This is the first issue of the Energy Regulation Quarterly (ERQ) for the year 2023. This is our tenth year of publication. We start this tenth year just as we did in our first year with an article by David Mullan, Emeritus Professor of Law at Queen’s University, one of Canada’s leading experts in administrative law. That first article was a 46-page blockbuster called “Regulators and the Courts: A Ten Year Perspective.”^[1]

The first section of the Mullan article in this issue of ERQ deals with this question: Given Vavilov’s^[2] apparent exclusion of questions of procedural fairness from its standard of review template, what standards are applied to such challenges?

The leading case is Abrametz,^[3] a decision of the Supreme Court of Canada that revisited the question of administrative delay which was first addressed by the court in 2000 in Blencoe.^[4] Following a very thoughtful analysis of the cases, Mullan concludes that the decisions of the last three years lead to the seven principles that he outlines. They deserve careful reading.

The next issue that Mullan reviews is the judicial review that is appropriate in the case of subordinate legislation. There he looks at Green v Law Society of Alberta^[5] and West Fraser Mills v British Columbia^[6]as well as Innovative Medicines, a decision of the Federal Court on December 5, 2020.^[7]

Mullan concludes that the controversy may be much about nothing but nonetheless the speculation should be put to an end and hopefully in the near future the Supreme Court will have an opportunity to do so.

Next Mullan turns to the question- what is the standard review for regulatory takings or what we more often call expropriation? This was a lively in issue in Annapolis Group Inc. v Halifax^[8] where the Regional Municipality of Halifax rezoned property and prevented the owner from certain development leading to claims of unjust enrichment, misfeasment in public office and improper use of regulatory powers for the purpose of seizing land for use as a public park without compensation.

Mullan proceeds next to discuss procedural fairness and legitimate expectation in the issuance of issuance of ministerial guidelines which became centre stage in TransAlta General Partnership.^[9] That case involved rulings by the Alberta government against the owners of coal-fired electricity generation facilities that the government decided to shut down. The question at issue was whether there should be depreciation adjustments arising out of the reduction of coal-fired emissions as part of the off coal agreement the utilities had entered into with the government. Also at issue was the procedural fairness of the guidelines that eliminated that provision. The question was whether any level of procedural fairness was reviewable. The real question became whether the guidelines were a legislative function or administrative in nature.

That analysis also involved a decision of the Ontario government in Tesla Motors^[10] where that government cancelled a subsidy program for those purchasing electric cars but established a two month grace period. It turned out that the government did not allow the Tesla customers to take advantage of the grace period. The Court of Appeal case noted the uncertainty of whether the doctrine of legitimate expectation could generate a right to a hearing in the case of legislative functions to which no such obligation would otherwise attach.

Another important discussion in this article concerns the recent development of the duty of candour by utilities that arose in the decision of the Alberta Utilities Commission in ATCO Electric^[11] where the Commission fined ATCO Electric $31 million because they concealed relevant information in order to recover certain costs. The decision noted that ATCO had breached its fundamental duty of honesty and candour to its regulator, a duty that required that the information it provided to the Commission be “full fair and accurate.” This is a decision that will have wide application across Canada. As always, the Mullan article is a must read textbook of the important developments in administrative law as it applies to energy regulation.

The second article in this issue of the ERQ written by Melanie Gillis and Noah Entwisle of the Halifax law firm, McInnes Cooper, concerns three important developments in the province of Nova Scotia. The first is a very significant expansion of the net metering program to support the development of solar energy. The second is a very aggressive new policy to develop green hydrogen projects. The third relates to the decision by the government of Nova Scotia to put a cap on the rates Nova Scotia Power can charge its customers.

Nova Scotia has had a net metering program to promote the development of solar energy since 2010. It has proved to be very popular with residential customers but less so with commercial customers because of the of 100 kW cap on the size of commercial installations.

The solar energy policy in Nova Scotia first attracted attention last year when Nova Scotia Power decided to charge customers a system access charge of eight dollars per kilowatt each month on net metered installations. The utility claimed that homeowners who generate their own electricity using solar panels were being subsidized by other customers. The government opposed the new charge and the utility subsequently withdrew the proposal.

As the article explains the government introduced a new policy increasing the net metering capacity cap for commercial customers from 100 kW to 1 MW. In addition, any Nova Scotia customer now has the right to self generate electricity with solar panels and install up to 27 kW nameplate capacity of renewable electricity generation and storage without approval from the utility. The amended regulations also require Nova Scotia Power to process net metering applications in a timely matter and approve all net metering applications unless there are reasonable grounds to deny them.

The article also addresses a new very significant initiative Nova Scotia to develop green hydrogen. Currently there are six active green energy hydrogen projects in Nova Scotia including four projects to deliver the product to Europe. The new legislation provides much needed clarity on the environmental assessment obligations that hydrogen projects are now subject to.

The next section of this article addresses a very controversial policy introduced by the Nova Scotia government in 2022. That was the cap the government placed on the rate increases that the energy regulator in Nova Scotia could grant the utility, Nova Scotia Power. Nova Scotia Power had applied for a 14 per cent rate increase over two years. The provincial government responded by passing legislation that limited the rate increase to 1.8 per cent over the next two years.

