Electricity Distribution – Terms and Conditions – Permanent Disconnection Provisions – Complaint Application
Decisions Summary
In this decision, the AUC considered a complaint filed by Burnco Rock Products Ltd. (“Burnco”) against FortisAlberta Inc. In its complaint, Burnco asked the AUC for relief from certain provisions in Fortis’ Customer Terms and Conditions of Electric Distribution Service (“T&Cs”), including a declaration that Burnco is not obligated to pay the Distribution Customer Exit Charge, an order requiring Fortis to repay the overcharges made by Burnco immediately, and that Fortis be required to salvage Site ID 0040592553255 (“Site 1”) and Site ID 0040667097191 (Site 2) (collectively, the “Sites”) without further delay.
For the reasons summarized below, the AUC determined that:
(a) Fortis’ T&Cs, and more specifically, those requiring the provision of notice or the payment of charges for permanent disconnection (the “Permanent Disconnection Provisions”), applied to Burnco.
(b) The Permanent Disconnection Provisions were applied to Burnco in a manner consistent with the Commission’s original approval of the T&Cs.
(c) There had been substantive compliance with the Permanent Disconnection Provisions, and their associated objectives of revenue certainty and rate stability had been satisfied:
(i) By June 28, 2016, Burnco had provided clear and unequivocal notice to Fortis of its intention to leave the distribution system and its desire to have Fortis’ equipment at the Sites salvaged. It was from that date that the notice periods prescribed by the T&Cs for each of the Sites began.
(ii) The most current evidence on the record indicated that Burnco had paid all the amounts charged by Fortis to the retailer for each of the Sites, up to and including October 31, 2017.
(d) Any distribution tariff payments received by Fortis for the Sites after the expiration of their respective notice periods were overcharges. Fortis was directed to refund any such overcharges in accordance with Article 11.8 of the T&Cs.
(e) There was no need to address salvage because both of the Sites were salvaged by Fortis on January 14, 2018.
Fortis’ Terms and Conditions Apply to Burnco
The AUC found that the T&Cs, including the Permanent Disconnection Provisions, did apply to Burnco.
Burnco submitted that the terms of the individual Electric Service Agreements (the “ESAs”) between Burnco and Fortis’ predecessor governed the relationship between Burnco and Fortis. Because the requirement for notice or the disputed charges for permanent disconnection set out in the T&Cs were not part of and did not accord with the terms of the ESAs, Burnco argued that it was not bound by them.
The AUC noted its previous holdings that the terms and conditions between a public utility and its customers are not voluntary contracts, but legally imposed regulations that bind the utility to provide a service at just and reasonable rates to all who require and demand them.
Burnco had been a customer of Fortis (or its predecessor) since 1993 when Burnco commenced taking electric service at Site 1. The relationship between Fortis and Burnco was not a purely contractual or consensual one. Rather, that relationship was bound by legislative regulation and consequently, in part, by Fortis’ approved T&Cs. Explicit consent by a customer, such as Burnco, to changes in those approved T&Cs were not required to make them binding on such a customer.
While not determinative, the AUC noted that the paramountcy of the T&Cs was also expressly or implicitly recognized in the language of the ESAs between Fortis and Burnco.
Application of Permanent Disconnection Provision
Having found that the T&Cs, including the Permanent Disconnection Provisions, applied to Burnco, the AUC went on to consider Burnco’s arguments that the AUC should overrule the T&Cs because they were unjust or unreasonable or, in the alternative, that the Commission should find that the T&Cs were being applied in a manner that was not contemplated in its original approval of the T&Cs.
The AUC was not persuaded that the Permanent Disconnection Provisions were applied in a manner not contemplated by the Commission’s original approval.
The AUC noted that:
(a) Fortis’ current notice obligation and payment in lieu of notice (“PILON”) provisions were approved as part of Fortis’ T&Cs in Fortis’ last Phase II distribution tariff proceeding.
