ATCO Electric Ltd. v. EUB,

• Judge: Fraser, C.J.A., McFadyen and Picard, JJ.A.
• Neutral Citation: 2004 ABCA 215
• Date: 15 January 2004
• Court: Court of Appeal (Alberta)

ATCO Electric Ltd. v. EUB (2004), 361 A.R. 1 (CA);

    339 W.A.C. 1

MLB headnote and full text

Temp. Cite: [2004] A.R. TBEd. AU.010

ATCO Electric Limited (appellant) v. Alberta Energy and Utilities Board (respondent)

(CA01-00476; 0201-0013-AC; 0201-0023-AC; 2004 ABCA 215)

Indexed As: ATCO Electric Ltd. v. Energy and Utilities Board (Alta.)

Alberta Court of Appeal

Fraser, C.J.A., McFadyen and Picard, JJ.A.

July 13, 2004.

Summary:

Under a 1999/2000 settlement, ATCO Electric Ltd. agreed to maintain certain distribution deferral accounts to accumulate variances between its approved rate based on forecasted costs and the actual costs. Deficiencies arose in the accounts for 2000. ATCO and the other parties to the settlement were unable to agree on the balances in the accounts. In 2001, ATCO applied for approval of its calculations of the balances and to recover carrying costs on those accounts for 2000 onward, until the accounts were collected in full. The Alberta Energy and Utilities Board dealt with ATCO's claims in three separate rulings. The Board concluded that ATCO was entitled to recover neither the 2000 carrying costs nor the full amount of the costs claimed for 2001 and 2002. ATCO appealed, asserting that the Board erred in disallowing its claim for the 2000 costs and in the methodology used to calculate the 2001 and 2002 costs.

The Alberta Court of Appeal dismissed the appeal.

Public Utilities - Topic 4665

Public utility commissions - Regulation - Rates - Considerations in fixing rates - Under a 1999/2000 settlement, ATCO Electric agreed to maintain distribution deferral accounts to accumulate variances between its approved rate based on forecasted costs and the actual costs - Deficiencies arose in the accounts for 2000 - ATCO and the other parties to the settlement were unable to agree on the balances in the accounts - In 2001, ATCO sought approval of its calculations and to recover its carrying costs on the accounts for 2000 onward, until the accounts were collected in full - The Alberta Energy and Utilities Board concluded that, inter alia, ATCO was not entitled to recover the 2000 carrying costs - ATCO appealed, asserting that the Board's duty to act in the public interest included a utility's economic interests - ATCO asserted that the Board also had to ensure that a utility was given a "reasonable opportunity to recover" its financing costs (Electric Utilities Act, s. 52(1)) - Therefore, the Board erred in approving the settlement and in not varying them to allow for recovery of the 2000 costs - The Alberta Court of Appeal rejected the assertions - Where a negotiated settlement was presented for approval in its entirety, as was the situation here, the public interest to be considered was that of the consuming public generally - The same standard applied to the Board's assessment of whether the tariffs in a negotiated settlement were "just and reasonable" - See paragraphs 132 to 163.

Public Utilities - Topic 4666

Public utility commissions - Regulation - Rates - Power to fix just and reasonable rates - [See Public Utilities - Topic 4665 ].

Public Utilities - Topic 4666

Public utility commissions - Regulation - Rates - Power to fix just and reasonable rates - Under a 1999/2000 settlement, ATCO Electric agreed to maintain distribution deferral accounts to accumulate variances between its approved rate based on forecasted costs and the actual costs - Deficiencies arose in the accounts for 2000 - ATCO and the other parties to the settlement were unable to agree on the balances in the accounts - In 2001, ATCO sought approval of its calculations and to recover its carrying costs on the accounts for 2000 onward, until the accounts were collected in full - The Alberta Energy and Utilities Board concluded that, inter alia, ATCO was not entitled to recover the 2000 carrying costs - ATCO appealed, asserting that the Board, by granting another utility carrying costs for 2000, contravened s. 51(1) of the Electric Utilities Act - Section 51(1) required the Board to ensure that the tariff was "just and reasonable" and was not, inter alia, unjustly discriminatory - The Alberta Court of Appeal dismissed the appeal - It was not unjust discrimination simply because a utility was required to comply with the deal it had made under a negotiated settlement even if that settlement was less advantageous than another negotiated settlement or Board decision - See paragraphs 118 to 121.

