On December 8, 2011 the Ontario Energy Board dismissed a motion by the Consumers Council of Canada (CCC) challenging the constitutionality of the Board's assessments to recover costs in respect of energy conservation or renewable energy programs.
The assessment is made under the Ontario Energy Board Act, 1998, to recover costs associated with the Home Energy Savings Program and the Ontario Solar Thermal heating Initiative. It is imposed on licensed electricity distributors and the Independent Electricity System Operator (IESO). In turn, distributors and the IESO pass the assessment onto their customers.
In its motion, CCC argued that the assessment was an indirect tax, and therefore outside of the constitutional powers of the provincial government. Under the Constitution Act, 1867, Canada's provinces do not have the jurisdiction to enact or authorize the imposition of indirect taxes.
The issue before the Board was whether the assessment was properly characterized as a regulatory charge or an indirect tax. The Board considered the Supreme Court Canada's five identified features of a tax: (1) a tax is compulsory and enforceable by law; (2) it is imposed under the authority of the legislature; (3) it is levied by a public body; (4) it is intended for a public purpose; and (5) it is unconnected to any form of regulatory scheme.
The proceeding focussed on whether the assessment met the fifth feature. CCC argued that the assessment was not a regulatory scheme because the Board exercises little or no control over how the assessment was levied. Unlike its traditional rate-setting role, the Board determines the assessment by simply applying the formula stipulated in the regulations.
The Board disagreed with CCC's narrow approach, and held that only where there appears to be no nexus whatsoever between a charge and a regulatory scheme would the charge fail under the test. Adopting a broad approach, the assessment and the funded programs were part of a complete and detailed code of regulation, in which energy conservation was only one part.
CCC also argued that the programs funded by the assessment were not attempts to regulate behaviour because they were voluntary. The Board disagreed and held that the programs, while voluntary, were still incentives which were clearly intended to affect behaviour. Even though not all consumers would participate in the programs, the programs were the result of all users' electricity use and provided benefits for all users through improved grid reliability and environmental benefits.
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