Energy @ Gowlings - August 27, 2008.

Edited by Paul Harricks

Contents

OEB Releases Generation Connection Staff Discussion Paper - Carlton Mathias

"Compete to Win" Report: Recommendations of the Competition Policy Review Panel - Ugochukwu Ukpabi

Canada's Major Projects Management Office is Operational - Clark Schow and Christine Yick

The Legal Basis of Public Utility Regulation - Tom Brett

OEB RELEASES GENERATION CONNECTION STAFF DISCUSSION PAPER By: Carlton Mathias

Background

On July 8, 2008, the Ontario Energy Board (Board) released its promised Staff Discussion Paper (the Discussion Paper or the Paper) on "Transmission Connection Cost Responsibility Review" (TCCRR). The Board's self-initiated TCCRR consultation was launched early in January 2008 to examine the cost responsibility for generation and load connections to transmission systems in Ontario. The launch of the consultation process was immediately followed by a stakeholder meeting in mid-February 2008, by which time 53 organizations had registered as participants in the process. While the consultation is to ultimately examine Board policies regarding cost responsibility for both generation and load connections, the Discussion Paper issued in July 2008 focuses solely on generation connections. A further paper will be issued with respect to load connections. Though a specific date has not been set Board staff hopes that it may be published within the next month or so. Both papers relate to connections to transmission systems, as opposed to distribution systems.

The TCCRR consultation developed in large part due to the Ontario Government's Supply Mix Directive (SMD) issued in June 2006. The SMD also underpins the Ontario Power Authority's (OPA) Integrated Power System Plan (IPSP) which was filed for Board review in August 2007. The SMD and the IPSP call for a doubling of Ontario's renewable energy supply to approximately 15,700 MW by 2025. The difficulty, however, is that much of the reasonably developable renewable energy in Ontario is locationally constrained - that is, it is far removed from the existing transmission grid. This raises the old saw of which does one build first, the generation or the transmission? A critical part of the answer lies in a determination of who pays for what and at what stage

The Ontario Model Today To help address the development of remote generation, the OPA's IPSP introduces to Ontario a plan to construct "enabler" lines. Enabler lines are radial transmission lines for the specific purpose of connecting generation resource clusters to the transmission grid. The OPA's evidence in the IPSP states that the present Transmission System Code (TSC) regulatory framework does not recognize the concept of enabler lines. The OPA recommends that the current regulatory regime "should be adapted to accord with the Electricity Act's and the Directive's renewable objectives". The OPA goes on to state that, "This view is expressed by a representative of the First Nations Energy Alliance North who specifically said that the OEB may need to consider changes to existing transmission policy to facilitate enabler lines to First Nations' renewable projects".

In outlining the issues for its consultation process, the OEB addresses the above-referenced issues head on. The Paper begins by outlining the current regime for connections and cost responsibility for them and then proceeds to outline enabler line development in both California and Texas. Thirdly, the Paper provides options for generation connection cost responsibility policies in Ontario.

With respect to the TSC's current connection process, the Paper summarizes cost responsibility in three points:

"Cost responsibility for customer driven connection facilities should rest with the customer;

This is also the case when the connection facilities are triggered by the needs of more than one customer; and

There is an exception that applies where a connection facility was otherwise planned by the transmitter to meet load growth or maintain system reliability and integrity."

The Paper also adds two additional points as being important:

"Generators are responsible for paying for and constructing their connections to the grids; and

Transmitters are not permitted to construct generator connections to the grid."

The Paper explains that the approach of the TSC is to assign connection cost responsibility to the entity that influences the costs. In this way, generators are motivated to develop only those resources which are the most economically efficient, accounting for both generation and connection costs. Now, however, the issue going forward is that, while this model has appeared to be rational to date, query whether it will foster development of Ontario's renewable energy resources - remotely located - in a manner consistent with the IPSP.

Other Jurisdictions In looking for guidance from beyond Ontario's borders, the Discussion Paper examines the development of remote renewable resources in California and Texas. The Paper highlights that, in Texas, the regulator and the system operator play a joint role in developing "Competitive Renewable Energy Zones" (CREZ). The regulator directs the system operator to identify the CREZ, each CREZ's size of potential resources as well as the size and cost of prospective transmission lines to transfer the power to the market. The regulator also runs a contest to determine who will build the lines. Before proceeding, generators must pay a deposit to back-stop their commitment to development. Once the generator connects to a line that gets built, the deposit is returned and the cost of the CREZ facilities are placed into the transmission rate base. The Discussion Paper notes that, for Texas, the amount that may ultimately be placed into the transmission rate base under this model is between US$2.95 billion and US$6.38 billion - this to facilitate 12,000 to 24,000 MW of power. The Paper notes that for Ontario, the IPSP has identified three enabler lines with a capital cost of Canadian $210 million to connect approximately 700 MW of renewable power.

