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The Office of the Utilities Consumer Advocate v Alberta Utilities Commission, 2021 ABCA 336

Link to Decision Summarized

GCOC – COVID-19

In this decision, the Alberta Court of Appeal (“ABCA”) dismissed an application for permission to appeal Alberta Utilities Commission (“AUC”) Decision 26212-D01-2021 regarding generic cost of capital, filed by the Utilities Consumer Advocate (“UCA”) pursuant to Section 29 of the Alberta Utilities Commission Act (“AUC Act”).

Background

In Decision 26212-D01-2021 (the “Decision”), the AUC determined the 2022 generic costs of capital for ATCO Electric Ltd, ATCO Gas and Pipelines Ltd, AltaLink LP, and EPCOR Distribution & Transmission Inc (the “Utility Companies”). Considering the Covid-19 pandemic, before establishing a process, the AUC asked whether there was enough ground for a further extension of the 2021 parameters for return on equity (“ROE”) and equity ratio for 2022 and if a return to a more traditional approach was possible.

The Utility Companies predominantly requested extending the ROE and equity ratios and dispensing with a proceeding for 2022. Interveners, including the applicant, generally opposed that view.

The AUC was of the view that the economic and market data available at the time was uncertain and remained in flux. It determined that there was an inadequate basis to depart from the approved ROE and equity thickness. A fair return for 2022 was set at the same level as was approved for 2021.

The UCA sought permission to appeal on two questions:

  • Did the AUC err in law or jurisdiction by failing to undertake its statutory obligation to set a fair return for 2022, including by applying the incorrect test and considering irrelevant factors? (the “Fair Return Issue”)

  • Did the AUC err in law by breaching its duty of procedural fairness in setting a fair return for 2022? (the “Procedural Fairness Issue”)

Discussion

Fair Return Issue

The AUC, in setting just and reasonable rates, is required to set a fair return for the utilities it regulates. In applying the Supreme Court of Canada’s decision Northwestern Utilities Ltd v Edmonton (City), [1929] SCR 186, the Commission has held that when determining the fair return, it must consider capital attraction, financial integrity and comparable investments, described as the Fair Return Standard.

The ABCA found that the AUC had a statutory discretion to select the method, procedure and evidence it considered appropriate to determine a fair return. The AUC was not required to utilize the intensive process it had used at times past; it could adopt an alternative approach, particularly in light of the COVID-19 pandemic and an alternative approach was not an error of law.

The ABCA further found that the AUC is given a wide discretion to consider all the facts it finds relevant in exercising its statutory mandate. These decisions involve questions of mixed fact and law. The Decision shows that the AUC sought to balance factors in deciding what was fair to the utilities and to customers given the uncertainty resulting from the pandemic. Such a decision would be reviewed by this Court on a standard of reasonableness.

In conclusion the ABCA found that the AUC did not make an error in law. In settling a utilities’ fair return, the AUC is empowered to weigh the evidence and exercise its judgment, which it did in this case.

Procedural Fairness Issue

The ABCA found that the merits of the Procedural Fairness Issue were undermined by the applicant’s assertion that the AUC failed to determine and conduct a process, as the AUC did determine and conduct this process. The ABCA found that the applicant’s complaint is a variation of its first issue, that the AUC did not conduct an intensive approach to the proceeding.

The procedure was different from that of previous approaches, but all parties were given notice, and the applicant was given the same opportunities as all other parties. The UCA’s complaint to the ABCA that it was not afforded an opportunity to answer the case made against it nor to correct statements of fact prejudicial to its view ignored that AUC proceedings are not dispute-based, and parties do not have a right to reply. The UCA was not denied any procedural rights.

Conclusion

Neither issue raised questions of law permitting the ABCA to grant permission to appeal. The UCA’s application for permission to appeal was dismissed.

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