallowed.
Section 7(g) of the MGA provides that
7 A council may pass bylaws for municipal purposes respecting the following matters:
…
(g) public utilities;
…
Section 180 of the MGA, which the AUC found applies to matters dealing with public utilities, states:
180(1) A council may act only by resolution or bylaw.
(2) Where a council or municipality is required or authorized under this or any other enactment or bylaw to do something by bylaw, it may only be done by bylaw.
(3) Where a council is required or authorized under this or any other enactment or bylaw to do something by resolution or to do something without specifying that it be done by bylaw or resolution, it may be done by bylaw or resolution.
Section 191(2) of the MGA states:
(2) The amendment or repeal must be made in the same way as the original bylaw and is subject to the same consents or conditions or advertising requirements that apply to the passing of the original bylaw, unless this or any other enactment provides otherwise.
Rates Improperly Imposed by Resolution (and not by bylaw)
The AUC held that because the increased rates were established by resolution and not by bylaw as required, the increased rates were improperly imposed.
Devon confirmed in its response to the AUC’s questions that the impugned rate change was not made by bylaw but rather, was made by Resolution 065/2017.
The AUC found that:
(a) section 7(g) of the MGA provides that a municipality may pass bylaws for municipal purposes respecting public utilities and that this may only be done by bylaw;
(b) given that section 7(g) of the MGA authorizes Devon to provide water service and charge rates for it by bylaw, it was section 180(2) of the MGA that applied to matters dealing with public utilities;
(c) under MGA section 191, an amendment to a bylaw respecting water utility charges must be made in the same way as the original bylaw, unless the MGA or any other enactment provides otherwise; and
(d) when read together, the effect of sections 7(g), 180(2) and 191 of the MGA was to require that any amendment to rates charged for public utility service, including water rates, be made by bylaw.
In this case, the AUC found that in purporting to increase water rates by resolution, Devon’s actions were inconsistent with the statutory framework under the MGA. If a municipality were permitted to simply include a provision within a bylaw giving it the authority to amend the bylaw by resolution, the municipality would be indirectly doing what the legislation has stated that it cannot do.
Relief
Section 43 of the MGA provides that if the AUC finds that a person’s service charge, rate or toll has been improperly imposed, it may order the charge, rate or toll to be wholly or partly varied, adjusted or disallowed. In this case, the AUC disallowed the amount of the rate increase billed to Imperial by Devon.
