Union Gas Ltd. v. Ontario Energy Board, 2013 ONSC 7048

• Judge: C. McKinnon, Himel and Wilton-Siegel, JJ.
• Court: Superior Court of Justice of Ontario (Canada)
• Case Date: October 16, 2013
• Jurisdiction: Ontario
• Citations: 2013 ONSC 7048;(2013), 316 O.A.C. 218 (DC)

Union Gas Ltd. v. Energy Bd. (2013), 316 O.A.C. 218 (DC)

MLB headnote and full text

Temp. Cite: [2014] O.A.C. TBEd. FE.040

Union Gas Limited (appellant) v. Ontario Energy Board (respondent)

(581/12; 2013 ONSC 7048)

Indexed As: Union Gas Ltd. v. Ontario Energy Board

Court of Ontario

Superior Court of Justice

Divisional Court

C. McKinnon, Himel and Wilton-Siegel, JJ.

December 20, 2013.

Summary:

Union Gas Ltd. appealed from a November 19, 2012 decision of the Ontario Energy Board, referred to as Board proceeding EB-2012-0087. The purpose of that proceeding was to determine the amount of Union Gas Ltd.'s 2011 utilities earnings that would be returned to ratepayers through an Earnings Sharing Mechanism (ESM). Specifically, the proceeding focussed on $22 million of earnings related to the Firm Transportation Risk Alleviation Mechanism, a program initiated by Trans-Canada Pipelines and made available to all gas utilities in the country. The Board determined that the revenue generated by those transactions could not properly be described as "utilities revenue" but was in fact "gas transportation costs", the profits of which should have been passed on to the ratepayers instead of being divided in accordance with the ESM that applied to "utilities revenue", which would have resulted in $5.3 million less being returned to ratepayers. Union Gas submitted that the classification of the funds as "gas transportation costs" amounted to impermissible retroactive ratemaking.

The Ontario Divisional Court, Wilton-Siegel, J., dissenting, dismissed the appeal.

Administrative Law - Topic 9069

Boards and tribunals - Jurisdiction of particular boards and tribunals - Energy and utility boards - [See Public Utilities - Topic 4666 ].

Public Utilities - Topic 4666

Public utility commissions or corporations (incl. private providers) - Regulation - Rates - Power to fix just and reasonable rates - In 2007 Union Gas Ltd. ("Union") entered into an Incentive Regulation Mechanism (IRM) Settlement Agreement covering the years 2008-2012 - The Settlement Agreement was approved by the Ontario Energy Board - An "amended IRM Agreement" was negotiated in 2009 - Union appealed from a decision of the Ontario Energy Board dated November 19, 2012 - The purpose of that Board proceeding was to determine the amount of Union's 2011 utilities earnings that would be returned to ratepayers through an Earnings Sharing Mechanism (ESM) - Specifically, the proceeding focused on $22 million of earnings related to the Firm Transportation Risk Alleviation Mechanism (FT-RAM), a program initiated by Trans-Canada Pipelines and made available to all gas utilities in the country - The Board determined that the revenue generated by those transactions could not properly be described as "utilities revenue" but was in fact "gas transportation costs", the profits of which should have been passed on to the ratepayers instead of being divided in accordance with the ESM that applied to "utilities revenue" - Union appealed from the Board's decision - Union alleged that the Board had already approved the rates for revenue held in Union's Gas Reduction Costs Deferred Account during a "Quarterly Rate Adjustment Mechanism" (QRAM) proceeding - Union submitted that the reclassification of its ESM earnings as "gas transportation costs" in the subsequent ESM proceeding amounted to impermissible retroactive ratemaking - The Ontario Divisional Court dismissed the appeal - Union was less than forthright in their disclosure obligations with respect to FT-RAM revenues and pursuant to s. 36 of the Ontario Energy Board Act, the Board had an obligation to address the situation and set just and reasonable rates - Furthermore, by stating that Union was "manufacturing" optimization opportunities, the Board effectively found that Union had acted improperly - The Board had an obligation to intervene and correct the situation, exercising its unfettered powers under s. 36 of the Act - The reasoning and findings of the Board were clear that the QRAM proceedings never dealt with the $22 million in dispute and it was only during the rate hearings held in 2012 that the true scope and nature of the FT-RAM program was revealed - Union's argument that what the Board was doing amounted to "classic retroactive rate setting" was rejected - The Board's decision was not only reasonable, but was also correct - See paragraphs 27 to 56.

Public Utilities - Topic 4668

Public utility commissions - Regulation - Rates - Powers respecting rates for past services - [See Public Utilities - Topic 4666 ].

