Calgary (City) v. Energy and Utilities Board (Alta.) et al., 2010 ABCA 132

• Judge: Côté, Hunt and Paperny, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: January 13, 2010
• Citations: 2010 ABCA 132;(2010), 477 A.R. 1 (CA)

Calgary v. EUB (2010), 477 A.R. 1 (CA);

      483 W.A.C. 1

MLB headnote and full text

Temp. Cite: [2010] A.R. TBEd. AP.120

City of Calgary (appellant/applicant) v. Alberta Energy and Utilities Board (respondent/respondent) and ATCO Gas and Pipelines Ltd. (respondent/respondent)

(0801-0030-AC; 2010 ABCA 132)

Indexed As: Calgary (City) v. Energy and Utilities Board (Alta.) et al.

Alberta Court of Appeal

Côté, Hunt and Paperny, JJ.A.

April 23, 2010.

Summary:

In May 2004, ATCO Gas and Pipelines Ltd. sought the Energy and Utilities Board's approval to correct balances in the deferred gas accounts (DGAs) for each of its south and north gas distribution service territories. The adjustments were sought because there had been inaccurate reporting of gas being transported for other entities through ATCO's pipeline network (transportation imbalances). It appeared that the errors began when the administration of ATCO's gas transportation system was moved to a new system. ATCO had included the transportation imbalances as prior period adjustments in the DGAs as part of its December 2003 gas cost recovery rate (GCRR) filings. While producing supplementary information requested by the Board, ATCO detected additional transportation imbalances. It then refiled its December 2003 GCRR excluding the transportation imbalance adjustments. Three Board decisions were relevant. The first decision partly allowed ATCO's application to use the DGA/GCRR reconciliation process to record the transportation imbalances (DGA Decision). In the second decision, the Board established a general rule that the DGA/GCRR reconciliation process had a two-year limitation period (Limitations Decision). The third decision focused on the Board's jurisdiction to make the DGA and the Limitations Decisions. The City of Calgary applied for leave to appeal.

The Alberta Court of Appeal, per Martin, J.A., in a decision reported at [2009] A.R. Uned. 40, granted leave to appeal.

The Alberta Court of Appeal allowed the appeal and remitted the matter to the Board for reconsideration in light of these reasons.

Administrative Law - Topic 9069

Boards and tribunals - Jurisdiction of particular boards and tribunals - Energy and utility boards - In May 2004, ATCO Gas and Pipelines Ltd. sought the Energy and Utilities Board's approval to correct balances in the deferred gas accounts (DGAs) for each of its south and north gas distribution service territories - The adjustments were sought because there had been inaccurate reporting of gas being transported for other entities through ATCO's pipeline network (transportation imbalances) - It appeared that the errors began when the administration of ATCO's gas transportation system was moved to a new system - ATCO had included the transportation imbalances as prior period adjustments in the DGAs as part of its December 2003 gas cost recovery rate (GCRR) filings - While producing supplementary information requested by the Board, ATCO detected additional transportation imbalances - It then refiled its December 2003 GCRR excluding the transportation imbalance adjustments - Three Board decisions were relevant - The first decision partly allowed ATCO's application to use the DGA/GCRR reconciliation process to record the transportation imbalances (DGA Decision) - In the second decision, the Board established a general rule that the DGA/GCRR reconciliation process had a two-year limitation period (Limitations Decision) - The third decision focused on the Board's jurisdiction to make the DGA and the Limitations Decisions - The City of Calgary appealed - At issue was, inter alia, the source of the Board's jurisdiction over DGAs - The Alberta Court of Appeal held that "DGAs in gas utility regulation exist to ensure that consumers pay the cost of the gas they consume, with no resulting profit or loss to the utility's shareholders" - The Board's rate-setting authority and its ability to establish deferral accounts for that purpose were at the very core of its competence - See paragraphs 34 to 44.