Under the California regime, the facilities similar to the above-described Texas facilities are called, "Locationally Constrained Resource Interconnection Facilities" (LCRIF). The process to construct these facilities in California has been approved by the Federal Energy Regulatory Commission and incorporated into the transmission tariff. The process requires coordination and planning among the California Energy Commission, the California Public Utilities Commission and the California Independent System Operator with respect to identification of and planning development of the LCRIF. Once a plan is approved and in place, the Discussion Paper explains that "firm commitments by generators to pay a pro-rata share of the transmission facilities are needed for at least 25% of the line's capacity with evidence that at least a further 35% of the capacity is likely to be taken up. The transmitter develops the LCRIF. The generators are obliged to pay for their share of the actual costs of the facility. Costs not covered by generators are included in the transmission rate base. As other generators join later, they pay a depreciated  share of the transmission facility costs."

The Discussion Paper indicates that the regime for enabler line development was also examined for the United Kingdom as part of Board staff's research. However, it was concluded that the relevance of the UK model is limited, because, "unlike many other jurisdictions, including Ontario, generators are charged for the use of the transmission system."

Upon reviewing the three comparative jurisdictions, the Discussion Paper comes to the conclusion that central to the approach of the other jurisdictions to enabler line development is that they do more than address the question of who pays, but also address process issues. The Paper sets out four elements that appear to be common to the approaches in the other jurisdictions reviewed:

"The cluster/zones/resource areas need to be identified and approved.

The appropriate size and location of the enabler facilities must be planned and be subject to some form of regulatory review.

An entity responsible for ensuring coordinated development of the clusters and associated transmission has to be identified.

Financial mechanisms for allocating risk and recovering costs of the transmission facilities have to be specified."

Looking Back To Ontario In examining the Ontario context for potential enabler line development, the Discussion Paper summarizes the roles of the OPA, transmitters and the Board. The OPA is described as playing a central role in the system planning and generation procurement. In this capacity, and formally through the IPSP, the OPA "identifies the location of renewable resource-rich clusters, evaluates which of these clusters are economic to develop, and proposes when three such clusters should be developed." The Paper raises as a flag, however, that while the OPA has a definitive role in generation procurement, it does not appear to have express statutory responsibility under the Electricity Act, 1998 to procure transmission facilities.

As for transmitters, the TSC provisions set out that generators are to provide their own connection facilities, independently of the transmitters. The generators must also pay for studies to be done by both, the particular transmitter to whom the generation is to be connected, and the IESO, to measure the impacts of the connection.

With respect to the Board, the Paper states that the Board's role is extensive relevant to generation connections. The Paper explains that the Board has four principal instruments reserved to it in this regard:

The TSC - it governs the relationship between transmitters and their customers and includes rules regarding cost responsibility for connections.

Review, approval and implementation of the IPSP - in approving the IPSP, the Board will approve the planning basis for clusters of renewable resources identified in the plan.

Leave to construct - when leave to construct under the OEB Act, 1998 is required for a generation connection, the practice of the Board has been such that a demonstration of the need for the connection facility is not required in the same way as when a transmitter is the proponent of such facilities. This is because the generator proponent is taking the financial risk for the cost of the connection.

Licences - under the OEB Act, 1998 no person may own or operate a transmission system unless licensed by the Board to do so. The Act gives the Board authority to impose conditions on licences, which may include requiring transmitters to expand their transmission systems or to implement transmission requirements identified in an approved IPSP.

Finally, this section of the Discussion Paper concludes by finding that Ontario has most, but not all of the four common elements to the comparative jurisdictions as set out further above. The Paper finds that the most relevant difference lies in coordination of the development of the generation facilities and the enabler transmission facilities. The Paper explains that in Ontario, while the OPA is in a good position to coordinate the development of the generation resources within a cluster, there is currently no central coordination of the associated enabler transmission facilities. Furthermore, and by contrast to the other jurisdictions, transmitters have a very limited role.

