Court of Appeal Confirms The AUC's Authority To Award Costs

On December 2, 2014 the Court of Appeal released its decision in ATCO Gas and Pipelines Ltd. v. Alberta (Utilities Commission), 2014 ABCA 397. Chief Justice Fraser, along with Justice Côté, dismissed ATCO's appeal of the Commission's costs award (Justice Martin dissenting in part). The decision affirms the Commission's authority to exercise discretion in awarding costs to both interveners and utilities.

FACTS

ATCO Gas and Pipelines Ltd. and ATCO Electric Ltd. (collectively "ATCO"), appealed two cost decisions issued by the Alberta Utilities Commission ("Commission"). The decisions related to ATCO's involvement in the Utility Asset Disposition Proceeding ("UAD") and the Performance-Base Reform Proceeding (PBR). Both proceedings were initiated by the Commission. Neither was a rate setting hearing. The UAD proceeding considered the implications of the Supreme Court of Canada's decision in ATCO Gas and Pipelines Ltd. v. Alberta (Energy and Utilities Board). The PBR proceeding examined performance-based regulation as part of a broader initiative by the Commission to reform utility regulation in Alberta.

The UAD proceeding commenced April 2, 2008 and was suspended on November 28, 2008. It resumed on October 17, 2012. The Commission awarded ATCO a significant portion of legal costs incurred after October 17, 2012, but nothing for costs incurred prior. In relation to the PBR Proceeding, the Commission awarded ATCO its legal costs in accordance with the scale of rates set out in AUC Rule 022, plus an additional premium of 20%. ATCO had applied for recovery of its actual legal costs incurred in each proceeding, which included legal fees well in excess of the AUC's scale of rates.

ATCO appealed both decisions on the grounds that, as a regulated public utility, it enjoyed a general right of recovery from its rate payers of all "prudently incurred" costs. This was said to be based on the "regulatory compact", under which a public utility undertakes to serve all customers in its service area in return for being granted the opportunity to earn a reasonable return on its prudent investment and to recover its prudently incurred expenses.

ISSUE

The issue on appeal was limited to whether or not the Commission had the statutory authority to make cost related rules, and further to award or deny costs incurred by utilities.

ANALYSIS

Chief Justice Fraser undertook a detailed review of the facts behind each proceeding. Finding that the appropriate Standard of...