Review and Variance – Sale of Transmission Assets – No-harm Test
In this decision, the AUC considered an application (the “Review Application”) by AltaLink Management Ltd. (“AltaLink” or “AML”), in its capacity as general partner of each of AltaLink, L.P. (“ALP”), PiikaniLink L.P. (“PLP”) and KainaiLink L.P. (KLP), requesting a review and variance of specific findings in:
(a) Decision 22612-D01-2018: AltaLink L.P. Transfer of Specific Transmission Assets to PiikaniLink L.P. and KainaiLink L.P. and the Associated 2017-2018 General Tariff Applications (“Transmission Asset Decision”); and
(b) Decision 23902-D01-2018: AltaLink L.P. Transfer of Specific Transmission Assets to PiikaniLink L.P. and KainaiLink L.P. and the Associated 2017-2018 General Tariff Applications Costs Award (“Costs Decision”).
The AUC denied the Review Application, based on finding that AltaLink failed to demonstrate that an error of fact, law, or jurisdiction was apparent on the face of the Transmission Asset Decision or the Costs Decision or otherwise existed on a balance of probabilities.
Transmission Asset Decision
The Transmission Asset Decision approved applications from AltaLink for the transfer of specific AltaLink assets to PLP and KLP, created PLP and KLP as new transmission facility owners (“TFOs”), and approved associated interim tariffs for PLP and KLP for the 2017 and 2018 test years. The AUC applied its no-harm test in considering the applications. While the AUC determined that the transaction contemplated by AltaLink did not meet the no-harm test, it imposed conditions to mitigate the financial harm and approved the applications subject to those conditions.
AltaLink sought a review of the Transmission Asset Decision requesting that the decision be varied to eliminate these conditions, namely:
(a) the removal of allowances for audits and funding of hearing cost reserves from the revenue requirements of the proposed PLP and KLP tariffs;
(b) the disallowance of any unreasonable or undue financial risk to ratepayers arising from the repayment terms in the financing of the proposed transfers from the ALP tariff; and
(c) the deferral of a decision to approve the establishment of deferral accounts for payments in lieu of taxes and annual structure payments for the PLP and KLP tariff.
(collectively, the “Conditions”).
AUC Review Process
The AUC’s authority to review its own decisions is provided under section 10 of the Alberta Utilities Commission Act. AUC Rule 016: Review of Commission Decisions (“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.
The review process has two stages. In the first stage, the AUC review panel must decide whether there are grounds to review the original decision (also referred to as the “preliminary question”). If the review panel decides that there are grounds to review the decision, it moves 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.
Section 4(d) of Rule 016 requires an application for review to set out the grounds for the review, which may include the following:
(a) the AUC made an error of fact, law or jurisdiction; or
(b) the existence of previously unavailable facts material to the decision, which existed prior to the issuance of the decision in the original proceeding but was not previously placed in evidence or identified in the proceeding and could not have been discovered at the time by the review applicant by exercising reasonable diligence.
Section 6(3) of Rule 016 provides that, in the case of an application made on the grounds of an error of fact, law, or jurisdiction, the applicant must demonstrate “the existence of an error of fact, law or jurisdiction is either apparent on the face of the decision or otherwise exists on a balance of probabilities that could lead the AUC to materially vary or rescind the decision.”
Claimed Grounds for Review
In its Review Application, AltaLink claimed that the AUC made several errors of fact and/or law that would result in ALP, KLP and PLP and their respective shareholders incurring costs beyond what was reasonable in the circumstances. More specifically, AltaLink asserted that the AUC made the following errors by finding that:
(a) the no-harm test was a forward-looking exercise, so the $32 million in savings enjoyed by ratepayers into the future as a result of routing the SW Line across the lands of the Piikani Nation and the Kainai Nation had no bearing on its approval of the Transfer Applications;
(b) future benefits flowing from the transfer of assets to PLP and KLP to AML and the Alberta utility industry, in general, were not sufficiently evidenced to establish that they would materialize and when;
(c) the terms of the loans between AML and PLP and AML and KLP would result in harm to ratepayers; and
(d) in relation to annual structure payments (“ASPs”) and payments in lieu of taxes, the Piikani Nation and Blood Tribe might have an incentive to seek increases in annual structure payments and payments in lieu of taxes, “at least theoretically.”
Application of No-Harm Test
No-Harm Test Is a Forward-looking Exercise
AltaLink argued that in its application of the no-harm test, the AUC hearing panel should have considered the benefits of routing the SW Line, which it claimed resulted in a $32 million savings, and that not doing so constituted an impermissible fetter on the AUC’s discretion and a failure to appropriately apply the no-harm test.
The review panel rejected this ground for review, finding that the hearing panel had not committed an error of law or fact in its finding not to apply the benefits asserted to arise from the routing of the portions of the SW Line through the Piikani Nation and the Blood Tribe lands, as an offset to the increased financial costs to ratepayers resulting from the creation of two new TFOs.
The review panel found that there was no reason for the hearing panel to consider the routing of the Line as an offset to its finding of financial harm because the subsequent asset transfer was not a condition reflected in the facility and need identification document (“NID”) approvals. The review panel found that:
(a) the hearing panel had to evaluate no-harm in the context of constructed facilities that were owned and operated by the existing utility, AltaLink; and
(b) this required the hearing panel to assess the no-harm test in the circumstances which existed subsequent to the completion of the facilities.
