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ATCO Electric Ltd. Decision on Application for Review and Variance of Decision 22742-D02-2019 2018-2019 Transmission General Tariff Application, AUC Decision 25139-D01-2020

Link to Decision Summarized

Rates – Electricity – Review and Variance


In this decision, the AUC considered whether to grant an application (the “R&V Application” filed by ATCO Electric Ltd. (“ATCO Electric”) requesting a review and variance (“R&V”) of specific findings in AUC Decision 22742-D02-2019 (the “Decision”). The Decision provided the AUC’s determinations on utility asset disposition (“UAD”) and other matters pertaining specifically to the Fort McMurray wildfire, filed as part of ATCO Electric’s 2018-2019 general tariff application in Proceeding 22742. The AUC approved the R&V Application and varied paragraphs 63 to 65 of the Decision.

AUC’s Review Process

The AUC’s authority to review its own decisions is discretionary and is found in section 10 of the Alberta Utilities Commission Act. That Act authorizes the AUC to make rules governing its review process and the AUC established Rule 016 under that authority. 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 Electric filed its R&V Application within the required period.

Section 4(d) of Rule 016 requires an applicant to set out in its application the grounds upon which it is relying, which may include the following:

(i) The Commission made an error of fact, law or jurisdiction;

(ii) Previously unavailable facts material to the decision, which existed prior to the issuance of the decision in the original proceeding but were 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;

(iii) Changed circumstances material to the decision, which occurred since its issuance.

Section 6(3) of Rule 016 describes the circumstances in which the AUC may grant a review as follows:

6(3) The Commission may grant an application for review of a decision, in whole or in part, where it determines, for an application for review pursuant to subsections 4(d)(i), (ii) or (iii), that the review applicant has demonstrated:

(a) In the case of an application under subsection 4(d)(i), 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 Commission to materially vary or rescind the decision.

(b) In the case of an application under subsections 4(d)(ii) or 4(d)(iii), respectively, the existence of: (i) Previously unavailable facts material to the decision..; or (ii) Changed circumstances material to the decision…

that could lead the Commission to materially vary or rescind the decision,

The AUC noted that the Supreme Court of Canada in Housen v Nikolaisen, as recently reaffirmed in Canada (Minister of Citizenship and Immigration) v Vavilov, determined that the applicable appellate review standard concerning an alleged error of fact, or mixed fact and law, is a “palpable and overriding error.” This guidance was incorporated by the AUC in Decision 2012-124 as follows:

30. … [F]indings of fact or inferences of fact made by the hearing panel are entitled to considerable deference, absent an obvious or palpable error. In the Commission’s view, this approach is consistent with that prescribed by the Supreme Court in Housen v. Nikolaisen [2002 SCC 33] and by the Court of Appeal in Ball v. Imperial Oil [2010 ABCA 111]. It is also consistent with the general principle that the trier of fact is better situated than a subsequent review authority to make factual findings or draw inferences of fact given the trier of fact’s exposure to the evidence and familiarity with the case as a whole.

In light of this guidance, the AUC concluded that it should apply the following principles to its consideration of the R&V Application before it:

(a)     decisions of the AUC are intended to be final; the AUC’s Rules recognize that a review should only be granted in those limited circumstances described in Rule 016;

(b)     the review process is not intended to provide a second opportunity for parties with notice of the application to express concerns about the application that they chose not to raise in the original proceeding; and

(c)      the review panel’s task is not to retry the application based upon its own interpretation of the evidence nor is it to second guess the weight assigned by the hearing panel to various pieces of evidence. Findings of fact and inferences of fact made by the hearing panel are entitled to considerable deference, absent an obvious or palpable error.

R&V Panel Findings

Review Grounds

ATCO Electric argued that the hearing panel made an error of fact, law and/or jurisdiction pursuant to section 4(d)(i) of Rule 016 when it directed that ATCO Electric treat the remaining net book value (“NBV”) of the destroyed assets of $0.664 million, and the costs associated with the repair or replacement of damaged or destroyed assets of $7.6 million, in a manner contrary to AUC and judicial precedent, and inconsistent with the AUC’s prior decisions and ATCO Electric’s normal depreciation and accounting treatment. The R&V panel majority rejected ATCO Electric’s argument for grounds for review on the basis of such an error.

The R&V panel majority found that the arguments presented by ATCO Electric were more akin to section 4(d)(ii) of Rule 016; that is, the arguments suppled “facts material to the decision, which existed prior to the issuance of the decision in the original proceeding but were 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.” The R&V panel majority therefore found that a review on the basis of this ground, while not asserted, had been demonstrated.

The R&V panel majority noted it was apparent that the hearing panel was of the view that ATCO Electric was applying to account for the destroyed assets at issue through its reserve for injuries and damages (“RID”) account, and that ATCO Electric intended to update its accounting policy for the RID account on a go-forward basis. In this proceeding, ATCO Electric cited a number of documents and exhibits as “clear references to the update of the accounting policy on disposals and retirements and its impact on the RID.” In the R&V panel majority’s view, had ATCO Electric understood the hearing panel’s interpretation of the applied-for accounting treatment, it would have provided the information filed in this R&V Application on the record of the original proceeding to clarify its requested accounting treatment.

The R&V panel majority found that the new information disclosed in this R&V proceeding could, on a balance of probabilities, lead the hearing panel to materially vary its findings in the Decision. This is because, for example, at paragraph 65 of the Decision, the hearing panel expressed concern with ATCO Electric’s approach to using the RID account as “…a mechanism for the recovery of capital costs, in circumstances such as those associated with events like the Fort McMurray wildfire,” and directed ATCO Electric to re-examine the reasonableness of this approach as part of ATCO Electric’s next general tariff application.

Variance

As clarified in the R&V Application, ATCO Electric was applying to retire the costs of the destroyed assets ($1.9 million) and capitalize the costs of the replacement assets ($7.6 million) in the year 2017. The R&V panel accepted that this proposed accounting treatment was consistent with ATCO Electric’s established RID treatment and accounting policies and prior AUC approvals. Accordingly, the R&V panel majority approved this accounting treatment.

Concurring Opinion of Commissioner Phillips

Commissioner Phillips concurred with the conclusion of the R&V panel majority but would have granted the first stage of the review test on the grounds that ATCO Electric satisfied the requirements of section 4(d)(i) of Rule 016, as applied for.

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