In 2019, the newly elected government of Alberta announced that it was creating an Associate Minister of Red Tape Reduction and passed the Alberta Red Tape Reduction Act. In response, the Alberta Utilities Commission (AUC) took the initiative and appointed an independent committee, named the AUC Procedures and Processes Review Committee, to “review the Commission’s rate application adjudicative processes and procedures and make recommendations to the AUC Chair…on how process and procedure steps can be made more efficient or eliminated altogether.”^[1]

Three members were appointed to the Committee, all of whom have extensive regulatory experience: C. Kemm Yates, Q.C., a leader in the regulatory bar; David J. Mullan, an emeritus law professor from Queen’s University and one of Canada’s foremost experts in administrative law; and Rowland J. Harrison, Q.C., also a former law professor and a former well-respected long-serving member of the National Energy Board (now the Canada Energy Regulator). The committee was appointed on May 8, 2020. It completed its work on August 14, 2020 issuing a 136-page report.^[2] Shortly after the report was issued, the AUC announced that it would abide by all the recommendations in the report.^[3]

In this note, I will provide an overview of the Committee’s recommendations and some commentary. The reader can refer to the report for details on the consultation process with the various stakeholders as well as the terms and references of the committee.

THE RECOMMENDATIONS

The committee made 30 specific recommendations organized in 18 broad categories. The recommendations are laid out in detail in the report. The thrust of the recommendations is that the AUC should take an active role in rate hearings in a manner that is efficient and fair. The committee set out a variety of recommendations based on the stakeholder feedback guided by sound legal analysis.

The first category of recommendations, which set the tone for the rest of the recommendations, call for proactive and assertive case management.^[4] Specifically, the Committee recommended that the AUC should be assertive with respect to the scoping and scheduling of the process. The Committee also recommended that the AUC issue a list of issues to be addressed in the proceeding, a preliminary schedule in advance, and a framework explaining to the parties how to expand on the list of issues and the processes. Finally, while the Committee did not recommend a strict legislatively mandated set of time limits to be imposed on the AUC for when to produce a decision in a proceeding, the AUC, in addition to accepting all the other recommendations, stated that it would enact time limits and adhere to them.

The Committee then proposed a category of recommendations related to the proceedings. These recommendations address, for instance, how to deal with confidential materials in the proceedings. Another recommendation is that all hearings be conducted in writing, subject to the participants demonstrating the need for an oral hearing. Issues discussed in the hearing should be determined in advance through the scoping process and determined according to the schedule set out at the start of the proceeding, as mentioned earlier.

With respect to interrogatories or information requests, the committee provided many recommendations. The thrust of these recommendations related to limiting the scope and volume of information requested. A schedule to ensure timely filings of the interrogatories and the responses, a standardized practice for handling motions related to the interrogatories, as well as a requirement that the information requested be justified are examples of some of the specific recommendations. Additionally, there should be a presumption of one round of interrogatories, especially when oral cross-examination can be used to uncover any further ambiguities arising from the written responses.

Cross-examinations were also the subject of several recommendations. Excessive cross-examination should be discouraged. Cross-examination should be limited to specific evidence and to areas and issues that the AUC would need to determine in its judgment in the proceeding. Non-expert opinion evidence should also be discouraged by reducing the costs that utilities and interveners can recover. The focus of cross-examination should be the reduction of the regulatory burden and discharging the AUC’s mandate.

With respect to making the final argument, the Committee recommended that the AUC adopt an efficient oral argument process after the close of the hearing record. The scope of the final argument would be determined by the AUC in advance with a set of topics identified for argument as well as time limits.

As to the AUC itself, the Committee recommended that decisions be written according to an issue-driven template. Members and staff of the AUC should receive training on writing such issue-driven decisions. Members of the AUC should also receive periodic training on their role as members of a quasi-judicial tribunal, as well as training on the basic legal requirements and responsibilities for assertive case management. Members of the AUC should have plenary meetings to discuss generic issues arising in the proceedings.