Options For Generation Connection Cost Responsibility Policies In Ontario Given the current connection cost regime, the roles of the central figures in the regime and the tools available to them, and with the illumination of the experience in California and Texas, the Discussion Paper considers four options for generation cost responsibility policies for Ontario. The Paper evaluates the four options on the basis of each ones (1) economic efficiency and (2) regulatory predictability and administrative efficiency.

The Paper explains that economic efficiency is important because its promotion is one of the Board's guiding objectives under the OEB Act. The Paper describes the objective of economic efficiency for present purposes as "achieving the connection of renewable generation resources to the transmission grid in a cost effective and timely manner. The key issue is whether parties have both the correct incentives and the means to minimize costs."

As for regulatory predictability and administrative efficiency, these are viewed from the perspective of potential proponents: whether proponents will be able to anticipate how and the rationale upon which regulatory decisions are to be made; whether the effort required in the administrative process is proportional to the undertaking being pursued.

The four options for Ontario that are considered are:

Status Quo - the generator has lead responsibility for constructing enabler facilities as well as cost responsibility for same.

Pooling - the transmitter has lead responsibility for constructing enabler facilities and the costs are recovered from transmission rate payers by placing the facilities in the rate base.

Hybrid - the transmitter has lead responsibility for constructing enabler facilities and the generator has principal cost responsibility. The enabler facilities are provided by a licensed transmitter who owns and operates the facilities and the associated costs are temporarily pooled. Capital contributions towards the cost of the facilities are made pro- rata by the generators in anticipation of connecting to the transmission. If and when other generators connect, pro-rata capital contributions from them reduce the cost to be recovered from rate payers, though in the intervening period, the costs are borne by the rate payers.

Shared - the transmitter has lead responsibility for constructing the enabler facilities and the generator has cost responsibility for same. A licensed transmitter constructs, own and operates the enabler facilities and all of these costs are recovered from generators who connect early. Capital contributions by subsequent generators are used to provide a refund to the generators who have already connected.

Conclusion The Discussion Paper itself does not settle on or recommend one of the four options. However, the Paper lays excellent groundwork for further discussion in the stakeholder consultation process. Consistent with the electricity industry landscape in Ontario, as is apparent from issues ranging from a determination of what Ontario's supply mix ought to be to what the market structure ought to be, settling on an option for enabler line development will be one of balancing trade-offs. It would be unfair to the Discussion Paper to provide here a simplified summary of the comprehensive analysis undertaken with respect to each of the four options examined. For those interested in reviewing the Discussion Paper, it can be found at www.oeb.gov.on.ca. The Discussion Paper also nicely concludes by setting out a number of questions to guide stakeholder input.

"COMPETE TO WIN" REPORT: RECOMMENDATIONS OF THE COMPETITION POLICY REVIEW PANEL By: Ugochukwu Ukpabi

I. Introduction

The Competition Policy Review Panel (CPRP)1, a body set up by the Government of Canada on July 12, 2007, recently released its report. The report, entitled: "Compete to Win,"2 (the Report) made a wide range of recommendations that are sure to have implications for trade and foreign investment in Canada. In part, CPRP's mandate was to: "examine and report on the laws and policies that will underpin Canada's continued economic growth and development".3

Overall, the Report canvassed greater openness of the Canadian foreign investment climate. In particular, it made recommendations concerning the following: the Investment Canada Act;4 sectoral regimes - (air transport, uranium mining, telecommunications and broadcasting); the Competition Act;5 financial services; taxation; the Canadian Economic Union, Canada-United States economic ties; strengthening the role of directors in mergers and acquisitions; international trade and investment; and the creation of a Canadian Competitiveness Council.

This article provides a summary of key findings of the CPRP Report particularly as it relates to the Investment Canada Act and the Competition Act. Further, it highlights a number of observations arising in connection with the CPRP Report.

II. Investment Canada Act And The Competition Act

Background

The Report noted the usual tension at play in reviewing competition policy: on one hand, openness to competition and foreign investment, and on the other, assuaging the attendant unease occasioned by such investment. Regarding the unease over foreign investments, it will be recalled that Industry Canada  recently released guidelines concerning foreign state-owned corporations (the Guidelines).6 The Guidelines are intended to subject investments by those state-owned corporations? primarily located in China and the Middle East? to additional scrutiny.

On balance, however, the general tenor of the Report appeared to favour more openness in Canada's foreign investment laws. It sought to do that through narrowing the scope of the Investment Canada Act; that is, the Report sought to minimize the situations whereby the Investment Canada Act provisions may be invoked. For example, the Report suggests increased reviewable thresholds for foreign investments in Canada.