Consideration of Cost Savings
AltaLink claimed that the evidence was clear that there was a savings of $32 million. The review panel found that based on the documents referenced by AltaLink in Proceeding 22612 and in the Review Application, AltaLink had only provided evidence of AltaLink asserting that there would be a savings of this magnitude, and that the incremental costs related to running the SW Line through the First Nations lands and creating two new utilities would be only a moderate increase when compared to the $32 million in savings.
The review panel found that the hearing panel made conclusions based on the evidence in the transmission asset transfer proceeding. Absent an obvious or palpable error, it is not the role of the review panel to re-examine findings of fact by the hearing panel. The review panel did not consider that an obvious or palpable error was demonstrated by AltaLink in this instance.
The AUC review panel concluded that:
(a) the application of the no-harm test by the hearing panel was consistent with prior AUC practices and the evidence before it; and
(b) therefore, there was no error of law or fact that was either apparent on the face of the decisions or otherwise existed on the balance of probabilities that could lead the AUC to materially vary or rescind the Transmission Asset Decision or the Costs Decision on this ground.
Future Benefits to AltaLink and the Alberta Utility Industry Were Not Sufficiently Evidenced to Establish That They Would Materialize and When
AltaLink argued that it put forward clear evidence of benefits to AltaLink, the Alberta utility industry, and ratepayers generally, including:
(a) access to First Nations demographics for workers;
(b) having strong relationships with Alberta First Nations and access to government programs;
(c) having access to a pool of personnel from the First Nations to meet human resource needs;
(d) benefits from the First Nations’ relationships with other First Nations in Canada, to expand existing or initiate new projects that may involve other First Nations’ resources;
(e) strengthening AltaLink’s relationships with the First Nations; and
(f) aligning the interests of the First Nations and AltaLink for the long-term safe and reliable operation of the utility assets located on their reserve lands.
The AUC review panel noted that:
(a) the hearing panel specifically requested evidence from AltaLink to substantiate its claimed intangible benefits; and
(b) the hearing panel made it clear in the Transmission Asset Decision that this issue was considered, finding that:
(i) AltaLink had failed to provide sufficient evidence to establish that the asserted benefits are likely to materialize and, if so, when and to what extent; and
(ii) AltaLink also failed to provide sufficient evidence that the asserted benefits, if realized, could be objectively quantified as cost savings to ratepayers, offsetting the ongoing incremental costs resulting from the proposed transfers.
The AUC review panel found that:
(a) the hearing panel considered both financial and non-financial aspects in its determination of the no-harm test;
(b) the hearing panel specifically considered issues on the continuity of safe and reliable service of the assets that would be transferred to each of PLP and KLP; and
(c) AltaLink was attempting to reargue an issue that the hearing panel had clearly decided upon.
The review panel concluded that there was no error of law or fact that was either apparent on the face of
the decisions or otherwise existed on the balance of vary or rescind the Transmission Asset Decision.
The AUC Erred in Finding That the Loan Terms Result in Harm
The review panel rejected AltaLink’s claimed ground for review that the AUC hearing panel erred in finding that the loan terms resulted in harm, finding that the hearing panel’s decision was based on the facts put into evidence by AltaLink.
The review panel found that the hearing panel was concerned about the structure of the loans to previously unknown entities that could not achieve the same financing arrangements independently of AltaLink, arrangements which could not be shown to be consistent with conventional or reasonable lending practices. Given the public interest mandate of the AUC, and the evidence presented, the review panel found that AltaLink failed to demonstrate an error of law or fact that was either apparent on the face of the decisions or otherwise existed on the balance of probabilities that could lead the AUC to materially vary or rescind the Transmission Asset Decision or the Costs Decision on this ground.
The AUC Erred in Deferring Its Decision on Deferral Accounts for Payments in Lieu of Taxes and Annual Structure Payments
In the Transmission Asset Decision, the hearing panel deferred consideration of the request to provide approval for the creation of a deferral account for the payments in lieu of taxes account and annual structure payment account for each of the PLP and KLP tariffs.
The review panel found that:
(a) at best, the request for a review on this ground was premature, given that the hearing panel made no final decision on whether to ultimately grant the requested deferral accounts; and
(b) the hearing panel raised its concern with payment in lieu of taxes and annual structure payments in information requests and was not satisfied with the evidence filed, finding “that its concerns may be addressed in future PLP and KLP GTAs when the actual payments in lieu of taxes and annual structure payments are tested.”
The AUC review panel concluded that AltaLink had not demonstrated that the hearing panel’s finding was incorrect in fact and/or law. Accordingly, AltaLink failed to demonstrate an error of law or fact that was either apparent on the face of the decisions or otherwise existed on the balance of probabilities that could lead the AUC to materially vary or rescind the Transmission Asset Decision or the Costs Decision on this ground.
Decision
In answering the preliminary question, the review panel found that AltaLink had not met the requirements for a review of the findings of the hearing panel in Decision 22612-D01-2018 imposing conditions to mitigate harm to customers, or the findings of the hearing panel in Decision 23902-D01- 2018 to disallow the hearing costs applied for by AltaLink.
The AUC review panel, therefore, dismissed AltaLink’s application for review of these decisions.
