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FortisAlberta Application for Orders Confirming Boundaries of FortisAlberta Inc. Exclusive Municipal Franchise Areas, AUC Decision 25644-D01-2021

Link to Decision Summarized

Municipal Franchise Areas – Rural Electrification Associations


In this decision, the AUC considered an application under Section 29 of the Hydro and Electric Energy Act (“HEEA”) from FortisAlberta Inc. (“FortisAB”) concerning the boundaries of ForitsAB’s municipal franchise areas (“MFA”)s. The AUC:

  • Confirmed FortisAB’s service area boundaries (“FortisAB’s expanded service areas”);

  • Altered the service area boundaries of rural electrification associations (“REAs”) to prevent incursion into FortisAB’s exclusive service areas under the MFAs, as required;

  • Ordered, consistent with the bylaws issued by the Town of Penhold (“Penhold”) and the Town of Bruderheim (“Bruderheim”), the transfer, as soon as practicable, of REA facilities and customers located within FortisAB’s expanded service areas under the MFA’s granted to FortisAB by those municipalities;

  • Ordered the eventual transfer of existing REA customers and associated facilities within the remainder of FortisAB’s expanded service areas to FortisAB consistent with the AUC’s findings in Decision 22164-D01-2018.

·                  Denied FortisAB’s request for the transfer of REA assets that are located within FortisAB’s expanded service areas but are not used to serve a REA member within those service areas namely, those located within the Town of Millet, the Town of Fort Macleod and the Summer Village of West Cove.

Discussion of Issues and AUC Findings

Annexed Distribution Service Area and REA Members Are Being Served by the REA Within the Annexed Boundary

In Proceeding 22164, the AUC examined the legislative and public interest considerations to determine whether to alter electric distribution service area boundaries to align with the MFAs entered into between FortisAB and various municipalities whose corporate boundaries had expanded through annexation and overlapped with an existing REA service area. In all those instances examined in that proceeding, there were REA members being served by the REA within the annexed distribution service area. In this proceeding’s decision, the AUC confirmed FortisAB’s exclusive franchise areas to correspond to the corporate limits of the municipalities. However, the AUC did not require the immediate transfer of existing REA facilities and members in the annexed distribution service areas absent a municipal bylaw requiring those members to connect to FortisAB.

In the current application, FortisAB estimated that approximately 21 members were being served by REAs in annexed distribution service areas, and that REA-owned distribution facility assets were in about 24 locations within municipal corporate limits.

FortisAB stated that in accordance with Decision 22164-D01-2018, it did not expect the immediate transfer of the REA members or facilities in the annexed distribution service areas. Rather, it asked for orders confirming FortisAB’s exclusive service areas in 14 municipalities, and that:

Any existing REA member, who is currently taking electric distribution service from one of the affected REAs within the corporate limits of a municipality identified in Appendix A to this Application, may continue to be served by the REA until such time as the municipality passes a bylaw requiring the REA members in the municipality to take electric distribution service from FortisAlberta. If a municipality does not pass any such further bylaw, the affected REA has the Commission’s approval to continue to serve an existing REA member within the municipality’s boundaries until the earliest of: (i) the existing REA member electing to transfer to FortisAlberta, (ii) a change in the member of service (such as a change in ownership of the applicable site), (iii) the affected REA requesting the transfer of the member and associated facilities to FortisAlberta, and (iv) the affected REA refusing to continue to serve the existing member.

The AUC confirmed FortisAB’s exclusive service areas to correspond with the municipal corporate limits and ordered the transfer of REA assets and members in the annexed distribution service areas in accordance with the conditions outlined in Decision 22164-D01-2018.

The AUC found hat the Town of Millet, the Town of Penhold and the Town of Bruderheim had each passed bylaws pursuant to Section 46 of the Municipal Government Act (“MGA”) requiring the REA members in those respective municipalities to take electric distribution service from FortisAB. Consistent with the bylaws passed by those municipalities, the transfer of REA assets and REA members within the corporate limits of the Town of Penhold and the Town of Bruderheim to FortisAlberta was ordered to be completed as soon as practicable.

Annexed Distribution Service Area and No REA Members Are Being Served by the REA Within the Annexed Boundary

Evidence provided in this proceeding showed three instances of REA distribution system assets located within municipal corporate limits that do not serve REA member sites within those boundaries: two belonging to EQUS in the Town of Fort Macleod and the Summer Village of West Cove, and one belonging to Battle River in the Town of Millet.

FortisAB argued that the ownership transfer of these pass-through assets would be in the public interest as the elimination of overlapping service areas would reduce or eliminate the need for an integrated operation agreement to govern the operation of an intermingled system. It added that EQUS and Battle River would be fairly compensated for their assets and that REA members located outside the service area boundaries would not experience an interruption in service from their REAs.

The AUC had previously found in Decision 22164-D01-2018, that the MFAs and the municipalities’ exercise of authority pursuant to the MGA, including section 45, was subsumed under the broader issue of what is in the public interest.

For the purposes of this analysis, the AUC considered sections 45 to 47 of the MGA, sections 29 and 32 of the HEEA and section 8 of the Alberta Utilities Commission Act (“AUC Act”).

The AUC noted that a plain reading of sections 29 and 32 of the HEEA grants authority to the AUC, when it is in the public interest to do so: (i) to reduce the service area of an REA and, as part of its public interest consideration; and (ii) order the transfer of any facilities of the electric distribution system of the REA to another party for the purpose of ensuring the continued distribution of electric energy in the service area or part that was served by the REA.

An alteration of the REA service area took place. The municipal boundary had expanded through annexation. The AUC held it was in the public interest to order that the reduction of the size of the REA service area conform with the boundaries governed by the MFAs.

FortisAB further requested an order requiring the transfer of REA assets upon the passage of a bylaw by the municipality pursuant to Section 46 of the MGA, an existing REA member wanting to be served by FortisAB or the REA no longer wanting to serve the member.

Evidence provided in this proceeding did not convince the AUC that the transfer of these assets was necessary to ensure continued distribution of electric energy within the annexed area. The AUC could therefore not rely on its authority under section 32(2)(b) to order the transfer of these assets to FortisAB.

The AUC noted that it has the general authority pursuant to Section 8 of the AUC Act to do all things that are necessary for or incidental to the exercise of its powers and the performance of its duties and functions. The AUC considered whether this general authority could authorize the transfer of the pass-through assets. It noted that provisions in the HEEA authorize the AUC to give effect to a change in a service area; issue such orders concerning the transfer of facilities as are considered necessary to ensure that customers continue to receive service in the service area; and provide for fair compensation to the REA. Comparatively, Section 8 of the AUC Act is a more general provision. Consistent with the rules of statutory interpretation, the AUC found that it cannot apply its section 8 authority in substitution for the explicit provisions in the HEEA that detail the Commission’s authority in the circumstances of a change in service area.

Accordingly, in those municipalities where there are pass-through assets, the Commission orders\ed the size of the REA service area be reduced to conform with the MFA pursuant to section 32(1)(a) of the HEEA. However, the transfer of the pass-through assets to FortisAlberta was not directed.

Order

The AUC confirmed FortisAB service areas outlined in a list in the decision. The AUC denied FortisAB’s request for the transfer of REA-owned assets located within FortisAB’s expanded service areas, but not used to serve an REA customer within those service areas namely, those located within the Town of Millet, the Town of Fort Macleod and the Summer Village of West Cove.

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