Electricity – Review and Variance
In this decision, the AUC denied the application from ATCO Electric Ltd. (“AE”) for a review and variance of findings in Decision 24964-D02-2021 regarding inflation rates for in-scope labour for 2020 and 2021. Decision 24964-D02-2021 (the “Decision”) related to AE’s 2020-2022 general tariff application (“GTA”).
The AUC review process has two stages. In this proceeding, the AUC considered the first stage in which it determined whether an error of fact, law, or jurisdiction was made by the panel of the Decision.
Section 4(d)(i) Grounds – Errors of Fact, Law or Jurisdiction
In the Decision, the AUC approved in-scope labour inflation rates of 1.90 percent for 2020 and 1.75 percent for 2021. AE had applied for in-scope labour increases of 2.25 percent in 2020 and 2.75 percent in 2021. In the application for review, AE submitted that the hearing panel failed to apply or incorrectly applied the correct legal test, under Section 122 of the Electric Utilities Act (“EUA”), regarding the rights of AE to recover its reasonably and prudently incurred costs. AE argued that paying amounts that legally must be paid as a result of the binding labour arbitration process is reasonable and prudent. Accordingly, it argued that section 122 required that the AUC approve these costs as just and reasonable. Denial would deprive AE of a reasonable opportunity to recover its approved fair return on equity.
AE further argued that in the Decision, the AUC panel had erred in relying on hindsight and irrelevant information. Namely, AE criticized the AUC’s reliance on information such as wage settlements by AltaLink Management Ltd. and by ENMAX and uncertainties surrounding the COVID-19 pandemic that was not available to the labour arbitrator.
AUC Review Panel Findings
The Review Panel, in this proceeding, framed the issue as to whether the hearing panel was statutorily bound under Section 122 of the EUA to apply AE’s asserted prudence methodology in its review of the applied-for inflation rates for in-scope labour for each of 2020 and 2021.
In this case, section 121(4) of the EUA places the burden on AE to establish that its costs are reasonable. The AUC noted that sections 121 and 122 of the EUA describe what the AUC is required to consider when evaluating a tariff. Section 122 gives the AUC express discretion over the methodology to be used in setting rates and may make use of a variety of analytical tools and evidence in assessing the justness and reasonableness of a utility’s proposed rates so long as the ultimate rates it sets are just and reasonable to both consumers and the utility. The AUC determined that the labour arbitration decision does not trump the AUC’s power to set just and reasonable utility rates.
The AUC determined that the panel in the Decision reasonably assessed AE’s inflation rates for in-scope labour for each of 2020 and 2021 to find that it was reasonable on its face and on a balance of probabilities. AE did not show, either on a balance of probabilities or apparent on the face of the Decision, that an error in fact, law or jurisdiction exists on this ground that could lead the AUC to materially vary or rescind the Decision.
In answering the preliminary question, the AUC Review Panel found that AE did not meet the requirements for a review of the Decision and the application for review was dismissed.
