The first section in this issue of the Energy Regulation Quarterly (ERQ) starts with a snapshot of pipeline developments, the benchmark of Canadian energy markets. The Enbridge Line 3 has been completed. The others are still moving forward but are behind schedule with significant cost overruns. The government of Canada has announced it will not provide any further public funding for the Trans Mountain Expansion because the cost has increased 70 per cent to $ 21.4 billion. At the same time TC Energy Corporation announced that the Coastal GasLink pipeline cost has increased from $ 6.6 billion to $ 11.2 billion.

The next section of the annual review covers the key regulatory decisions. It starts with Canadas first decision on EV charging rates. The British Columbia Utility Commission turned down the rates proposed by BC Hydro because the rates did not include all the relevant costs and would likely contribute to an un-even playing field.^[1]

Next came the first decision by a Canadian energy regulator started by a whistleblower claim^[2]. There the Alberta Commission found that ATCO Electric had charged ratepayers for the costs of a contract it had entered into at $10 million above fair market price to benefit the utilities’ unregulated affiliate. To make matters worse the utility took steps to conceal the facts from the Commission. The Commission charged that the utility had breached its duty to disclose all relevant information to the regulator. This is another first in Canadian energy regulation. After a lengthy investigation the company agreed to pay a fine of $31 million, the highest fine awarded by a Canadian energy regulator to date.

The next decision reported on was another first. The Nova Scotia Commission approved an investment by a utility in a new technology called the tidal generation. It turned out not to be successful. The utility then asked the Commission to allow it to write off the costs. The Commission refused because there was insufficient evidence to determine whether the investment was still useful.^[3] This will become the next challenge for Canadian energy regulators. We have seen a number of decisions where regulators struggle with investments in new technology. This is the first one dealing with technology write offs. It will not be the last.

Another significant and unique decision from the Alberta is the decision in Calgary District Heating^[4] (CDH) that reinforced the concept of complaint-based regulation. Here the Alberta Commission decided not to regulate the rates of CDH because district energy services in the City of Calgary were competitive. In complaint-based regulation the utility has the right to set rates without the regulator’s approval but in the event of a complaint the regulator can consider if the rates are just and reasonable and set new rates on a retroactive basis if necessary. To date this form of regulation is rare but other jurisdiction may follow particularly in district energy applications.

Next came the decision of the Alberta Commission to substantially amend its Rules of Practice.^[5] It started with the Commission appointing an independent panel composed of Kem Yates, David Mullan and Rowland Harrison all of whom have very substantial experience in Canadian energy regulation.

That panel issued a report containing 30 recommendations of which 29 were accepted. The Alberta Commission recently reported that the recommendations have substantially improved its processing of complicated rate cases.

The AUC is now averaging 7.4 months between the application date and the date of the decision, an improvement of 41 per cent. Other Canadian energy regulators will no doubt review the amended Rules of Practice with some care

The last section of the annual review deals with regulatory decisions in the courts. It starts out with the Alberta Court of Appeal decision regarding the constitutionality of the Federal Impact Assessment Act.^[6] That decision has been reported on in these pages earlier and does not require further analysis except to say that the majority found the legislation not constitutional. The Alberta government called it the “no pipelines Act” and the federal government promised to appeal it to the Supreme Court of Canada.

Many of the Court decisions in the annual review relate to questions of jurisdiction. There were six decisions that fell within that category. This was the same number of decisions that fell within that category the previous year. Waterloo Hotel^[7] raised a rare but important issue — did the Ontario Energy Board have exclusive jurisdiction of the question before it? The court found that it did. Not all provinces have this provision in their statute but it is certainly an important one in Ontario.

The next jurisdiction case was a decision of the Ontario Superior Court of Justice in West Whitby Landowners^[8] where the court held that the Board does not need to hold a hearing every time someone requests it. The Ontario Energy Board also made an important decision in Waterfront Toronto^[9] where Enbridge asked the Board to order Waterfront Toronto to pay $70 million to cover the cost of a new pipeline. Waterfront Toronto claimed that the Board had no jurisdiction to order Waterfront to pay anything because it was not a gas customer. The Board agreed.

There were a number of decisions last year regarding aboriginal property rights. The decision of the BC Supreme Court in Blueberry River First Nation^[10] (BRFN) found that new construction projects should be put on hold where the province had authorized a number of industrial developments that the BRFN had opposed over many decades. This was the first Canadian decision to consider whether the cumulative effects of previous development can amount to an unjustified infringement of treaty rights.

The next decision of note is the Alberta Court of Appeal decision in AltaLink Management^[11] where the court emphasized that in determining whether or not a project is in the public interest, the regulator must consider the opportunities and benefits the project offers First Nations.

The next section of this issue of the ERQ is an article by Monica Gattinger and David Morton. Morton is the Chair and CEO of the British Columbia Utilities Commission. Gattinger is the Director of the Institute for Science, Society and Policy at the School of Political Studies and Chair of Positive Energy at the University of Ottawa. This is an important article because it lays out the challenges that energy regulators in Canada will face over the next five years. The authors refer to it as a massive disruption.