(b) The Commission had consistently held in previous decisions that:
(i) the formal regulatory process of approving the tariff, which includes the T&Cs, allows affected parties sufficient opportunity to test the T&Cs. Once approved, it is therefore no longer open to a party such as Burnco to seek to have the Commission “overrule” the approved T&Cs.
(ii) it would not consider the application of the approved T&Cs as “unfair, unreasonable or unforeseen” unless there it was established that they were applied in a manner “not contemplated in the Commission’s original approval.”
The AUC found that the argument by Burnco was not consistent with previous decisions of the Commission or its predecessor on the purpose of notice or a PILON charge, and was otherwise not supported by the evidence.
When it initially approved the PILON charges in Fortis’ T&Cs, the Board (the AUC’s predecessor) expressly distinguished between the concepts of the PILON charge and a utility’s recovery of its initial investment:
• The purpose of notice or a PILON is to provide a level of revenue certainty and rates stability for the distribution wires company and its customers in circumstances of a request to reduce load or terminate service.
• PILON is not directly associated with recovery of the initial investment, which recovery is more directly dealt with by the investment policy and associated customer contribution, electric service agreement and buy-down policy.
The AUC found that once it received Burnco’s signed salvage request forms on June 28, 2016, Fortis knew or reasonably ought to have known, that the Sites would no longer be providing revenue. The AUC found that Burnco’s repeated requests for permanent disconnection and salvage of the Sites were clear, consistent and unequivocal. Most significantly, on June 28, 2016, Fortis received a signed confirmation of Burnco’s intention to salvage and request to de-energize. This was in direct response to Fortis’ express confirmation that the salvage request forms were the “right” forms and that upon their receipt, Fortis would “proceed.”
The AUC found that this knowledge, coupled with Fortis’ continued receipt of distribution tariff payments for the Sites during the notice periods prescribed by the T&Cs, provided Fortis with an appropriate level of revenue certainty and rates stability for it and its remaining customers.
Notice Period for the Sites
With respect to Site 2, the AUC found that:
(a) pursuant to the T&Cs, Burnco was required to provide nine months’ notice for the permanent disconnection;
(b) such notice was effective on June 28, 2016, and it was therefore from that date that the notice period began;
(c) amounts billed on a monthly basis to the retailer for the Sites had all been paid to Fortis by the retailer, at least up to October 31, 2017, and that those amounts were equivalent, on a monthly basis, to the amounts payable during the notice period for each site;
(d) as such, Fortis had already received the full amounts payable during the notice period for Site 2; and
(e) all distribution tariff payments received for Site 2 beyond the expiration of the nine-month notice period were, therefore, overcharges and Fortis was directed to refund any such overcharges in accordance its T&Cs.
As for Site 1, the AUC found that:
(a) pursuant to the T&Cs, Burnco was required to provide a notice period of 20 months;
(b) amounts billed on a monthly basis to the retailer for Site 1 had all been paid to Fortis by the retailer, at least up to October 31, 2017;
(c) it was unclear for how long after October 31, 2017:
(i) Fortis had been overpaid for the notice period if Fortis continued to receive distribution tariff payments for Site 1 beyond the expiration of the 20 month notice period; or
(ii) Fortis was entitled to recover those amounts if Fortis had not received the distribution tariff payments for Site 1 between October 31, 2017 and the expiry of the notice period for that site.
Order
Based on the AUC’s findings summarized above, the AUC ordered Fortis to:
• Calculate the total invoice amount for a notice period of 20 months for Site 1 based on a notice period commencement date of June 28, 2016, and, in accordance with Article 11.8 of Fortis’ Customer Terms and Conditions of Electric Distribution Service, refund any payments made for Site 1 beyond the expiration of the 20 month notice period by no later than May 23, 2018.
• Calculate the total invoice amount for a notice period of nine months for Site 2 based on a notice period commencement date of June 28, 2016, and, in accordance with Article 11.8 of Fortis’ Customer Terms and Conditions of Electric Distribution Service, refund any payments made for Site 2 beyond the expiration of the nine-month notice period by no later than May 23, 2018.