Public Utilities - Topic 4672

Public utility commissions - Regulation - Rates - Powers respecting excess earnings (incl. deferral accounts) - [See Public Utilities - Topic 4666 ].

Public Utilities - Topic 4741

Public utility commissions or corporations - Judicial review - General (incl. standard of review) - Union Gas Ltd. appealed from a decision of the Ontario Energy Board dated November 19, 2012 - The purpose of that proceeding was to determine the amount of Union Gas Ltd.'s 2011 utilities earnings that would be returned to ratepayers through an Earnings Sharing Mechanism - Specifically, the proceeding focused on $22 million of earnings related to the Firm Transportation Risk Alleviation Mechanism, a program initiated by Trans-Canada Pipelines and made available to all gas utilities in the country - The Board determined that the revenue generated by those transactions could not properly be described as "utilities revenue" but was in fact "gas transportation costs", the profits of which should have been passed on to the ratepayers instead of being divided in accordance with the ESM that applied to "utilities revenue" - Union Gas submitted that the classification of the funds as "gas transportation costs" amounted to impermissible retroactive ratemaking - The Ontario Divisional Court stated that "the appropriate standard for this appeal is reasonableness. This case concerns ratemaking. Ratemaking is at the core of the Board's expertise and home statute. Whether a rate has been fixed retroactively is largely a factual determination. This Court has repeatedly held that the Ontario Energy Board is a highly specialized tribunal and that its decisions are deserving of considerable deference" - See paragraph 25.

Cases Noticed:

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. 19].

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. [para. 19].

Bell Canada v. Canadian Radio-Television and Telecommunications Commission, [1989] 1 S.C.R. 1722; 97 N.R. 15, refd to. [para. 19].

Northland Utilities (Yellowknife) Ltd. et al. v. Public Utilities Board (N.W.T.) et al., [2010] Northwest Terr. Cases Uned. 92; 2010 NWTSC 92, refd to. [para. 19].

Alberta Teachers' Association v. Information and Privacy Commissioner (Alta.) et al., [2011] 3 S.C.R. 654; 424 N.R. 70; 519 A.R. 1; 539 W.A.C. 1; 2011 SCC 61, refd to. [para. 21].

Cornish v. Ontario Securities Commission (2013), 306 O.A.C. 107; 2013 ONSC 1310 (Div. Ct.), refd to. [para. 21].

Toronto Hydro-Electric System Ltd. v. Ontario Energy Board (2010), 261 O.A.C. 306; 2010 ONCA 284, refd to. [para. 24].

Great Lakes Power Ltd. v. Ontario Energy Board (2010), 262 O.A.C. 245; 2010 ONCA 399, refd to. [para. 24].

Electricity Distributors Association v. Ontario Energy Board et al., [2013] O.A.C. Uned. 403; 2013 ONSC 3118 (Div. Ct.), refd to. [para. 24].

Summitt Energy Management Inc. v. Ontario Energy Board (2013), 309 O.A.C. 85; 2013 ONSC 318 (Div. Ct.), refd to. [para. 24].

Goldcorp Canada Ltd. et al. v. Ontario Energy Board (2012), 295 O.A.C. 93; 2012 ONSC 3097 (Div. Ct.), refd to. [paras. 24, 58].

Power Workers' Union et al. v. Ontario Energy Board et al. (2013), 307 O.A.C. 109; 2013 ONCA 359, refd to. [para. 24].

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

Consumers Association of Canada et al. v. Canadian Radio-Television and Telecommunications Commission et al., [2009] 2 S.C.R. 764; 392 N.R. 323; 2009 SCC 40, refd to. [para. 25].

Calgary (City) v. Energy and Utilities Board (Alta.) et al. (2010), 477 A.R. 1; 483 W.A.C. 1; 2010 ABCA 132, refd to. [para. 25].

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. 49, 110].

Newfoundland and Labrador Hydro v. Newfoundland and Labrador (Board of Public Utilities) et al. (2012), 323 Nfld. & P.E.I.R. 127; 1004 A.P.R. 127; 2012 NLCA 38, refd to. [paras. 52, 112].

Statutes Noticed:

Ontario Energy Board Act, S.O. 1998, c. 15, Schedule B, sect. 36 [para. 27].

Counsel:

Patricia D.S. Jackson, Crawford Smith and Alex Smith, for the appellant;

Michael Millar, for the respondent.

This appeal was heard on October 16, 2013, before C. McKinnon, Himel and Wilton-Siegel, JJ., of the Ontario Divisional Court. The judgment of the Divisional Court was released on December 20, 2013, including the following opinions:

C. McKinnon, J. (Himel, J., concurring) - see paragraphs 1 to 56;

Wilton-Siegel, J., dissenting - see paragraphs 57 to 117.