Markets – Financial Oversight
Application
TriSummit Utilities Inc. (“TSU”), a Canadian corporation designated as an owner of a gas utility and an owner of a public utility, filed an application with the Alberta Utilities Commission (“AUC”) for an order declaring that ss 26(2) through 26(5) of the Gas Utilities Act (“GUA”) do not apply to TSU. Alternatively, TSU requested an AUC order declaring that s 26(2) of the GUA does not apply to all applicable transactions or classes of transactions that TSU may undertake.
Decision
The AUC granted the alternative relief requested by TSU and declared that s 26(2) of the GUA does not apply to TSU unless and until the order is varied or rescinded by the AUC.
Pertinent Issues
TSU
Background
Through its subsidiary companies TriSummit Utility Group Inc. (“TSG”) and TriSummit Utility Holdings Inc. (“TS Holdings”), TSU wholly and indirectly owns Apex Utilities Inc. (“AUI”), a natural gas distribution utility operating solely in Alberta. AUI is regulated by the AUC pursuant to the Alberta Utilities Commission Act (“AUC Act”), the GUA and the Public Utilities Act (“PUA”).
Designation
TSU is a designated owner of a gas utility for the purposes of ss 26 and 27 of the GUA, and a designated owner of a public utility for the purposes of s 109 of the PUA. AUI, TSG and TS Holdings are also designated owners of a gas and public utility pursuant to the regulations enacted under the GUA and PUA.
Relief Requested
TSU requested under s 3(1)(c) of the GUA that the AUC order de-designate TSU under s 26(1) of the GUA so that ss 26(2) through 26(5) of the GUA do not apply to TSU.
S 26(2) of the GUA requires that designated owners of gas utilities obtain AUC approval prior to issuing debt or equity (or consummating a number of other transactions) or the transactions are void. S 26(3) of the GUA lists certain financial transactions for which the AUC’s approval is not required, and s 26(5) of the GUA provides that when a declaration is made by the AUC under s 26(4) of the GUA, certain transactions made prior to the declaration are no longer void or in contravention of the GUA.
In the alternative, TSU requested, pursuant to s 26(4) of the GUA, an AUC order declaring that s 26(2) of the GUA does not apply to all applicable transactions or classes of transactions that TSU may undertake. This makes the alternative relief narrower compared to the main one.
AUC Decision
Legal Test
When deciding whether to grant an exemption pursuant to either s 3 or s 26(4) of the GUA, the AUC considers whether the requested exemption is in the public interest. The public interest test requires consideration of the AUC’s dual mandate to establish just and reasonable rates, and to ensure the safety, reliability and integrity of the utility system in Alberta. The AUC must be satisfied that the exemption would not undermine the ability of the utility to provide safe and reliable service at just and reasonable rates.
In the context of exemptions pursuant to s 26(4) of the GUA, the AUC also considers the following non-exhaustive list of factors in determining whether a requested exemption should be granted:
- the operational and regulatory history of the utility;
- the potential effect of the requested exemption on regulatory oversight;
- the duration and scope of the requested exemption;
- any potential effect on the utility’s overall corporate structure;
- any objections to the application registered by interveners; and
- other general public interest concerns.
Main Relief
The AUC understood that TSU primarily sought relief from the operation of s 26(2) of the GUA. As a result, the AUC held that, since the express purpose of 26(4) of the GUA was to provide such relief, it was unnecessary for the AUC to resort to the broader s 3 of the GUA exemption.
Additionally, the AUC was not clear that granting a s 3 GUA exemption from ss 26(3), 26(4) and 26(5) of the GUA was in the public interest because it may affect the AUC’s jurisdiction over TSU in the future. The AUC was not persuaded by TSU’s arguments that a s 3 GUA exemption is preferable to a s 26(4) of the GUA exemption or that TSU will suffer any undue risk as a result of a s 26(4) GUA exemption.
Alternative Relief
Accordingly, the AUC considered TSU’s alternative request for relief and found that granting TSU a s 26(4) GUA exemption from s 26(2) GUA was in the public interest and that it would likely result in benefits to TSU in the operation of its multi-jurisdictional assets. The AUC was satisfied that the circumstances giving rise to TSU’s initial s 26 GUA designation as an owner of a gas utility have sufficiently changed so that the AUC no longer requires the same level of oversight to ensure the protection of customers and the integrity of Alberta’s utility system.
The AUC was also satisfied that it will retain sufficient oversight over TSU because TSU will remain a designated owner of a utility under s 27 GUA and s 109 PUA, and because its subsidiary companies TSG, TS Holdings and AUI will also remain designated under ss 26 and 27 of the GUA and 109 of the PUA. Finally, AUI, the utility operator itself, will remain regulated by the AUC.
Accordingly, the AUC found that granting TSU an exemption from s 26(2) of the GUA will not undermine the ability of the utility to provide safe and reliable service at just and reasonable rates.
