Water – Financial Statements
Application
In Decision 28201-D01-2023, the Alberta Utilities Commission (“AUC”) determined that Salt Box Coulee Water Supply Company Ltd. (“Salt Box”) committed two contraventions: failing to file audited financial statements contrary to the AUC’s direction in Decision 24295-D02-2020; and charging monthly fees and rate riders to unconnected lot owners contrary to the terms and conditions (“T&Cs”) of service approved in Decision 24295-D02-2020. AUC enforcement staff (“Enforcement Staff”) applied for approval of a negotiated settlement agreement (“NSA”) reached between Enforcement Staff and Salt Box in this Phase 2 of the enforcement proceeding.
Decision
The AUC denied the application for approval of the NSA as contrary to the public interest since it was clear that Salt Box was unwilling or unable to adhere to the terms to which it has agreed.
The AUC also established an updated process schedule to complete the proceeding, which included steps for the AUC and Enforcement Staff to ask information request and conduct an oral hearing, including making submissions on the appropriate penalty.
Pertinent Issues
NSA
Despite having agreed to the terms of the proposed NSA, Salt Box subsequently filed further correspondence setting out that:
- Salt Box did not expect to provide audited financial statements by December 15, 2023, as previously agreed;
- Salt Box did not believe it can fund any refunds at this time; and
- Salt Box’s approved rates were not sufficient to allow water utility operations to continue.
In addition, in January 2024, Salt Box was struck from the register of Alberta Corporate Registries for a failure to file annual returns.
The AUC found that approval of the NSA would be contrary to the public interest. The AUC noted that, in part due to the benefits of promoting negotiated settlements, it generally does not disturb a settlement agreement reached between parties unless the proposal would bring the administration of justice into disrepute or otherwise be contrary to the public interest. The AUC found that approval of this NSA would be contrary to the public interest, as it was clear to the AUC that Salt Box, based on its own statements, was unwilling or unable to adhere to the terms in the NSA. There is no benefit to the public in approving an NSA that cannot or will not realistically be fulfilled.
Production of Financial Documents
The AUC held that the consequences of Salt Box’s continued failure to provide audited financial statements were severe and affect all parties. The AUC was aware that Salt Box may have been operating with a revenue shortfall, however, it was unable to ascertain the existence and severity of this shortfall due to a lack of transparency into Salt Box’s operations. Salt Box did provide unaudited financial statements for 2019 and 2020 on December 15, 2023, but these financial statements were not verified by an accountant. The AUC previously specifically ruled that it required audited financial statements from Salt Box.
The AUC also noted that the lack of audited financial statements hinders its ability to resolve this enforcement proceeding. It was faced with having to determine a penalty without any insight as to the effect of the potential penalty on the financial viability of the utility. Accordingly, to resolve this proceeding, the AUC decided to compel the production of financial documents to scrutinize the financial situation of Salt Box.
Consequently, the AUC issued an order directing Salt Box and its sole director to file with the AUC all documents in their possession relating to the financial position of the utility dating from January 1, 2018, to December 31, 2023.
Further Process
The AUC established further process steps for this proceeding setting deadlines for Salt Box to provide the required information and for parties to file submissions, and established an oral hearing.