Administrative Law - Topic 9069

Boards and tribunals - Jurisdiction of particular boards and tribunals - Energy and utility boards - In May 2004, ATCO Gas and Pipelines Ltd. sought the Energy and Utilities Board's approval to correct balances in the deferred gas accounts (DGAs) for each of its south and north gas distribution service territories - The adjustments were sought because there had been inaccurate reporting of gas being transported for other entities through ATCO's pipeline network (transportation imbalances) - It appeared that the errors began when the administration of ATCO's gas transportation system was moved to a new system - ATCO had included the transportation imbalances as prior period adjustments in the DGAs as part of its December 2003 gas cost recovery rate (GCRR) filings - While producing supplementary information requested by the Board, ATCO detected additional transportation imbalances - It then refiled its December 2003 GCRR excluding the transportation imbalance adjustments - Three Board decisions were relevant - The first decision partly allowed ATCO's application to use the DGA/GCRR reconciliation process to record the transportation imbalances (DGA Decision) - In the second decision, the Board established a general rule that the DGA/GCRR reconciliation process had a two-year limitation period (Limitations Decision) - The third decision focused on the Board's jurisdiction to make the DGA and the Limitations Decisions - The City of Calgary appealed - Calgary argued that the Board retroactively changed rates and its decision had a prohibited effect - The Alberta Court of Appeal rejected this ground of appeal - The history of DGAs demonstrated that affected parties knew they would be used from time to time to alter gas rates based on later, actual gas costs - Reconciliation of the DGA/GCRR would sometimes benefit consumers and sometimes not - Gas rates sometimes changed because of the lack of predictability (volatility) in gas prices and sometimes from other factors such as measuring errors - Whatever the cause, the objective was to ensure that the consumer paid the actual cost of the gas - This legitimate object was accepted by all parties - It strengthened the utility regulatory system by ensuring that the utility received a fair rate of return on its rate base - Therefore, whether the rates should be characterized as final or interim, the use of the DGA in this case did not involve prohibited ratemaking -See paragraphs 45 to 61.

Administrative Law - Topic 9069

Boards and tribunals - Jurisdiction of particular boards and tribunals - Energy and utility boards - In May 2004, ATCO Gas and Pipelines Ltd. sought the Energy and Utilities Board's approval to correct balances in the deferred gas accounts (DGAs) for each of its south and north gas distribution service territories - The adjustments were sought because there had been inaccurate reporting of gas being transported for other entities through ATCO's pipeline network (transportation imbalances) - It appeared that the errors began when the administration of ATCO's gas transportation system was moved to a new system - ATCO had included the transportation imbalances as prior period adjustments in the DGAs as part of its December 2003 gas cost recovery rate (GCRR) filings - While producing supplementary information requested by the Board, ATCO detected additional transportation imbalances - It then refiled its December 2003 GCRR excluding the transportation imbalance adjustments - Three Board decisions were relevant - The first decision partly allowed ATCO's application to use the DGA/GCRR reconciliation process to record the transportation imbalances (DGA Decision) - In the second decision, the Board established a general rule that the DGA/GCRR reconciliation process had a two-year limitation period (Limitations Decision) - The third decision focused on the Board's jurisdiction to make the DGA and the Limitations Decisions - The City of Calgary appealed - The Alberta Court of Appeal allowed the appeal - Stripped to its essentials, two reasons emerged from the Board's decision: the nature of the DGA as a deferral account and the fact that the DGA had been used in the past to make adjustments over several years - "The Board's own analysis highlighted the accumulation of factors that made unreasonable its decision to allow ATCO to recover eighty-five percent of the transportation imbalances through the DGA. Unlike most previous uses of DGAs, these charges did not result from gas price volatility. Nor did they resemble other past uses of DGAs where errors were attributable to measuring equipment problems and where there had been no suggestion of utility fault. Here the failure to levy appropriate gas charges was entirely due to deficiencies within ATCO's own system, exacerbated by a long delay in discovering the problem. ATCO's destruction of data made data verification impossible. As a result of the delays, at least some who were not consumers when the problems originated would have to absorb the costs of ATCO's carelessness. Even though this was not prohibited ratemaking per se, the long delays gave rise to inter-generational equity issues which lie at the heart of the prohibition against retrospective ratemaking" - See paragraphs 65 to 74.