Investment Canada Act

The Report contained the following recommendations concerning the Investment Canada Act:

A. The Net-Benefit Test

Recommendations concerning the net-benefit test adopted under the Investment Canada Act include:

The "likely to be of net benefit" test should be retained7 (CPRP found that it was more aligned to the overarching objective of increased openness to foreign investment);

The introduction of a reverse onus test under which the Minister of Industry would be required to explain why a proposed investment has not satisfied the likely to be of net-benefit test; and

Alteration of the likely to be of net-benefit test under which the investment will be approved unless the investment is contrary to Canada's national interest (that is, a change from the test of "likely to be of net-benefit to Canada" to that of "contrary to Canada's national interest").

B. Reviewable Threshold

The Report suggests the following:

Raising the minimum reviewable threshold for review from $295 million to $1 billion

Changing the metric for measuring the value of Canadian businesses from "gross assets" to that of "enterprise value"

The revised figure ($1 billion) to be made also applicable to non-WTO investors

Elimination of the separate threshold of $5 million applicable to foreign investment in non-federally regulated financial services, transportation services (including pipelines) and uranium mining enterprises

Elimination (except in the cultural industry) of mandatory reporting of foreign investments that do not exceed the suggested limits

C. National Security Test

The Report indicated its support for:

An explicit "national security test" review

Bringing the scope of the national security test review closer to the process followed in the United States (that is, a process resembling the Committee on Foreign Investment)

D. Transparency

Transparency initiatives suggested include:

Requiring the Minister to report publicly on the disallowance of any individual transaction under the Investment Canada Act. Further, the Minister to be required to give reasons for his decision

Publication of annual reports on the Investment Canada Act

Increased use of guidelines and other advisory materials to provide information concerning the review process

Improving the speed of approving applications

Competition Act

The Report recommended the following:

Amendments to the Competition Act:

Aligning the merger notification process with the merger review process followed in the United States

Reducing from three years to one the period within which the Commissioner of Competition may challenge a merger

Repeal of price discrimination, promotional allowances and predatory pricing provisions

Repeal of existing conspiracy provisions

Repeal of existing resale price maintenance  provisions and replacing them with a new civil provision. The new civil provision to be subject to private access rights before the Competition Tribunal

Granting power to the Competition Tribunal to order administrative monetary penalties of up to $5 million for violations of the abuse of dominant position provisions

Repealing the "Air Canada" amendments, which created special provisions for abuse of dominant position and penalties for a dominant air passenger service

Periodic review by the Minister of Industry of applicable financial thresholds triggering the obligation to notify a merger transaction

The proposed Canadian Competitive Council to assume responsibility for competition advocacy

The Competition Bureau to reinforce its commitment to giving timely decisions

III. Initial Observations

Perception Gap The CPRP disagreed with the finding of the Organization for Economic Co-operation and Development (OECD) which had suggested that, overall, Canada's investment climate was one of the most restrictive, at least when compared with those of other OECD countries. However, in reaching its conclusion, the CPRP did not rigorously engage with the OECD findings, but rather proceeded to cite other reports favourable to its eventual conclusion that the Canadian investment climate was not as restrictive. It may have been helpful if the CPRP had at least attempted to reconcile these conflicting conclusions.

Alteration Of The Net-Benefit Test It is unclear as to what purpose the proposed alteration of the "likely to be of net-benefit to Canada" test will serve. The proposed change? from "likely to be of net-benefit to Canada" to "contrary to Canada's national interest"? could, depending on how it is interpreted, run counter to the CPRP's declared objective of further opening Canada's investment climate. Moreover, the phrase, "contrary to Canada's national interest" seems rather imprecise and appears to accord undue discretion to government officials.

WTO And Other Reciprocal Obligations The CPRP's recommendation that the reviewable threshold amount? $1 billion Canadian? be extended to non-World Trade Organization countries is rather puzzling. Two things may be noted in this regard: First, Canada is not under any obligation to extend benefits to non-WTO members. Second, extending benefits to non-WTO members (North Korea and a handful of other rogue states) places them on the same platform as WTO members. In sum, it is difficult to see how rights accorded WTO members should be extended to non-members.

IV. Conclusion

Response to the Report has generally been positive. Business communities across the country have praised the Report. For example, the Canadian Chamber of Commerce applauded and published its own response. Nevertheless, the Report may not have succeeded in easing the anxiety of those who worry that further openness will lead to the "hollowing out" of corporate Canada. It remains to be seen how far the Canadian Government will go in adopting the recommendations made in the Report.