The Committee also made some recommendations regarding interveners, costs, and implementing the Committee’s recommendations through the AUC’s rules. A reader interested in the details should consult the report. The Report is clearly written and cogent. Rather than recite the various recommendations and analyze them, in the next section, I will provide some perspective on how we may have arrived at the situation where the Committee’s work was needed and some thoughts on how to best embrace the recommendations.

COMMENTARY

The Committee was struck in response to the provincial government’s red tape reduction initiative, and the recommendations are very sensible and on point for that goal. The recommendations stem both from the stakeholders’ feedback as well as a careful analysis of the legal guidelines that govern the AUC’s conduct. As a former member of the Commission, I commend the Committee on its rigorous work completed in a very timely manner. The value of these recommendations should be seen not only in what they recommend for the AUC, but, in a way, also what they suggest to all the participants in the rate-making process. Reading the submissions and the recommendations reminded me of many of the concerns I had when I was at the AUC. Indeed, many of the recommendations had been discussed by staff, other members of the AUC, as well as other stakeholders, but the challenge was always how to implement them.

The recommendations effectively codify best-practices that stakeholders and the AUC may have agreed to in principle in the past but may have had trouble implementing on a case-by-case basis. After all, it is easy to state at the outset that one is committed to an efficient process, but if that means, for example, sacrificing an opportunity to orally cross-examine an adverse witness, the commitment may weaken. Having a set of rules that are a product of consultation by the respected and experienced Committee members should give all some comfort in moving forward with implementing the recommendations.

There is always a tension between expeditious efficient proceedings and fairness, especially procedural. The most famous efficient proceeding is the one litigated in the foundational case of Northwestern Utilities Ltd. v Edmonton.^[5] The case is often cited for the three principles of fair return for public utilities, namely that a “company will be allowed as large a return on the capital invested in its enterprise (which will be net to the company) as it would receive if it were investing the same amount in other securities possessing an attractiveness, stability and certainty equal to that of the company’s enterprise.”^[6] The predecessor board of the AUC had awarded an allowed rate of return to the Northwestern Utilities. Later, interest rates fell and the board decided to unilaterally lower the allowed rate of return without a hearing. The Supreme court not only allowed the substantive award under the test for fair rate of return but was also not bothered by the lack of a hearing. Indeed, just a few years ago (now retired) Justice Côté of the Alberta Court of Appeal cited Northwestern for the proposition that “the Commission can get its information in whatever mode it sees fit.”^[7] Awarding allowed rates of return with no hearing would be the ultimate in terms of efficient regulation. But this would raise a whole set of fairness questions, and not just the procedural ones.

After all, economic circumstances can easily change rendering prior decisions impractical or unfair to the regulated utilities. Consider the last economic downturn in 2008. The AUC had previously established a formula for awarding the allowed rate of return. The formula had been in use for many years prior to the financial meltdown. At that stage, the AUC could have kept the formula in operation. That process would have been the most efficient in terms of hearing costs. Nonetheless, the parties all agreed that the formula was not the proper regulatory tool at that time. The result was a lengthy and exhaustive process involving weeks of oral hearings and thousands of pages in the record culminating in the 2009 Generic Cost of Capital (GCOC) Decision.^[8] The Decision determined that the existing formula would not generate rates of return commensurate with the economic conditions facing the utilities. As such, it suspended the formula and made a one-time finding on the rate of return. Two years later, the AUC took up the question on the GCOC again. This time, to avoid the lengthy process of the 2009 GCOC hearing, the AUC decided to incorporate the 2009 record into the 2011 hearing.^[9] Fortunately, the incorporation of the record came at the suggestion of the utilities and with the approval of the interveners, which allowed for an expeditious process. Perhaps the previous process, concluded just two years prior, informed this push by the parties. On the other hand, the passage of time can also fade memories and experiences of the parties and their counsel. New parties or counsel may be tempted to seek the full panoply of, what they perceive as, procedural fairness protections in, what is undoubtedly for them, the most important proceeding. As such, having the Committee’s recommendations, both in the form of the report and in the AUC rules, makes it easier for the AUC to overcome the default approach of long sluggish hearings.

