An important part of Ontario's green energy initiative is
legislation that seeks to levy a so-called special purpose charge
("SPC") on ratepayers. The Consumers Council of Canada
("CCC") says that the SPC is unconstitutional as an
indirect tax. It has brought a motion before the OEB asking it,
among other things, to determine whether the Ontario Energy Board
("OEB") has the jurisdiction to issue the assessment
pursuant to unconstitutional legislation, and to cancel the
The Ontario government recently passed Ontario Regulation
66/10 (the "Regulation") to the Ontario Energy
Board Act, 1998 (the "OEB Act"). This new regulation
mandates the OEB to assess the SPC against licensed electricity
distributors ("LDCs") and the Independent Electricity
System Operator (the "IESO"), in the amount of
$53,695,310. On April 9, 2010, the OEB, pursuant to section 26.1 of
the OEB Act and the Regulation, issued an assessment against all
LDCs and the IESO.
The SPC is a key building block to the Green Energy and
Green Economy Act, 2009 (commonly referred to as the
"Green Energy Act"). According to the
Regulation, the SPC relates to "the expenses incurred and
expenditures made by the Ministry in respect of its energy
conservation programs or renewable energy programs". Section
26.2 of the OEB Act sets out a broad and all-encompassing list of
the special purposes for which the assessment is collected, such as
"to fund research and development or other engineering or
scientific activities aimed at furthering the conservation or the
efficient use of fuels".
The controversy, with respect to the Regulation, lies not in
requiring LDCs and the IESO to fund the province's green energy
initiatives. Rather, it arises from the fact that the Regulation
permits LDCs to recoup the amount of the SPC assessment from their
customers – Ontario ratepayers.
The province of Ontario derives its taxation power from section
92(2) of the Constitution Act, 1867. The province does not
have the constitutional jurisdiction to enact an indirect tax,
unless it can properly be qualified as a regulatory charge imposed
under one of the province's heads of power under the
Constitution Act, 1867. If the SPC is found to have the
attributes of a tax, is indirect, and is not found to be connected
to any form of regulatory scheme, it is unconstitutional, and of no
force or effect.
It is argued that the SPC has the attributes of a tax: (i) it is
compulsory and enforceable by law; (ii) it is imposed under the
authority of the legislature; (iii) it is levied by the OEB, which
is a public body; (iv) it is intended for a public purpose, namely
energy conservation programs in Ontario; and (v) it is unconnected
to any form of regulatory scheme, as the broad and all-encompassing
purposes set out in section 26.2 of the OEB Act make clear. Because
the assessment is issued against the LDCs and the IESO but
ultimately paid by ratepayers, it amounts to an indirect tax, and
will be deemed unconstitutional, unless the government can
discharge its burden and establish that the SPC is in fact a
The implications of CCC's motion are significant: if section
26.1 of the OEB Act is found to be constitutionally valid, it is
expected that the OEB will next issue an assessment against gas
distributors, an assessment which could exceed $100 million. The
costs of this assessment would also be recouped from ratepayers,
thereby increasing the cost of energy to Ontario ratepayers by more
than $150 million over a short period of time, above and beyond the
increases already planned by LDCs and gas distributors, and
authorized by the OEB.
CCC's motion has generated a significant amount of interest.
The following parties have asked for, and been granted, status as
intervenors: Canadian Manufacturers & Exporters; Enbridge Gas
Distribution Inc.; Industrial Gas Users Association; Toronto
Hydro-Electric System Limited; the Vulnerable Energy Consumers
Coalition; and Union Gas Limited. The Ontario Ministry of the
Attorney General and the Ministry of Energy and Infrastructure will
also be appearing. The OEB will be hearing submissions on certain
preliminary issues on July 13, 2010.
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guide to the subject matter. Specialist advice should be sought
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Canada is a constitutional monarchy, a parliamentary democracy and a federation comprised of ten provinces and three territories. Canada's judiciary is independent of the legislative and executive branches of Government.
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