Public Utilities - Topic 4679

Public utility commissions - Regulation - Rates - Interest and carrying charges - [See Public Utilities - Topic 4665 and second Public Utilities - Topic 4666 ].

Public Utilities - Topic 4679

Public utility commissions - Regulation - Rates - Interest and carrying charges - Under a 1999/2000 settlement, ATCO Electric agreed to maintain distribution deferral accounts to accumulate variances between its approved rate based on forecasted costs and the actual costs - Deficiencies arose in the accounts for 2000 - ATCO and the other parties to the settlement were unable to agree on the balances in the accounts - In 2001, ATCO sought approval of its calculations and to recover its carrying costs on those accounts for 2000 onward, until the accounts were collected in full - The Alberta Energy and Utilities Board concluded that, inter alia, ATCO was not entitled to recover the 2000 carrying costs where neither the 1999/2000 settlement, nor the 2001/2002 settlement, nor the Deferral Accounts Regulation had authorized the claim - ATCO appealed - The Alberta Court of Appeal concluded that the appropriate standard of review was reasonableness - See paragraphs 52 to 59 - The Board's decision was not only reasonable it was correct - See paragraphs 65 to 117.

Public Utilities - Topic 4679

Public utility commissions - Regulation - Rates - Interest and carrying charges - Under a 1999/2000 settlement, ATCO Electric agreed to maintain distribution deferral accounts to accumulate variances between its approved rate based on forecasted costs and the actual costs - Deficiencies arose in the 2000 accounts - The parties were unable to agree on the balances in the accounts - In 2001, ATCO sought approval of its calculations and to recover its carrying costs on those accounts for 2000 onward, until the accounts were collected in full - The Alberta Energy and Utilities Board held that ATCO was not entitled to the full amount of the costs claimed for 2001 and 2002 - The Board, after considering a number of alternatives, based the cost of financing on the weighted average cost of capital for a "stand-alone" deferral account business unit operated under the umbrella of an integrated utility - The Board concluded that the business risk associated with this function would be low, meaning that debt financing, which was typically less costly to consumers than equity financing, should be readily available - Thus, the cost of capital to finance the accounts was properly based on a relatively high debt/equity ratio - The Alberta Court of Appeal stated that the methodology used to calculate the financing rate was a matter within the Board's discretion and expertise and was reviewable on the standard of patent unreasonableness - See paragraphs 60 to 64 - The Board did not err in the methodology used - See paragraphs 165 to 190.

Public Utilities - Topic 4741

Public utility commissions - Judicial review - General - Standard of review - [See second and third Public Utilities - Topic 4679 ].

Cases Noticed:

Pushpanathan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982, addendum [1998] 1 S.C.R. 1222; 226 N.R. 201, refd to. [para. 49].

Ryan v. Law Society of New Brunswick, [2003] 1 S.C.R. 247; 302 N.R. 1; 257 N.B.R.(2d) 207; 674 A.P.R. 207; 2003 SCC 20, refd to. [para. 49].

Toronto (City) et al. v. Canadian Union of Public Employees, Local 79 et al., [2003] 3 S.C.R. 77; 311 N.R. 201; 179 O.A.C. 291; 2003 SCC 63, refd to. [para. 49].

Dr. Q., Re, [2003] 1 S.C.R. 226; 302 N.R. 34; 179 B.C.A.C. 170; 295 W.A.C. 170; 2003 SCC 19, refd to. [para. 49].