As these recommendations are put into action, I would also encourage all the parties who participated in giving the Committee feedback as well as those who are active in AUC proceedings to think of other innovations that can be easily adopted. Building on the 2011 GCOC proceeding, for example, and given that the records of all AUC proceedings are stored electronically and easily searchable, I would suggest that reintroducing evidence for every proceeding seems unnecessary and cumbersome. It would be a worthwhile endeavor for the AUC to develop a rolling record of financial data for the macro-economy as well for the individual utilities regulated by the AUC. This would mean that the utilities would only need to update or contest specific data points in the record in each hearing.

Returning to the committee’s recommendations, I reiterate that these are not only beneficial for the AUC but also for the parties in hearings. Notwithstanding every party’s commitment at the outset to ensure an efficient hearing, rabbit-holes always appear and are often pursued. Parties suddenly discover a new-found interest in the evidence presented and wish to explore the evidence in a more wholesome manner. This presents a conundrum to the AUC and the panel presiding over the hearing: should the AUC allow more discovery or stick to its original scope and deadlines? The age-old tension between efficiency and fairness rears its head once again.

Consider the 2011 ATCO gas hearing.^[10] One intervenor had sought some information from ATCO Gas in its gas rate hearing. ATCO provided some responses, which the intervenor thought inadequate. It brought a motion to compel ATCO to provide further information.^[11] The AUC decided that some of the responses were adequate and some were inadequate, thereby directing ATCO to provide more responses. ATCO responded that it needed more time. More back and forth between ATCO Gas, the intervenor, and the AUC resulted in a motion by ATCO Gas to strike a portion of intervenor’s evidence, which the AUC granted.^[12] The intervenor then asked for a review and variance in the hearing, which the AUC denied. In the same hearing, another intervener asked for the suspension of the hearing in light of a recent acquisition by the ATCO Group of an Australian gas company. The AUC denied that request. By the end of the hearing, in addition to the usual substantive arguments regarding the appropriate rate of return, additional procedural fairness arguments were made. Some of these even concerned the role of AUC counsel and whether the counsel was biased in the way he questioned the ATCO Gas witnesses.

I mention these examples not to cast aspersions on any of the parties or their counsel, but to point out that what may start off as a simple rate hearing with a predetermined set of issues can mutate into a complex hearing requiring the AUC to decide upon nuanced administrative law questions, such as the role of counsel. These questions do not have simple answers. No matter how much one searches the cases or the treatises by learned administrative law professors, the answers do not jump out at the AUC members or their counsel. And this is where the default response of favouring procedural fairness can kick in, usually at the expense of efficiency of the process.

Perhaps this default to excessive fairness is an overhang from the fallout from the now infamous spying incident.^[13] As someone who was appointed shortly after the incident, there was a sense at the time that no claim of procedural unfairness was too small to dismiss. The Supreme Court of Canada’s Stores Block judgment and its progeny at the Alberta Court of Appeal seemed to create a sense that the AUC was the appellate courts favourite agency for exacting scrutiny on both substance and procedure.^[14] But perhaps the pendulum swung too far. And that is why we are here today with the Committee and its recommendations.

Indeed, perhaps an indicator of the level of fairness at the AUC is the number of appeals from its decisions that raise questions of procedural fairness. A search of recent appeals to the Alberta Court of Appeal from decisions of the AUC reveals a heavy focus on the substantive outcomes, as opposed to the procedures adopted by the AUC. Using CanLII, I searched for cases involving the AUC, and narrowed the search by keywords “procedural fairness” and “bias”. There were 55 cases over the past 12 years, with only 11 mentioning procedural fairness or bias, or about 20 per cent. Almost none of them succeeded in their claims of unfairness.

