The appeal by an operator of a coal-fired electricity generator (“Milner”) from a decision of the Alberta Energy and Utilities Board (the “Board”) to refuse to investigate or hold a hearing arising from a complaint lodged by Milner was allowed where the complaint had arguable merit

28. September 2010 0

Administrative law – Decisions of administrative tribunals – Utility and Review Board – Rules and by-laws – Natural resources – Electricity – Loss of electricity – Line Loss Rule – Judicial review – Investigations – Compliance with legislation – Statutory interpretation – Complaints lacking merit – Definition

Milner Power Inc. v. Alberta (Energy and Utilities Board), [2010] A.J. No. 866, 2010 ABCA 236, Alberta Court of Appeal, July 29, 2010, C.M. Conrad, R.L. Berger and P.W.L. Martin JJ.A.

Milner filed a complaint under sections 25 and 26 of the Electric Utilities Act, S.A. 2003, c. E-5.1 (the “Act”) against the Alberta Electric System Operator (“AESO”) alleging that the AESO Line Loss Rule did not comply with the requirements of the Transmission Regulation AR 174/2004, (Regulation), and that it was otherwise unjust and unreasonable. The Board refused to investigate or hold a hearing and summarily dismissed Milner’s complaint on the grounds it was not warranted. Milner obtained leave to appeal this decision.

Milner operates a coal-fired electricity generator which transmits energy onto Alberta’s interconnected electrical system. Energy losses occur as electrical energy is transmitted. The loss energy, or difference between the load and supply, is referred to as “line losses”. The line losses are primarily paid for by Milner and other generators. The amounts involved are significant. For example, in 2008, line losses were approximately $235.2 million. The AESO elected to adopt a new line loss rule which had the effect of changing the method from a tariff-based approach to a rule-based loss factor approach. Milner and some other stakeholders objected to AESO’s proposed loss factors. On August 17, 2005, Milner submitted a complaint to the Board which raised a concern that the AESO’s proposed Line Loss Rule had not been adequately reviewed and failed to study the use of an alternate approach proposed by some of the stakeholders. Milner sought a Board hearing to address the issues alleging that the Line Loss Rule was inconsistent with or in contravention of the Act and Regulation. Milner’s complaint contained evidence and submissions alleging that the proposed methodology failed to meet the mandatory requirements of the Act and Regulation and that the adopted approach prejudiced those generators whose output created a net reduction in system losses while benefiting those generators responsible for the losses.

In decision 2005-150, the Board denied Milner’s request to set its complaint down for a hearing. The Board relied on section 24(4) of the Act which authorized it to decline to hold a hearing into a complaint if it considered the complaint to be “frivolous, vexatious, trivial or otherwise does not warrant an investigation” or hearing. Milner appealed this decision.

The Court of Appeal determined that the critical issue in the matter was the proper interpretation of the words “or otherwise does not warrant investigation” as they appeared in section 25(4). This is a question of law relating to the right of the Board to refuse to investigate or hold a hearing. The Court held that the Board was required to apply the correct threshold test and that the failure to apply the correct test was reviewable on appeal.

The Court held that section 25(4) should not be interpreted as permitting the Board to refuse to investigate or hear complaints on a wide discretionary basis for any reason it deems fit. The section should be interpreted as conferring a right to refuse further investigation or hearing where the complaint is lacking in merit because it is frivolous, vexatious, trivial or otherwise warrantless in the sense of being without merit. The Court accepted Milner’s argument that the ordinary meaning of the phrase “otherwise does not warrant” was supported by the ejusdem generis or limited class rule. The rule is described as “when one finds a clause that sets out a list of specific words followed by a general term, it will normally be appropriate to limit the general term to the genus of the narrow enumeration that precedes it”: National Bank of Greece (Canada) v. Katsikonouris, [1990] 2 S.C.R. 1029. In this case, the terms “frivolous, vexatious, trivial” create a list with an identifiable class as those complaints lacking any merit. The general phrase “otherwise does not warrant” should be read as part of the same limited class as frivolous, vexatious and trivial. The Court concluded that the entire statutory scheme supported the interpretation that the Board can decline to pursue a complaint only when the complaint itself is without arguable merit. In this case, it was clear based on the face of the complaint that Milner had raised a doubt that the Line Loss Rule contravened the act or regulation. In the result, the Court held that the Board failed to apply the appropriate test and the matter was remitted to the Board to continue to further investigate or hold a hearing.

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