Gas & Electricity – Application for Corporate Reorganization
In this decision, the AUC considered an application (the “Application”) from Canadian Utilities Limited (“CUL”) to complete internal restructuring and reorganization relating to the Alberta PowerLine Limited Partnership (“APL”). The AUC approved the Application.
Statutory Scheme
CUL is a designated owner of a public utility under sections 101 and 102 of the Public Utilities Act (“PUA”), under section 1(1) of the Public Utilities Designation Regulation and a designated owner of a gas utility under sections 26 and 27 of the Gas Utilities Act (“GUA”), and under section 2 of the Gas Utilities Designation Regulation. Therefore, CUL must obtain approval or an exemption from approval from the AUC if it engages in certain transactions.
Background
APL owns and operates the Fort McMurray West 500 kV Transmission Project, which provides electric transmission service between the Edmonton and Fort McMurray regions.
CUL indirectly owns an 80 percent equity interest in APL through its ownership of four numbered companies and APL’s general partner. CUL’s internal reorganization is intended to achieve certain tax efficiencies and to facilitate a sale of its interest in the transmission line.
AUC Findings
The AUC noted that the central question in deciding whether to approve a transaction outside of the ordinary course of business, under sections 101(2)(d)(i) and 101(2)(d)(ii) of the PUA, and sections 26(2)(d)(i) and 26(2)(d)(ii) of the GUA, is whether customers are harmed by the transaction.
The customers in this case were the consumers of electricity and natural gas utility services.
The AUC stated that factors considered by the AUC in considering the no-harm test include:
a) customers are, to the maximum extent possible, to be protected against any negative ramifications arising from a transaction;
b) customers are not entitled to a level of post-transaction regulatory certainty they would not have realized if the transaction had not been approved; and
c) customers are at least no worse off after the transaction is completed after consideration of the potential positive and negative impacts of a proposed share transaction.
The AUC found that the proposed transactions did not have any potentially harmful operational effects on regulated customers that would impair the integrity and reliability of the electricity and natural gas systems. The ownership and operations of the utilities would not change because of the internal reorganization by CUL. Further, the internal reorganization was not anticipated to affect the credit rating for CU Inc. Additionally, there would be no cost allocation implications resulting from the proposed transactions. Transaction costs of the internal reorganization would be borne by CUL and will not be passed on through any corporate cost allocation.
The AUC concluded that approval of the Application for internal reorganization would not result in any financial harm to customers. Approval would not have a harmful effect on regulated utility service or the rates charged for those services, nor would the internal reorganization negatively affect regulatory oversight of CUL or any other designated owner. The no-harm test was therefore satisfied.
Order
The AUC granted approval of the applied-for share transfers and the applied-for internal restructuring and reorganization.