Footnotes

1. The CPRP members included the following: L.R. Wilson (Chair), P. Thomas Jenkins, Isabelle Hudson, and Brian Levitt.

2. The text of the Report may be found at: http://www.ic.gc.ca/epic/site/cprp-gepmc.nsf/en/h_00040e.html.

3. The Report, v.

4. Investment Canada Act, R.S. 1985, c. 28.

5. Competition Act, R.S. 1985, c. C-34.

6. Guidelines-Investment by state-owned enterprises-Net benefit assessment available online at www.ic.gc.ca last visited on July 29, 2008.

7. Regarding state-owned corporations, the Guidelines indicated that their 'governance and commercial orientation' would be incorporated into the likely net-benefit test.

CANADA'S MAJOR PROJECTS MANAGEMENT OFFICE IS OPERATIONAL By: Clark Schow and Christine Yick

The Federal Government's newly established Major Projects Management Office (MPMO) is now operational and serving as the managing body for a number of upcoming major resource projects across the country, including:

TransCanada Corp.'s Belle Plaine Polygeneration Project in Belle Plaine, Saskatchewan;

Plutonic Power Corporation's Bute Inlet Hydro Generation Project in northern British Columbia; and

B.C. Hydro's proposed expansion of the Mica Generation Station, north of Revelstoke, British Columbia 

The creation of the MPMO was announced in October 2007 by Natural Resources Minister Gary Lunn as part of the Federal Government's Regulatory Improvement Initiative. The goal of the MPMO is to streamline the federal regulatory process, improve predictability, and cut assessment time for major resource projects in half.

The Need For Regulatory Efficiency The current federal regulatory process for major project developments involves multiple permits, licences and approvals from several regulatory agencies and a number of government departments (in many cases, jurisdiction overlaps and projects often require separate approvals from federal, territorial, provincial, and settlement area regulatory authorities). Until the creation of the MPMO, there was no formal "process" for obtaining the required permits and liaising with government departments, and project developers were required to liaise with regulatory bodies and government departments separately. This led to the regulatory process being unwieldy and unpredictable, resulting in delayed approvals and cost overruns. Some notable examples are:

Project developers of the Mackenzie Valley Gas Project have been in front of regulators since 2004 and incurred $300 million in regulatory costs. Some estimate the cost could be as high as $600 million before the project begins delivering gas. A final decision regarding regulatory approval was expected by 2007 but is currently delayed until at least 2009.

Kinder Morgan's Trans Mountain Anchor Loop pipeline project took three years to obtain regulatory approval, although the project is expected to take only nine months to build.

Plutonic Power Corporation's East Toba and Montrose Run of River Project took more than 500 days for regulatory approval, as opposed to the 180 days that Plutonic expected. The project costs increased by $70 million, forcing Plutonic to obtain additional debt and equity financing in order to complete the project.

Given the complexity of the regulatory regime, and the Federal Government's expectation that $300 billion will be invested in new resource projects over the next five years, and the MPMO provides welcome changes to accommodate significantly increased investment.

How The MPMO Works The MPMO will provide project management services and act as a single point of entry into the federal regulatory system. The MPMO will endeavour to streamline the federal regulatory process and work collaboratively with the various government departments to ensure increased efficiency and transparency. The MPMO will not interfere with the authority or discretion of government departments, rather, such departments retain the responsibility for ensuring that the applicable statutes and regulations are followed.

There is no legal requirement for project developers to engage the MPMO, but they are strongly encouraged to do so. The MPMO is overseen by the Major Projects Deputy Ministers' Committee and relies on participation from the Canadian Environmental Assessment Agency, Natural Resources Canada, Environment Canada, Fisheries and Oceans Canada, Transport Canada, Indian and Northern Affairs Canada, the Canadian Nuclear Safety Commission and the National Energy Board.

Any "major resource project" will fall within the jurisdiction of the MPMO to manage. This includes any project that is subject to a comprehensive study, a panel review, or a large multi-jurisdictional screening under the Canadian Environmental Assessment Act. The MPMO will not oversee major resource projects in the Northwest Territories, Yukon, or Nunavut as a regulatory overhaul is being considered by Indian and Northern Affairs Canada.

