On September 25, 2015, the Supreme Court of Canada released a
6-1 decision that has far-reaching implications for provincial
energy tribunals and administrative tribunals generally, and which
may also impact collective bargaining between regulated entities
and their unions.
The case, Ontario (Energy Board) v. Ontario Power Generation
Inc., 2015 SCC 44, arose from the
decision of the Ontario Energy Board (OEB) not to allow Ontario
Power Generation (OPG) to recover through rates $145 million in
compensation costs paid to its unionized workers under their
collective agreements. The Supreme Court's ruling focused on
two important issues: (i) the scope of the OEB's discretion to
set just and reasonable rates and (ii) the right of tribunals to
participate in appeals of their own decisions.
On the first issue, the majority reaffirmed the broad discretion
of energy regulators to set rates using the tools and methodologies
that, in light of their expertise, they consider appropriate in the
circumstances. In this case, the OEB disallowed the compensation
costs on the basis that OPG's cost structure was excessive when
compared to peer utilities and companies that the OEB used as
benchmarks. In the opinion of the majority, this approach was
consistent with the OEB's statutory mandate to balance the
interests of OPG shareholders and electricity consumers and to act
as a "market proxy" by "emulat[ing] as best as
possible the forces to which a utility would be subject in a
competitive landscape". Significantly, the majority held that
this mandate is not constrained, in the case of compensation costs,
by the fact that those costs were determined through a collective
bargaining process. Contrary to the position taken by OPG and its
two unions, the Court found there is no "presumption of
prudence" with respect to those costs, nor is there any
requirement to consider the reasonableness of the costs only in the
context of the circumstances that existed at the time the
collective agreements were made.
The second issue may also have far-reaching and practical import
for Canadian administrative tribunals. Rejecting the argument of
OPG and its unions that the input of tribunals into appeals from
their decisions should largely be restricted to addressing
jurisdictional issues and providing clarifications, the Supreme
Court majority articulated a more flexible approach. In determining
the scope of tribunal participation in such appeals, relevant
factors include whether the appeal would otherwise be unopposed and
whether the tribunal's original ruling was adjudicative or
regulatory in nature. In the majority's view, "the
principles of finality and impartiality are [to be] respected
without sacrificing the ability of reviewing courts to hear useful
and important information and analysis". The majority
concluded that the OEB had not acted improperly in defending the
appeal of its own decision (i) because the rate proceeding and
decision were regulatory in nature and (ii) because (practically
speaking) no one else was likely to defend it. The majority also
rejected OPG's and the unions' allegation that the OEB had
engaged in impermissible "bootstrapping", in the sense of
having sought to supplement a deficient decision with new arguments
This case, the first energy regulatory appeal to be considered
by the Supreme Court of Canada in nearly a decade, is likely to
feature prominently in future editions of Canadian administrative
law textbooks by virtue of its strong affirmation of the
wide-ranging authority of the country's regulatory tribunals,
both in terms of the approach they take in their own proceedings
and in their capacity for defending their regulatory decisions on
appeal. With respect to price-regulated monopolies and
quasi-monopolies such as OPG, the decision may also influence
bargaining in labour negotiations and could have favourable impacts
for customers and consumers as a result.
Stikeman Elliott litigators Glenn Zacher, Patrick Duffy and
James Wilson acted for the OEB in its successful appeal from the
adverse Ontario Court of Appeal ruling.
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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.
The Government of Alberta recently announced a number of policy changes that will impact the Alberta Electricity Market, composed of its generators, transmitters, distributors, retailers, electricity consumers and wholesale electricity market.
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