Utilities Commission breached its duty of procedural fairness when making a significant policy change without adequate notice of that potential change

The Respondent, Alberta Utilities Commission, made a decision that prevented electrical utilities companies from earning a return on their mandated investments in electrical infrastructure. Four utilities companies successfully appealed the Commission’s decision to the Court of Appeal, on the basis the Commission breached its duty of procedural fairness.

Administrative law – Decisions reviewed – Energy and Utilities Board – Judicial review – Legislative compliance – Procedural requirements and fairness – Standard of review – Correctness – Government – Electricity rates

AltaLink Management Ltd. v. Alberta Utilities Commission, [2023] A.J. No. 1166, 2023 ABCA 325, Alberta Court of Appeal, November 14, 2023, J. Watson, B.L. Veldhuis and D. Pentelechuk JJ.A.

Four utilities companies appealed decisions of the Respondent, Alberta Utilities Commission (the “Commission”). The appellants are: Alta Link Management Ltd. (AltaLink), ATCO Electric Ltd. (ATCO), ENMAX Power Corporation (ENMAX), and EPCOR Distribution & Transmission Inc. (EPCOR).

The Court summarized the background context concisely as follows:

2 Speaking very simplistically, the electrical power architecture of Alberta consists of (a) utilities that generate electricity, (b) utilities that take in the generated electricity and transmit the electricity, and (c) utilities that deliver the electrical power to end users. The costs related to construction and maintenance of the various elements of the vast, intricate, and complex infrastructure must be defrayed somehow and by somebody. Subject to the imperative provisions of the statutes, it falls to the Commission to determine which sector of the system must make particular investments necessary to support the entire power architecture, and how the related costs should be paid for and by whom.

The Commission decided to revise a longstanding policy which governs payment and recovery of certain mandated infrastructure-related costs by electric utilities companies. The Commission disallowed any electric utility from earning a “return” on their mandated investment in electrical infrastructure. Instead, they could only treat the reasonable portion of those costs as expenses in the year of disbursement.

Although their arguments were not uniform, the Appellants argued that the legislation permits them (or some of them) to earn a return on the investments in question. Three of the Appellants also argued that the Commission breached its duty of procedural fairness by failing to provide adequate notice that it was considering such an outcome.

The Court of Appeal granted permission for an appeal on these questions:

• The fairness issue – did the Commission fail to meet the requirements of procedural fairness?
• The allocation issue – is the long-established Commission policy lawful? Was the Commission compelled by the legislation to allow Transmission System Owners to earn a return on their mandated investments in electrical infrastructure?
• The return issue – did the Commission err in law in treating the mandated investments as expenditures, rather than as capital amounts on which some component of the utility system is entitled to earn a rate of return?

The Court of Appeal reviewed the complex procedural history that brought case before the court.

The Court of Appeal confirmed the applicable standard of review was correctness for the issue of procedural fairness (the fairness issue). The Court of Appeal confirmed the applicable standard of review was correctness for the other two issues as they were questions of law.

On the first issue, EPCOR, ENMAX, and ATCO argued that the Commission breached its duty of procedural fairness by failing to provide adequate notice that it would consider whether they would be entitled to earn a return. The Court of Appeal held that the Commission should have provided clear and transparent notice that it was considering this issue. The Commission argued that its notice was adequate in the circumstances. The Court of Appeal held that the Commission did not provide adequate notice of the issue of disallowing a return on investment for all types of electrical utility companies.

The Court of Appeal allowed the appeal. It quashed the Commission’s decision and returned issues 2 and 3 to the Commission for re-hearing and reconsideration. On the second and third issues, the Court of Appeal offered comments regarding statutory interpretation.

This case was digested by Scott J. Marcinkow, and first published in the LexisNexis® Harper Grey Administrative Law Netletter and the Harper Grey Administrative Law Newsletter.  If you would like to discuss this case further, please contact Scott Marcinkow at smarcinkow@harpergrey.com.

To stay current with the new case law and emerging legal issues in this area, subscribe here.