The article indicates that in the end the utility reached an agreement with its major customers that established an average rate increases of 6.9 per cent across all customer classes in 2023 and 2024. The Board approved those rates^[12] because it was concerned about the credit downgrades Nova Scotia Power had incurred as a result of the rate cap. The regulator also stated that it had a legal obligation to grant rate increases where they were just and reasonable.

The regulator’s reaction to the rate cap was also influenced by the utility’s decision in response to the cap to stop making investments in a new transmission line called the Atlantic Loop. This $5 billion transmission project would give Nova Scotia greater access to hydroelectricity generated in Labrador and Québec. That renewable energy was considered essential if Nova Scotia was to eliminate its dependence on coal-fired electricity generation.

The next article in this issue the ERQ written by Jason Kroft and Ghazal Hamedani of the Toronto law firm, Miller Thomson, deals with the various carbon tax regime across Canada. It deals with provinces of Québec, Ontario, Alberta, British Columbia and the Atlantic Provinces. It also contrasts the development in Canada with the carbon tax regimes in the U.S. and Europe.

As the article points out, the attempt by the Canadian government to impose carbon taxes in all provinces has faced years of legal challenges. In the end the Supreme Court of Canada concluded that the Greenhouse Gas Pollution Act^[13] was constitutional and the federal government had the authority to establish the tax regime across Canada.^[14]

The article also makes it clear that the policies that many provinces have put in place are not acceptable to the federal government and negotiations are still underway in some provinces. It is also true that experts in some quarters question the efficiency of carbon taxes as an economic instrument. The conclusion of this article is that the ability of carbon taxes to meet goals established for carbon reduction in Canada is by no means clear.

This issue of the ERQ has two book reviews. The first book, “California Burning” is by Katherine Blunt. It is has been reviewed by Ahmad Faruqui, a well-known energy economist who until recently was practising with the Brattle Group in San Francisco. Faruqui notes in his opening sentence that the subtitle of this book, “The Fall of PG&E and what it means for the American power grid” is very telling. The book, he notes, “reads like a corporate obituary.”

Faruqui also notes that the book has a razor-sharp focus on the wildfires that were caused by PG&E over the last few years, several which resulted in criminal charges being filed and upheld against the company.

The book is well worth reading. It does a very good job of describing the complexity that large utilities like PG&E face these days. He notes that much of the colour is missing in this book because it is based mostly on interviews with victims of the company’s disasters such as wildfires and pipeline explosions.

Faruqui concludes that even with these limitations the book is a must read. It documents in great detail the numerous blunders that tarnished the image of one of the largest electricity and gas utilities in America. He also notes that other utility executives should read this book. It will help them come to know what to do and what not what to do.

The second book being reviewed in this issue, The Guide to Energy Arbitration, is a collection of contributions from some of the leading energy arbitrators in the world. This book which is now in its fifth edition is edited by J William Rowley, Doak Bishop and Gordon Kaiser.

The author of the book review is Ralph Cuervo-Lorens, a partner in the McMillan law firm in Toronto. Lorenz points out in this review that the energy sector is the poster boy of global arbitration. Much of this book relates not to domestic energy policy but rather to the activities of the multinationals that move energy between countries or search for energy in foreign jurisdictions. Given the importance of energy in the arbitration world, this book has proven to be essential to energy counsel and arbitrators alike. That no doubt is why it is now in its fifth edition.

The book tracks the development of arbitration under different treaties including NAFTA and more recently the USMCA as well as the complexity of price review arbitrations under a number of treaties. That may be why many well know energy arbitrators have five copies of this book on their bookshelf. Ralph Cuervo-Lorens we should point out provides an in depth analysis of the content. Readers will find it very helpful.

1. David J. Mullan, “Regulators and the Courts: a Ten Year Perspective” (2013) 1:1 ERQ, online: <energyregulationquarterly.ca/articles/regulators-and-the-courts-a-ten-year-perspective-1#sthash.MF7dllrP.dpbs>.
2. 2019 SCC 65.
3. Law Society of Saskatchewan 2000 SCC 44.
4. Blencoe v British Columbia, 2000 SCC 44.
5. 2017 SCC 20.
6. 2018 SCC 22.
7. Innovative Medicines Canada v Canada, 2022 FCA 2010.
8. 2022 SCC 36.
9. 2022 ABCA 381.
10. Tesla Motors Canada v Ontario, 2018 ONSC 5062.
11. Alberta Utilities Commission, Notice of enforcement proceeding, 29 November 2021 (Application of the AUC Enforcement Staff for the commencement of a proceeding pursuant to sections 8 and 63 of the Alberta Utilities Commission Act).
12. Nova Scotia Utility and Review Board re General Rate Application by Nova Scotia Power, 2023, NSUARB 12.
13. SC 2018 C12.
14. Reference re: Green House Gas Pollution Pricing Act, 2021 SCC 11.