Rural Electrification Associations – Review and Variance
In this decision, the AUC considered review applications filed by North Parkland Power REA Ltd. (“North Parkland”) and by Rocky REA Ltd. (“Rocky REA”), and collectively the “REAs”) requesting a review and variance of specific findings in AUC Decisions 25038-D01-2019 and 25039-D01-2019 (the “Decisions”). The Decisions addressed requests by the REAs for approval of boundary alterations. The REAs’ review applications concerned findings in the Decisions regarding the denial of the requested boundary changes in original Proceedings 25038 and 25039. The AUC denied the review applications.
The AUC panel who authored the Decisions will be referred to as the “Hearing Panel” and the member of the AUC panel considering the review applications will be referred to as the “Review Panel.”
In the Decisions, the Hearing Panel held that approval of the boundary changes was not in the public interest.
The Hearing Panel’s findings of the North Parkland Decision are reproduced below. The Review Panel noted that findings in the Rocky REA Decision were mostly duplicative, so were not reproduced:
32. When considering the current application and the effects of any boundary change, it is important to understand the history behind the current service area boundaries for electric utility service providers.
33. The purpose of REAs is to provide electricity service to rural customers who would otherwise find the service to be cost-prohibitive, due to their distance from established electricity transmission or distribution lines. REAs therefore operate within the service territories of other regulated public utilities, such as Fortis. An important distinction between REAs and public distribution utilities is that the public distribution utilities are obligated to provide service to all customers within their statutory service areas, while the REA provides service only to its members within its statutory service area.
35. The Commission considers that service area boundaries for electric utility service providers were established purposefully in accordance with the legislation. Constantly changing service area boundaries creates uncertainty for both utilities and customers, which interferes with the orderly, economic and efficient operation of the Alberta Interconnected Electric System (“AIES”). Therefore, in the absence of extraordinary circumstances, the boundaries as they currently exist should be respected.
39. In the absence of evidence to the contrary, the Commission accepts that Tri “M” Farms believes that receiving service from North Parkland would be economically beneficial. The Commission also finds, based on the testimony of Mr. Mulligan, that customer cost is the sole reason that this application was brought forward.
40. The Commission notes that the nearest facilities capable of connecting the customer’s expansion to the AIES are Fortis facilities. It is unclear how North Parkland could connect the expansion using its own facilities at lesser cost; it is assumed that North Parkland, if its application was approved, intended to use Fortis’s facilities.
41. The Commission agrees with North Parkland’s assertion that use of another party’s facilities is contemplated in the wire owners agreement for those areas where service areas overlap and are not subject to direction of the Commission. However, the Commission is of the opinion that, in the absence of direct compensation from North Parkland to Fortis, customers of Fortis would be subsidizing service to Tri “M” Farms if the REA service boundary was expanded.
46. In weighing the evidence before it, the Commission finds that the personal economic benefit of becoming a member of the REA, as alleged by the consumer, would be the only material benefit of granting the application. This must be considered against the fact that Tri “M” Farms is located within Fortis’s statutory service area, there are no safety and reliability concerns, Fortis stated that it is willing and able to provide service and has the facilities close and available to connect to, with just and reasonable rates as approved by the Commission, and Fortis customers would be subsidizing this proposed service if North Parkland did not compensate Fortis for use of Fortis’s facilities. In addition, Mr. Mulligan, as a sophisticated business owner, has the option and resources necessary to provide alternative service in the form of generators in the event he finds Fortis’s rates to be too high for his high-demand, short-term seasonal needs.
47. Based on the foregoing, the Commission does not consider the boundary change to be in the public interest.
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. The review process 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 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.
Grounds for Review and Hearing Panel Findings
In its review applications, the REAs submitted that the AUC made numerous findings that were errors of law, fact, or jurisdiction as well as errors that were both procedural and substantive.
The REAs alleged that the Hearing Panel created several new tests in the Decisions, none of which were included on the issues list that was attached to the Notice of Hearing, which prejudiced the REAs because they could not know the case they had to meet in the hearing.
The alleged new tests created were:
(a) constantly changing boundaries: errors of law, fact, and jurisdiction;
(b) extraordinary circumstances: error of law, procedural unfairness;
(c) consumer wishes vs Fortis concerns: error of law; and
(d) subsidization by Fortis customers: errors of law and jurisdiction.
In addition, the REAs alleged that the Hearing Panel erred in its consideration of construction costs and the REAs’ rights under the wire owners agreement (“WOA”), which constituted an error of law.
Review Panel Findings
The Review Panel found no error that could lead it to materially vary or rescind the Decisions. The Review Panel found that the paragraphs of the Decisions formed part of the historical summary of service area boundaries for electric utility service providers in Alberta. The Hearing Panel did not appear to make factual findings regarding service area boundary confusion or uncertainty, nor did the reference to “extraordinary circumstances” articulate a test to be met but was an explanation that the types of circumstances to meet the test have to be unusual, uncommon or relatively rare.
The Review Panel did not consider the Hearing Panel’s weighing of consumers’ interests with Fortis’s interests to be unfair or prejudicial to the REAs because it was not contained on the issues list. The Review Panel reviewed the issues list and Notice of Hearing to which it was attached and found that neither indicated that the issues list was to be prescriptive or exhaustive. Rather, the Notice of Hearing indicated that the AUC must “consider each application for a service area boundary change on a case-by-case basis.” The weighing of consumers’ interests with Fortis’s interests was also consistent with the Commission’s broad discretion set out in section 25(2) of the Hydro and Electric Energy Act to consider “any other circumstances” in determining whether approval of the service boundary alteration is in the public interest and consistent with having regard for the unique circumstances of each case.
North Parkland asserted that the Hearing Panel erred in concluding that it was unclear how North Parkland could construct at a lower cost than Fortis given that the record confirmed that North Parkland could do so by connecting to and using Fortis’s distribution system. While the record contained a drawing and budgetary estimate for Tri “M” Farms that specified a lower construction cost than that provided by Fortis, North Parkland’s drawing and estimate contemplated a different technical configuration than that which Fortis had quoted to Tri “M” Farms, a difference which Fortis’s witness suggested would affect the price difference. Moreover, the Hearing Panel considered that the closest facilities capable of connecting the customer’s expansion to the AIES were Fortis facilities. Based on the foregoing, the Review Panel found the Hearing Panel’s conclusion that it was unclear how North Parkland could construct at a lower cost than Fortis to be reasonable based on the record before it and that it did not amount to an error of fact or law.
The Review Panel did not consider the Hearing Panel to have erred by wrongly ascribing weight and relevance to the proximity of the respective pre-existing lines of Fortis and Rocky REA and ignoring Rocky REA’s rights under the WOA as suggested by Rocky REA. The record established that Fortis’s facilities were 1.2 kilometres away compared to Rocky REA’s facilities at nearly four kilometres away. The Review Panel considered an assessment of proximity to be reasonable in evaluating costs and a relevant consideration in the Rocky REA application. Moreover, the Hearing Panel’s findings in this regard did not address, and were unrelated to, rights under the WOA as suggested by Rocky REA.
The Review Panel found that the Hearing Panel’s assessment of the subsidization related evidence to be a determination that, on its face or on a balance of probabilities, was not unreasonable. On review of the record of the original proceedings, there was evidence that the REAs proposed to connect to or tap off of Fortis’s facilities, and there would be costs associated with the maintenance of the Fortis lines. Moreover, the Fortis witnesses testified that if the REAs provide service to these consumers then customers of Fortis would subsidize the service.
The Review Panel did not find an error that could lead it to materially vary or rescind the Decisions.