Costs – First Nations
In this decision, the Alberta Court of Appeal (“ABCA”) allowed the appeal of Alberta Utilites Commission (“AUC”) Decision 22612-D01-2018 (the “Decision”) and directed the AUC to allow two limited partnerships, ultimately controlled by the Piikani Nation and the Blood Tribe (the “Partnerships”), to pass on audit and hearing costs they incur as utility owners to ratepayers.
In the Decision, the AUC found that its approval of the electrical transmission asset transfers from AltaLink Mangagement Ltd. (“AML”) to the Partnerships would result in incremental costs to the ratepayers. The AUC refused to allow the Partnerships to pass on audit fees and AUC hearing costs, estimated to be $60,000 to ratepayers.
AML as the transferor of the transmission assets was granted permission to appeal on two issues: First, did the AUC improperly fetter its discretion when considering the transfer by applying the “no-harm test”; and second, did the AUC err by failing to consider all relevant factors.
AML argued that the AUC must, when exercising its authority, take into account the honour of the Crown principle and the reconciliation concept.
The ABCA determined that the AUC’s decision to ignore the cost savings arising from the routing of the transmission lines across the reserves of the Piikani Nation and the Blood Tribe is an error of law. The AUC did not consider all relevant facts when considering if a sale is in the public interest, which constitutes a legal error.
Background and Facts
In 2005, the Alberta Energy and Utilities Board approved the expansion of the electric transmission system in southwestern Alberta applied for by AltaLink Limited Partnership. As part of this proceeding, three route alternatives were considered, and AltaLink Limited Partnership presented one as its preferred route. Among other factors, that alternative was preferred as it was the shortest and lowest cost route. This alternative crossed the lands of the Piikani Indian Reserve No. 147 and the Blood Indian Reserve No. 148.
Before AltaLink Limited Partnership submitted its application, the Piikani First Nation and the Blood Tribe passed resolutions approving the specific routing across their reserves. Later, both First Nations exercised their options to purchase a fifty-one percent interest in the transmission line on their lands.
In the Decision, the AUC approved the transfer of the transmission assets to the Partnerships. As a condition of the approval, the AUC stated that the Partnerships cannot recover $60,000 in external auditor and hearing costs incurred for regulatory proceedings from ratepayers as part of their tariffs.
In its Decision, the AUC applied its “no-harm test”. The AUC focused on whether the sale would impact the rates and reliability of the utility service for ratepayers. The AUC was concerned about the financial impact of the transaction. Specifically by incrementally recurring annual audit fees paid to external auditors and hearing costs that would not arise if AML was to continue the operation of the assets. It weighed this negative effect against the potential benefits of savings from the shorter, less expensive route and intangible benefits arising from the partnership with the First Nations. The AUC found that the benefits did not mitigate the financial harm to ratepayers from incremental costs. However, the harm could be mitigated by imposing a condition that the audit and hearing costs may not be recovered from ratepayers.
AML applied to the ABCA seeking an order directing the AUC to vary the Decision to allow the Partnerships to include the costs in question in their respective tariffs, or, alternatively, an order quashing the Decision and remitting it back for reconsideration.
The AUC Erred by Considering Only Forward-Looking Considerations
In its application of the no-harm test, the AUC rejected the potential past savings arising from the transmission line’s routing on First Nations lands and the intangible benefits AML suggested arose from the Partnerships. The first benefit was rejected on the basis that the no-harm test is forward-looking. The second benefit was rejected with the explanation that it could, as an intangible benefit, not be quantified.
The ABCA determined that the AUC erred in considering only forward-looking benefits. There is no legislative basis or rationale for this strict approach as an absolute rule. Further, the ABCA determined that the AUC had erred when determining that cost savings solely from the initial construction phase are irrelevant.
The ABCA determined that a much broader view of the no-harm test and the public interest was appropriate. Particularly, the approach included factors the AUC considers relevant to the transfer and sale application, even if they arise before the application.
While making this finding, the ABCA noted that a forward-looking approach would result in consideration of all relevant public interest factors most of the time. Projects that increase economic activity on a reserve ought to be encouraged. They are in the public interest. This project explicitly contemplated such activity.
As the ABCA found the AUC to have made an error in this respect and only one error is needed for the appeal to be granted, it did not consider the second issue.
The appeal was allowed. As requested by AML, the ABCA varied Decision 22612-D01-2018 by ordering that the PiikaniLink Limited Partnership and the KainaiLink Limited Partnership may include the incremental audit and hearing costs in their respective tariff applications.