The issue is how will Canadian regulators handle massive investment that we are about to see as governments attempt to decarbonize the electricity grid across Canada. The authors note that they will face great uncertainty. The main issue to put it simply is who is going to call the shots. Will the regulators have a passive role and take instruction from the government or will they lead the charge. The answer the authors suggest is a bit of both.

The authors explain that the challenge comes from two factors. The first is the money. The second is the technology. Money matters because of the amount. Trillions of dollars. To a regulator that is called rate base expansion. That raises another question that always troubles regulators-who pays? In the case of the technology the problem is simple. The big question on everyone’s mind is will the technology succeed? And how do you write it off when it fails?

The article is quick to point out that there is another new important social goal on the regulatory scene That is the concept of reconciliation. This issue of the ERQ surveys those decisions. The recent decisions have clearly broadened the scope of issues that regulators must now consider. It is no longer simply a question of making sure that there was adequate consultation. The concept of reconciliation goes well beyond that. The courts have been very clear. In making decisions with respect to what is in the public interest, regulators must now consider the impact on aboriginal parties. In fact, it is now at the top of the list.

This article does not come up with any easy answers, but it does a very good job of laying out the questions. That is a good place to start.

Another addition to this issue of the ERQ is a book review of a recent book by Scott Hempling. Hempling has written a number of articles for this journal and more than once we have reviewed one of his books. This latest book is an important contribution to the literature on energy regulation. It is a detailed study of mergers and acquisitions in the United States. Hempling is very critical of the policy of the Federal Energy Regulatory Commission over many years with respect to the approval of mergers and acquisition within the United States electric utility industry. He is of the view that the Commission has been more than generous. He claims than they should not have relied on a strange reverse onus test called the no harm test.

That benchmark test was that mergers should be approved if the applicant can show that they would result in no harm. This no harm test was adopted in Canada where it has been used for many years. For that reason, Canadian lawyers and regulators will have more than a passing interest in this book. It is highly recommended.

One of the things that the editors of the ERQ do from time to time is that we republish reports that analyse important areas of regulatory practice. The general practice is to provide an editor’s introduction. We include two such reports in this issue. The first report was prepared by a consulting company called Guidehouse that was retained by both the American Gas Association and the Canadian Gas Association.

The report addresses a very important question facing gas utilities in North America today. That question is simply this. What is the future of natural gas utilities from an investor’s viewpoint given the very substantial investments taking place in both Canada and the United States to reduce carbon emissions? This report does a good job of surveying the investment community particularly the United States. Not surprisingly one of the major findings is that gas utilities should pay attention to ways in which they can decarbonize their product. At least in Canada there is strong evidence that companies are doing just that. Recent initiatives by Enbridge in Ontario and Fortis in British Columbia are good evidence. The report is worth reading.

A final report appears in this issue of the ERQ. It’s a report by Michael Cleland and Monica Gattinger called Next Zero an International Review of Energy Delivery System Policy and Regulation for Canadian Energy Decision Makers.

1. Re British Columbia Hydro and Power Authority Public Electric Vehicle (EV) Fast Charging Rate Application Decision and Final Order (26 January 2022), G-18-2022, online: British Columbia Utilities Commission <www.ordersdecisions.bcuc.com/bcuc/decisions/en/item/520273/index.do>.
2. Re Allegations against ATCO Electric Ltd. (29 June 2022), 27013-D01-2022, online: Alberta Utilities Commission <efiling-webapi.auc.ab.ca/Document/Get/719764>.
3. Nova Scotia Power Incorporated (Re), 2022 NSUARB 2, online: Nova Scotia Utility and Review Board <www.canlii.org/en/ns/nsuarb/doc/2022/2022nsuarb2/2022nsuarb2.html?autocompleteStr=2022%20NSUARB%202&autocompletePos=1>.
4. Re Calgary District Heating Inc. (2 March 2022), 26717-D01-2022, online: Alberta Utilities Commission <efiling-webapi.auc.ab.ca/Document/Get/713215>.
5. C. Kemm Yates, David J. Mullan & Rowland J. Harrison, “Report of the AUC Procedures and Processes Review Committee” (14 August 2020), online (pdf): <media.www.auc.ab.ca/prd-wp-uploads/2021/12/2020-10-22-AUCReviewCommitteeReport-1.pdf>.
6. SC 2019, c 28, s 1.
7. Vista Waterloo Hotel Inc. v 1426398 Ontario Inc., & Ontario Energy Board, 2021 ONSC 2724.
8. West Whitby Landowners v Elixicon Energy, 2022 ONSC 1035.
9. Re Enbridge Gas Inc. (7 July 2022), EB-2022-0003, online: Ontario Energy Board <www.rds.oeb.ca/CMWebDrawer/Record/750562/File/document>.
10. Yahey v British Columbia, 2021 BCSC 1287.
11. AltaLink Management Ltd v Alberta (Utilities Commission), 2021 ABCA 342.