Administrative Law - Topic 9102

Boards and tribunals - Judicial review - Standard of review - In May 2004, ATCO Gas and Pipelines Ltd. sought the Energy and Utilities Board's approval to correct balances in the deferred gas accounts (DGAs) for each of its south and north gas distribution service territories - The adjustments were sought because there had been inaccurate reporting of gas being transported for other entities through ATCO's pipeline network (transportation imbalances) - It appeared that the errors began when the administration of ATCO's gas transportation system was moved to a new system - ATCO had included the transportation imbalances as prior period adjustments in the DGAs as part of its December 2003 gas cost recovery rate (GCRR) filings - While producing supplementary information requested by the Board, ATCO detected additional transportation imbalances - It then refiled its December 2003 GCRR excluding the transportation imbalance adjustments - Three Board decisions were relevant - The first decision partly allowed ATCO's application to use the DGA/GCRR reconciliation process to record the transportation imbalances (DGA Decision) - In the second decision, the Board established a general rule that the DGA/GCRR reconciliation process had a two-year limitation period (Limitations Decision) - The third decision focused on the Board's jurisdiction to make the DGA and the Limitations Decisions - The City of Calgary appealed - The Alberta Court of Appeal held that the appropriate standard of review was reasonableness - See paragraphs 62 to 64.

Mines and Minerals - Topic 8030

Oil and gas - Regulation - Provincial energy boards - [See all Administrative Law - Topic 9069 ].

Cases Noticed:

Calgary (City) et al. v. Energy and Utilities Board (Alta.) (2007), 404 A.R. 317; 394 W.A.C. 317; 2007 ABCA 133, refd to. [para. 24].

Calgary (City) v. ATCO Gas and Pipelines Ltd. - see Calgary (City) et al. v. Energy and Utilities Board (Alta.).

ATCO Electric Ltd. v. Energy and Utilities Board (Alta.) (2004), 361 A.R. 1; 339 W.A.C. 1; 2004 ABCA 215, refd to. [para. 34].

EPCOR Generation Inc. v. Energy and Utilities Board (Alta.) (2003), 346 A.R. 281; 320 W.A.C. 281; 2003 ABCA 374, refd to. [paras. 36, 228].

Consumers Association of Canada et al. v. Canadian Radio-Television and Telecommunications Commission et al. (2008), 375 N.R. 124; 2008 FCA 91, affd. [2009] 2 S.C.R. 764; 392 N.R. 323; 2009 SCC 40, dist. [para. 199]; refd to. [paras. 36, 206].

Bell Canada v. Bell Aliant Regional Communications - see Consumers Association of Canada et al. v. Canadian Radio-Television and Telecommunications Commission et al.

Edmonton (City) v. Northwestern Utilities Ltd., [1961] S.C.R. 392; 28 D.L.R.(2d) 125; 34 W.W.R.(N.S.) 600, reving. in part (1960), 34 W.W.R.(N.S.) 241; 25 D.L.R.(2d) 262 (Alta. C.A.), refd to. [paras. 39, 115].

ATCO Gas and Pipelines Ltd. v. Energy and Utilities Board (Alta.), [2006] 1 S.C.R. 140; 344 N.R. 293; 380 A.R. 1; 363 W.A.C. 1; 2006 SCC 4, refd to. [paras. 41, 108].

Coseka Resources Ltd. v. Saratoga Processing Co. et al. (1981), 31 A.R. 541; 16 Alta. L.R.(2d) 60 (C.A.), refd to. [paras. 46, 158].

Northwestern Utilities Ltd. v. Edmonton (City), [1979] 1 S.C.R. 684; 23 N.R. 565; 12 A.R. 449, refd to. [paras. 46, 236].

Bell Canada v. Canadian Radio-Television and Telecommunications Commission, [1989] 1 S.C.R. 1722; 97 N.R. 15, refd to. [paras. 47, 158].

ATCO Gas and Pipelines Ltd. v. Energy and Utilities Board (Alta.) et al. (2008), 433 A.R. 183; 429 W.A.C. 183; 2008 ABCA 200, leave to appeal refused (2008), 392 N.R. 390; 469 A.R. 396; 470 W.A.C. 396 (S.C.C.), refd to. [para. 64].

Natural Resource Gas Ltd. v. Ontario Energy Board (2006), 214 O.A.C. 236; 149 A.C.W.S.(3d) 889 (C.A.), refd to. [para. 64].