Barrie Public Utilities et al. v. Canadian Cable Television Association et al., [2003] 1 S.C.R. 476; 304 N.R. 1; 2003 SCC 28, refd to. [para. 52].

Alberta Energy Co. v. Goodwell Petroleum Corp. et al. (2003), 339 A.R. 201; 312 W.A.C. 201; 233 D.L.R.(4th) 341; 2003 ABCA 277, refd to. [para. 52].

Industrial Power Consumers Association of Alberta v. Transalta Utilities Corp. et al. (2000), 255 A.R. 194; 220 W.A.C. 194; 2000 ABCA 186, refd to. [para. 53].

ATCO Ltd. et al. v. Calgary Power Ltd. et al., [1982] 2 S.C.R. 557; 45 N.R. 1; 41 A.R. 1, refd to. [para. 53].

Transalta Utilities Corp. v. Public Utilities Board (Alta.) (1986), 68 A.R. 171 (C.A.), refd to. [para. 56].

Pezim v. Superintendent of Brokers (B.C.) - see Pezim v. British Columbia Securities Commission et al.

Pezim v. British Columbia Securities Commission et al., [1994] 2 S.C.R. 557; 168 N.R. 321; 46 B.C.A.C. 1; 75 W.A.C. 1, refd to. [para. 56].

Western Irrigation District v. Alberta et al. (2002), 312 A.R. 358; 281 W.A.C. 358; 2002 ABCA 200, refd to. [para. 57].

Chieu v. Canada (Minister of Citizenship and Immigration), [2002] 1 S.C.R. 84; 280 N.R. 268; 2002 SCC 3, refd to. [para. 58].

Cartaway Resources Corp. et al., Re (2004), 319 N.R. 1; 195 B.C.A.C. 161; 319 W.A.C. 161; 2004 SCC 26, refd to. [para. 65].

Investors Compensation Scheme Ltd. v. West Bromwich Building Society, [1998] 1 W.L.R. 896 (H.L.), refd to. [para. 76, footnote 46].

Bank of Credit and Commerce International S.A. v. Ali et al., [2001] 1 All E.R. 961; 268 N.R. 204 (H.L.), refd to. [para. 76].

Equitable Life Assurance Society v. Hyman, [2000] 3 All E.R. 961, refd to. [para. 77, footnote 48].

Jumbo King Ltd. v. Faithful Properties Ltd., [1999] H.K.C.F.A.R. 279, refd to. [para. 77].

Rizzo & Rizzo Shoes Ltd. (Bankrupt), Re, [1998] 1 S.C.R. 27; 221 N.R. 241; 106 O.A.C. 1, refd to. [para. 127].

Bell ExpressVu Limited Partnership v. Rex et al., [2002] 2 S.C.R. 559; 287 N.R. 248; 166 B.C.A.C. 1; 271 W.A.C. 1; 2002 SCC 42, refd to. [para. 127].

Love et al. v. Subdivision and Development Appeal Board (Flagstaff (County)) (2002), 317 A.R. 261; 284 W.A.C. 261; 2002 ABCA 292 (C.A.), refd to. [para. 127].

British Columbia Electric Railway Co. v. Utilities Commission (B.C.), [1960] S.C.R. 837, refd to. [para. 131].

TransAlta Utilities Corp. v. Public Utilities Board (Alta.) (1986), 68 A.R. 171 (C.A.), refd to. [para. 131].

Atco Ltd. et al. v. Calgary Power Ltd. et al., [1982] 2 S.C.R. 557; 45 N.R. 1; 41 A.R. 1, refd to. [para. 132].

Dartmouth (City), Re (1976), 17 N.S.R.(2d) 425; 19 A.P.R. 425 (C.A.), refd to. [para. 132].

Kenora (Town) Hydro Electric Commission v. Vacationland Dairy Co-operative Ltd., [1994] 1 S.C.R. 80; 162 N.R. 241; 68 O.A.C. 241, refd to. [para. 132].

