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ATCO Pipelines Decision on Preliminary Question – Application for Review of Decision 23537-D01-2018 (Errata) Compliance Application to Decision 22986-D01-2018 (AUC Decision 23953-D01-2018)

Link to decision summarized

Weld Assessment and Repair Program – Review and Variance


In this decision, the AUC granted ATCO Pipeline’s application requesting a review and variance of AUC Decision 23537-D01-2018 (Errata) (the “Decision”).

The review application concerned the AUC’s disallowance in the Decision of all incremental weld repair costs associated with ATCO’s weld assessment and repair program (“WARP”).

Background

ATCO Pipelines filed its 2017-2018 general rate application (“GRA”) on September 22, 2016, considered by the AUC in Proceeding 22011. As part of its GRA, ATCO sought to incorporate into its 2017 and 2018 revenue requirements, costs associated with the WARP; specifically, the costs to re-inspect several prefabricated welds and repair any defective work. ATCO Pipelines outlined deficiencies concerning radiographic inspections of its prefabricated welds.

In Decision 22011-D01-2017 (the “GRA Decision”), the AUC deferred its decision on the WARP costs and directed ATCO Pipelines to file additional information in a compliance filing.

In Decision 22986-D01-2018 (the “First Compliance Decision”), the AUC denied 100 percent of the WARP re-inspection. The AUC held that additional information was required before a conclusion could be reached on the reasonableness of ATCO Pipelines’ repair costs. The AUC directed ATCO Pipelines to provide additional information regarding the WARP repair costs in a further compliance filing.

ATCO Pipelines requested a review and variance of the AUC’s disallowance of the WARP re-inspection costs in the First Compliance Decision. On September 27, 2018, the AUC issued Decision 23539-D01-2018 (the “WARP Re-inspection Costs R&V Decision”), in which it granted the first stage of ATCO’s review application. The AUC granted a review based on the hearing panel’s misplaced reliance on intervener argument as the basis for what actions ATCO should have taken prior to discovering the deficiencies. The review panel found that this constituted  an error of fact, law or jurisdiction apparent on the face of the decision that could lead the AUC to materially varying or rescinding that decision.

Decision Subject to Review Application

In the Decision, the AUC found it unreasonable to permit ATCO Pipelines to recover re-inspection costs from customers when it could pursue recovery of these costs through litigation from those responsible (the involved radiographic inspection companies and technicians). The AUC found that ATCO Pipelines should recover the costs from the involved radiographic companies and technicians rather than recover costs from customers and then credit customers for any litigation proceeds. The AUC considered that ratepayers should not be responsible for any incremental repair costs arising from the improper inspections.

Legislative Framework

ATCO Pipelines filed the present application for review of the AUC’s denial of 100 percent of the incremental WARP repair costs in the Decision.

The review application requested a review and variance of the Decision, pursuant to section 10 of the Alberta Utilities Commission Act (“AUCA”) and Rule 016: Review of Commission Decisions (“Rule 016”).

The AUC’s authority to review its own decisions is discretionary and is found in section 10 of the AUCA. Rule 016 sets out the process for considering an application for review. A person who is directly and adversely affected by a decision may file an application for review within 60 days of the issuance of the decision, pursuant to section 3(3) of Rule 016. ATCO Pipelines filed its review application within the required period.

Two-stage Review Process

The review process typically has two stages. In the first stage, a review panel must decide whether there are grounds to review the original decision. This is sometimes referred to as the “preliminary question.” 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.

In this decision, the review panel decided the preliminary question for the review application.

Grounds for Review

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. These grounds may include an error of fact, law or jurisdiction made by the hearing panel (subsection 4(d)(i)). ATCO’s review application alleged such errors.

ATCO Pipelines submitted that the review application should be granted on the grounds that the error found by the AUC in the WARP Re-inspection R&V Decision applied equally to the disallowed weld repair costs and the Decision. It argued that the AUC’s disallowance of weld repair costs associated with improper inspections was arbitrary and counter to the AUC’s stated “periodic review and monitoring” standard.

Review Panel Findings

The AUC review panel granted the review application, holding that ATCO Pipelines demonstrated an error of fact, law or jurisdiction that was apparent on the face of the Decision that could lead the AUC to materially vary or rescind the Decision. This conclusion was supported by the following findings:

(a)     the original finding that “ratepayers should not be responsible for any incremental repair costs arising from the improper inspections” was premised on the AUC’s disallowance of re-inspection costs in the First Compliance Decision; and

(a)     as the Decision was premised on findings that were subject to review, the review panel was satisfied that the Decision should be reviewed as well.

Summary

In answering the preliminary question on ATCO Pipelines’ review application, the review panel found that ATCO Pipelines demonstrated that an error of fact, law or jurisdiction existed on the face of the Decision that could lead the AUC to materially vary or rescind the Decision. Accordingly, the AUC granted the first stage review.

The AUC ordered that the second stage review processes for each of the Decision and the First Compliance Decision would be conjoined in the interests of regulatory efficiency.

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