Lest the reader wonder if the Committee’s recommendations may lead to more appeals on fairness grounds, which it might, but which will also result in reversals on appeal, the Committee conducted a legal analysis of its recommendations. I commend the committee for its rigorous legal analysis, which strongly suggests that the AUC can implement the recommendations without fear of reversal on procedural fairness grounds.

A major example where procedural fairness was the one of the main grounds of appeal is the AUC’s decision in the Milner Power complaint regarding the ISO line loss methodology.^[15] I should note that the case did not involve rate-making but is nonetheless informative. The Court of Appeal refused to grant leave to appeal the AUC’s decision in a series of judgments by Justice O’Ferrall, one of which dealt with the question of procedural fairness.^[16] Justice O’Ferrall found that the AUC had not denied the parties their right to procedural fairness. The case took 14 years from when the complaint by Milner was first filed to the AUC in 2005 to when the final judgment of the Court of Appeal was rendered. Interspersed throughout those years were many appeals to the Court of Appeal, a hearing at the AUC generating a split decision,^[17] followed by a review and variance motion, which was granted, and then a series of decisions by the AUC followed by a three-part denial of leave to appeal by the Court of Appeal.^[18] Indeed, had the Court of Appeal found for the appealing parties, the ISO line loss proceeding would have rivalled Jarndyce and Jarndyce in terms of complications and duration.

What may be now forgotten is that what started this long saga was that the predecessor board of the AUC had dismissed Milner’s complaint regarding the ISO line loss rule without a hearing, because the board found that the complaint was “frivolous and vexatious.”^[19] This decision was overturned by the Court of Appeal and returned to the AUC for a hearing on the merits of Milner’s complaint.^[20] One cannot help but wonder where all the parties would be today had the hearing been held on an expedited basis according to the committee’s recommendations? Whether the predecessor board had found for or against Milner, the Court of Appeal would have probably upheld the decision as reasonable and reached the same conclusion Justice O’Ferrall did. The difference may have been 12 years of protracted regulatory and appellate litigation and decisions. The lesson for all parties should be that a process that balances efficiency and fairness helps all those who are involved in the long-run.

The technically complex nature of the ISO line loss rule may also explain why the proceeding dragged on for so long. This raises the more general question of whether the adversarial nature of AUC proceedings is the best way to decide these matters. There had been many discussions while I was at the AUC of roundtables and other alternatives to hearings. Similarly, ideas such as hot-tubbing the experts so that there is a more consensus-driven hearing, at least for the technical evidence, had been discussed. The AUC may wish to examine these as ways to augment the Committee’s recommendations, especially if technical hearings continue to be lengthy and complicated.

All in all, implementing these recommendations, especially under the umbrella recommendation of more assertive case management, should be welcomed by all. The AUC and its staff now have some written guidance in the committee’s report (hopefully codified in the AUC rules), a report borne of stakeholders’ comments and feedback. The parties in the process, utilities and interveners alike, also now have a reference document to guide them and remind them that the process is to be more expeditious.

I recall that the former chair of the AUC, the late Willie Grieve, QC, used to always point to the AUC’s mission statement,^[21] which he had worked on developing and had hung on every office wall in the AUC. Whenever there was an internal discussion regarding a process or outcome, Grieve would point to the wall and read off a relevant sentence, such as “[t]he Alberta Utilities Commission is a trusted leader that delivers innovative and efficient regulatory solutions for Alberta.” The committee’s report fits well into the AUC’s mission, and should accompany it on the metaphorical wall for all to refer to when conducting themselves at the AUC.

*Moin A. Yahya is a Professor of Law at the University of Alberta and a former member of the Alberta Utilities Commission (AUC). The views expressed here are personal academic reflections and not meant to reflect the current or past views of the AUC on current or past proceedings or decisions. The views are also not meant to cast any aspersions on any of the parties mentioned in the article, but rather mentioned for demonstrative purposes.