British Columbia Electric Railway Co. v. Public Utilities Commission of British Columbia et al., [1960] S.C.R. 837, refd to. [para. 132].

Reference Re Section 101 of the Public Utilities Act (Nfld.) (1998), 164 Nfld. & P.E.I.R. 60; 507 A.P.R. 60 (Nfld. C.A.), refd to. [para. 132].

Edmonton (City) v. Northwestern Utilities Ltd., [1961] S.C.R. 392, refd to. [para. 132].

Yukon Energy Corp. et al. v. Utilities Board (Yukon Terr.) (1996), 74 B.C.A.C. 58; 121 W.A.C. 58 (Yuk. C.A.), refd to. [para. 133].

Public Utilities Board (N.S.) v. Nova Scotia Power Corp. et al. (1976), 18 N.S.R.(2d) 692; 20 A.P.R. 692; 75 D.L.R.(3d) 72 (C.A.), refd to. [para. 133].

Bell Canada v. Canadian Radio-Television and Telecommunications Commission, [1989] 1 S.C.R. 1722; 97 N.R. 15, refd to. [para. 133].

Portage la Prairie (City) v. Inter-City Gas Utilities Ltd. (1970), 12 D.L.R.(3d) 388 (Man. C.A.), refd to. [para. 134].

Utilities Consumers' Group v. Yukon (Utilities Board) (2001), 35 Admin. L.R.(3d) 11; 2001 YKCA 5 (C.A.), refd to. [para. 139].

Radhakrishnan v. University of Calgary Faculty Association et al. (2002), 312 A.R. 143; 281 W.A.C. 143; 2002 ABCA 182, refd to. [para. 157].

Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941; 150 N.R. 161, refd to. [para. 165].

Centre communautaire juridique de l'Estrie v. Sherbrooke (Ville) et al., [1996] 3 S.C.R. 84; 201 N.R. 61, refd to. [para. 165].

Authors and Works Noticed:

Alberta, Hansard, Legislative Debates (May 2, 1998), p. 1488 [paras. 2, 12, footnotes 3, 11].

Black, A.J., Electricity Competition and Fair Market Access in Canada (1999), 20 Energy L.J. 291, generally [para. 16, footnote 18].

Glaeser, Martin, Public Utilities in American Capitalism (1957), pp. 196, 197 [para. 126, footnote 55].

Hansard (Alta.) - see Alberta, Hansard, Legislative Debates.

Krieger, Stefan, Problems for Captive Ratepayers in Nonunanimous Settlements of Public Utility Rate Cases (1995), 12 Yale L.J., fn. 57 [para. 126, footnote 55].

Phillips, The Regulation of Public Utilities (1988), p. 371 [para. 185, footnote 71].

Priest, Margo, The Privatization of Regulation: Five Models of Self-Regulation (1997-98), 29 Ott. L. Rev. 233, generally [para. 134, footnote 58].

Roman, Andrew J., Electricity Deregulation in Canada: An Idea Which Has Yet to be Tried? (2002), 40 Alta. L. Rev. 97, pp. 100 [para. 1, footnote 1]; 114 [para. 23, footnote 27].

Rose, J.R., The Cost of Capital in Public Utility Rate Regulation (1957), 43 Virginia L. Rev. 1079, pp. 1088, 1089 [para. 185, footnote 71].

Waddams, Stephen M., The Law of Contracts (4th Ed. 1999), p. 105 [para. 77, footnote 47].

Counsel:

H.M. Kay, Q.C., and L.G. Keough, for the appellant;

J.R. McKee, and A.E. Domes, for the respondent.

This appeal was heard on January 15, 2004, by Fraser, C.J.A., McFadyen and Picard, JJ.A., of the Alberta Court of Appeal. Fraser, C.J.A., delivered the following judgment for the court at Calgary, Alberta, on July 13, 2004.