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TransAlta Corporation – Decision on Preliminary Question in Application for Review of Decision 25369-D01-2020, AUC Decision 26305-D01-2021

Link to Decision Summarized

Request for Review


In this decision, an AUC review panel (“Review Panel”) denied TransAlta Corporation’s (“TransAlta”) application to review the findings in Section 3.2.10 of Decision 25369-D01-2020 (the “Decision”) in which it was determined that not all of the costs incurred for the construction of transmission line 1043L-Reserve were prudently incurred. The hearing panel (“Hearing Panel”) reduced the transmission line costs as well as the legal and related costs attributable to negotiating and concluding a Cooperation Agreement with the Enoch Cree Nation (“ECN”).

Discussion of Issues and Review Panel Findings

The AUC Breached TransAlta’s Right to Procedural Fairness

TransAlta claimed that the Hearing Panel made an error of law because the Hearing Panel disallowed costs on the basis of the finding that the parties (TransAlta and AltaLink Management Ltd., or “AML”) failed to meet the consultation requirements set out in Rule 007. TransAlta pointed to the fact that no IRs or notices were provided by the Hearing Panel that would have alerted them that the Hearing Panel had a concern as to their compliance with Appendix A1 of Rule 007.TransAlta asserted that this concern would constitute a “New Issue”.

The Review Panel noted that, at all times, the onus was on TransAlta and AML to demonstrate the prudence of their costs. It noted that IRs were sent to each of TransAlta, AML, and ECN and that, moreover, TransAlta and AML are sophisticated parties who understand the legislative scheme and AUC rules applicable to their operations.

The Hearing Panel determined from the record that “there is no record of communication with Enoch from a month prior to the facilities application (June 2010) to just two months before AltaLink restarted construction on the reserve (October 2011), a period of one year and four months.” The Hearing Panel noted in paragraphs 112 and 113 of the Decision, the absence of any documentary evidence to support the requirement to document commitments.

The Review Panel found that not only did the Hearing Panel make known that the consultation commitments made by TransAlta to ECN were of interest, it provided several opportunities for TransAlta to provide the evidence it was relying on in support of its applied-for relief. However, TransAlta, by its own admission, had nothing further to provide in evidence. The Review Panel found that the process established provided TransAlta with a full opportunity to present its case to support the prudence of its costs.

The AUC Misinterpreted or Misapplied the Prudence Test

TransAlta argued that the Hearing Panel held that it would apply the prudence test to the Edmonton Region Project costs but then modified or ignored components of the test, thus committing an error of law. TransAlta noted that the Hearing Panel ignored evidence that multiple meetings took place between October 2011 and May 2012 and that the ECN liaison was present, thus demonstrating that they had met their commitments.

The Review Panel again noted that the onus is on the applicant to demonstrate the prudence of costs. The Hearing Panel noted a gap in evidence supplied by TransAlta for the 2011-2012 period and that it would have been reasonable for them to expect evidence “such as meeting dates beyond October 27 or action items, […] a written evidential record to support this assertion, such as emails arranging the meetings, calendar invites, meeting notes, or invoices for catering”. The Hearing Panel applied the prudence test on the evidence that was provided and therefore did not commit an error of law. For this reason, the Review Panel dismissed the request for review on this ground as well.

The AUC Erred in Law in its Consideration of Rule 007, the Duty to Consult, and the Right of Way (“ROW”) Agreements

TransAlta argued that the Hearing Panel erred in law by scrutinizing engagement with the ECN in the period following the facilities application through the lens and documentary requirements of Rule 007. TransAlta claimed that the purpose of Rule 007 is to guide applicants in preparing a participant involvement program and does not impose consultation on all phases of a construction project. The Review Panel disagreed with this narrow characterization of Rule 007, noting that consultation is an ongoing process. It dismissed TransAlta’s request for review on this ground.

TransAlta also claimed that an error of law arose because the Hearing Panel determined the scope and content of the duty to consult based solely on Rule 007 without regard to the Constitution Act or notice to the Attorney General of Canada. The Review Panel found that TransAlta appeared to conflate references to consultation under Rule 007 with the Crown’s duty to consult affirmed by the Supreme Court of Canada, which considers consultation and accommodation of Indigenous groups when conduct might adversely impact established or potential treaty rights. The Review Panel found that the Hearing Panel’s examination of TransAlta and AML’s consultation with ECN was conducted in the context of reviewing their actions for prudence, in particular with respect to their follow-up commitments. For this reason, TransAlta failed to demonstrate an error in law on these grounds.

TransAlta also claimed that the Hearing Panel overlooked its right to access the right of ways, including how the agreements circumscribe the scope and content of the duty owed by TransAlta and AML to consult with ECN. However, the Review Panel noted that the Hearing Panel reduced expenditures available for recovery due to the detrimental effect of TransAlta’s failure to adhere to its commitments during the pre-construction stage, a period of 16 months. The Review Panel found that TransAlta failed to demonstrate an error on this ground.

The AUC Erred in Basing the Disallowances on the Entirety of the Cost of the Edmonton Region Project, and not the Incremental Costs of the Delays

TransAlta claimed that the Hearing Panel based its disallowance of 15 per cent on the entirety of the costs of the 1043L-Reserve portion of the Edmonton Region Project instead of on the incremental cost of the delays, and that this represents an error of law. The Review Panel found that the Decision made it evident that the Hearing Panel considered the prudent conduct of all parties during all phases of construction. Moreover, the Electric Utilities Act grants the AUC broad discretion in determining what costs are prudent or reasonable and does not require a line by line evaluation of each cost incurred to make its decision. Therefore, TransAlta’s request on this ground was denied.

Decision

For the reasons set out above, the Review Panel found that TransAlta had not met the requirements for a review and the application was therefore dismissed.

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