1. Alberta Utilities Commission, “Bulltein 2020-17” (8 May 2020), online (pdf): AUC <www.auc.ab.ca/News/2020/Bulletin%202020-17.pdf>.
2. Kemm Yates, David J. Mullan & Rowland J. Harrison, “Report of the AUC Procedures and Processes Review Committee” (14 August 2020), online (pdf ): AUC <www.auc.ab.ca/Shared%20Documents/2020-10-22-AUCReviewCommitteeReport.pdf>.
3. There was one recommendation that the report did not make but that the AUC adopted, nonetheless. See Alberta Utilities Commission, “Announcement” (22 October 2020), online (pdf ): AUC <www.auc.ab.ca/News/2020/2020-10-22-Announcement.pdf>.
4. For the sake of simplicity, I have summarized the recommendations without quotation marks. As such, some of my words are taken directly from the report. The reader should assume that the source is the Committee’s report whether paraphrased or directly quoted.
5. Northwestern Utilities Ltd. v Edmonton (City), [1929] SCR 186.
6. Ibid at 193.
7. Calgary (City) v Alberta (Energy and Utilities Board), 2010 ABCA 132 at para 193.
8. Re 2009 Generic Cost of Capital (12 November 2009), 2009-216, online (pdf): AUC <www.auc.ab.ca/regulatory_documents/ProceedingDocuments/2009/2009-216.pdf>.
9. Re 2011 Generic Cost of Capital (8 December 2011), 2011-474 at para 13, online (pdf): AUC <www.auc.ab.ca/regulatory_documents/ProceedingDocuments/2011/2011-474.pdf>.
10. Re ATCO Gas 2011-2012 General Rate Application Phase I (5 December 2011), 2011-450, online (pdf): AUC <www.auc.ab.ca/regulatory_documents/ProceedingDocuments/2011/2011-450.pdf>.
11. Ibid at paras 24–32 (Section 2.1.1).
12. Ibid at paras 37–40 (Section 2.1.3).
13. The story can be easily found in an online search, but a short summary can be found in Lavesta Area Group Inc. v Alberta (Energy and Utilities Board), 2012 ABCA 84.
14. The cases are all described in detail in Re Utility Asset Disposition (26 November 2013), 2013-417, online (pdf): AUC <www.auc.ab.ca/regulatory_documents/ProceedingDocuments/2013/2013-417.pdf>.
15. Re Milner Power Inc. Complaints regarding the ISO Transmission Loss Factor Rule and Loss Factor Methodology (20 January 2015), 790-D02-2015, online (pdf): AUC <www.auc.ab.ca/regulatory_documents/ProceedingDocuments/2015/790-D02-2015.pdf>.
16. Milner Power Inc v Alberta Utilities Commission, 2019 ABCA 127. The Court of Appeals cases are Capital Power Corporation v Alberta Utilities Commission, 2018 ABCA 437 [Capital Power Corp], Milner Power Inc v Alberta Utilities Commission, 2019 ABCA 127, ENMAX Energy Corporation v Alberta Utilities Commission, 2019 ABCA 222.
17. Re Complaint by Milner Power Inc. Regarding the ISO Transmission Loss Factor Rule and Loss Factor Methodology (16 April 2012), 2012-104, online (pdf): AUC <www.auc.ab.ca/regulatory_documents/ProceedingDocuments/2012/2012-104.pdf>.
18. The history of the proceeding and its decisions are nicely summarized in Capital Power Corp, supra note 16.
19. Re Milner Power Inc. Complaint Against the Proposed AESO Line Loss Rule (30 December 2015), 2005-150, online (pdf): AUC <www.auc.ab.ca/regulatory_documents/ProceedingDocuments/2005/2005-150.pdf>.
20. Milner Power Inc. v Alberta (Energy and Utilities Board), 2010 ABCA 236.
21. Alberta Utilities Commission, “Mission Statement” (last visited 21 January 2020), online: <www.auc.ab.ca/pages/mission-statement.aspx>.