New Brunswick (Board of Management) v. Dunsmuir, [2008] 1 S.C.R. 190; 372 N.R. 1; 329 N.B.R.(2d) 1; 844 A.P.R. 1; 2008 SCC 9, refd to. [para. 65].

Northwestern Utilities Ltd. v. Edmonton (City) (1976), 2 A.R. 317 (C.A.), affd. [1979] 1 S.C.R. 684; 23 N.R. 565; 12 A.R. 449, refd to. [para. 115].

Edmonton (City) v. Public Utilities Board (Alta.) - see Northwestern Utilities Ltd. v. Edmonton (City).

Calgary (City) v. Madison Natural Gas Co. (1959), 28 W.W.R.(N.S.) 353; 19 D.L.R.(2d) 655 (Alta. C.A.), refd to. [para. 124].

Kin Franchising Ltd. v. Donco Ltd. (1993), 7 Alta. L.R.(3d) 313 (C.A.), refd to. [para. 193].

Germain v. Automobile Injury Appeal Commission et al., [2009] 7 W.W.R. 509; 333 Sask.R. 116; 2009 SKQB 106, refd to. [para. 193].

Northwestern Utilities Ltd. v. Edmonton (City), [1929] S.C.R. 186, refd to. [para. 193].

Alberta Power Ltd. et al. v. Public Utilities Board (Alta.) et al. (1990), 102 A.R. 353 (C.A.), refd to. [para. 210].

Barrie Public Utilities et al. v. Canadian Cable Television Association et al., [2003] 1 S.C.R. 476; 304 N.R. 1; 225 D.L.R.(4th) 206; 2003 SCC 28, refd to. [para. 212].

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. 229].

Authors and Works Noticed:

Bouckaert, B., and De Geest, G., Encyclopedia of Law and Economics (2000), pp. 401 to 403 [paras. 121, 124]; 403 ff. [para. 133]; 417 ff. [para. 213]; 425 to 428 [para. 213].

Dias, Reginald Walter Michael, Jurisprudence (4th Ed. 1976), pp. 53, 54, 56, 57, 64 [para. 176].

Dias, Reginald Walter Michael, Jurisprudence (5th Ed. 1985), pp. 33, 34, 36, 37, 38, 43, 44 [para. 176].

Kahn, Alfred E., The Economics of Regulation: Principles and Institutions (1998 Reprint), vol. 1, pp. 47 to 54, 101 to 109 [para. 145].

MacAvoy, Paul W., and Sidak, J. Gregory, The Efficient Allocation of Proceeds from a Utility's Sale of Assets (2001), 22 Energy L.J. 233, pp. 235, 237 [para. 144]; 238 [para. 132]; 241 to 246 [para. 144].

Netz, Janet S., Price Regulation: A (Non-Technical) Overview, in Bouckaert, B., and De Geest, G., Encyclopedia of Law and Economics (2000), p. 401 to 403 [paras. 121, 124]; 403 ff. [para. 133]; 417 ff. [para. 213]; 425 to 428 [para. 213].

Penning, Yvonne, The 1986 Bell Rate Case: Can Economic Policy and Legal Formalism Be Reconciled (1989), 47(2) U.T. Fac. L. Rev. 607, p. 610 [para. 48].

Priest, A., Principles of Public Utility Regulation 75 (1969), generally [para. 124].

Salmond, John William, Jurisprudence (12th Ed. 1966), pp. 229, 230 [para. 176].

Stevenson, William A., and Côté, Jean E., Civil Procedure Encyclopedia (2003), vol. 3, c. 45, pp. 45 to 54, Part Z.3 [para. 193].

Counsel:

B.J. Meronek, Q.C., for the appellant/applicant, City of Calgary;

J.P. Mousseau and P. Khan, for the respondent/respondent, A.E.U.B.;

H.M. Kay, Q.C., L.E. Smith, Q.C. and L.A. Goldbach, for the respondent/respondent, ATCO Gas and Pipelines Ltd.

This appeal was heard on January 13, 2010, by Côté, Hunt and Paperny, JJ.A., of the Alberta Court of Appeal. The judgment of the Court of Appeal was delivered on April 23, 2010, and included the following opinions:

Hunt, J.A.(Paperny, J.A., concurring) - see paragraphs 1 to 76;

Côté, J.A., concurring in part - see paragraphs 77 to 239.