To start the regulatory process with the MPMO, project developers must first submit a project proposal for approval by the MPMO. Once a project proposal is submitted and approved by the MPMO, the MPMO distributes the proposal to the appropriate government departments and develops a Project Agreement which will establish the framework for how the project moves through the regulatory system. The Project Agreement will include the following:

A description of the roles, statutory obligations, responsibilities and commitments of each governmental department involved;

Work plans for aboriginal consultation and permitting, authorization, and approvals;

Project service standards, performance targets, and timelines; and

A schedule for the submission of additional information.

The MPMO will also assist project developers in preparing project proposals (and distribute such proposals to government departments), and offer guidance with respect to the licences, permits, and authorizations to be obtained by project developers. In order to improve transparency of the federal regulatory system, the MPMO offers web-based tracking of projects through the "MPMO Tracker"1 which allows the public to monitor and view the progress of any project overseen by the MPMO. The MPMO will also conduct short and long-term studies in order to improve the performance of the regulatory system in the future, including legislative options, cost recovery, cumulative effects, energy infrastructure corridors, regional assessment, and capacity building initiatives and processes.

Conclusion Many industry insiders believe that the creation of a body such as the MPMO has become increasingly necessary to fix many of the problems with the old regulatory regime and to support incoming investment in Canadian energy and infrastructure projects; and with six projects currently submitted (and with a goal of being able to manage over 100 projects per year), the MPMO will soon show whether it achieve its mandate to simplify the federal regulatory process.

Footnote 

1. http://www2.mpmo-bggp.gc.ca/MPTracker/disclaimer-avis-eng.aspx

THE LEGAL BASIS OF PUBLIC UTILITY REGULATION By: Tom Brett

Many advisors and others in the energy field are unaware of the significance that legal principles and decisions play in the evolving shape of public utility regulation. First of all, the Courts perform their traditional function of supervising the conduct of public utility tribunals on procedural matters -- for example, ensuring the avoidance of bias, observance of the principles of natural justice in the conduct of their proceedings and in their rules, and defining the jurisdiction of the tribunal through careful interpretation of enabling statutes. As well, many energy statutes, including the Ontario Energy Board Act, provide for the regulator to refer a question of law to the Courts. More importantly, the Courts, both in Canada and the United States, have also made many findings which define basic public utility concepts, such as just and reasonable rates, fair and compensatory rates of return, the proper disposition of the proceeds of the sale of utility assets no longer used and useful, and the treatment of stranded costs, to name a few.

The Courts have also defined the limits of energy regulators' discretion in making findings and decisions on the matters noted above, by establishing the degree of deference the Courts should accord the Board's decisions. If the Board is exercising its discretion in an area of its professional expertise, such as setting an appropriate return on equity, the Courts generally will not interfere unless they find the regulator's decision to be patently unreasonable. On the other hand, where the Courts find that the regulator lacks jurisdiction to deal with the matter, the Courts will intervene if they believe the regulator's interpretation of the enabling statute is incorrect. The Courts begin this process by careful interpretation of the regulator's enabling statutes. While energy regulatory statutes are similar in Canada's provinces, they are not identical and, like most statutes, evolve over time. The words of the particular statute are all important to the judges and the regulatory lawyer. My favourite law school professor at the University of Toronto, the late J.B. Milner, captured the nuance of legal drafting in one of his favourite admonishments -- The two most important words in the English language are "some" and "all".

The basic concepts in public utility regulation have been defined by Courts over the years, often in the process of interpreting the language of the statute in question. The decisions, especially by provincial Courts of Appeal or the Supreme Court, create precedents which will be applied by the Courts in subsequent cases, and must be followed by regulators. In addition, virtually every energy regulator has at least one lawyer member, and either internal or external counsel, to ensure that their decisions are in accord with the prevailing statutes and judicial decisions. Canadian Courts' energy decisions sometimes cite American jurisprudence since the energy regulatory system in the United States developed some years before Canada's. In addition, the Courts will sometimes cite their previous decisions in review of the work of other regulators, such as the Canadian Radio-television and Telecommunications Commission. Some very old precedents were created in judicial reviews of the railways' regulator, when railways were more closely regulated. Occasionally, the Court will be divided on a matter, and both a majority and minority decision are written and published. A recent example was a 2006 Supreme Court of Canada decision, Atco Gas and Pipeline Ltd. v. Alberta Energy and Utilities Board [2006] 1 S.C.L. 140, 2006 SCC 4.

In that case Atco sold a building in the City of Calgary which it no longer required, and proposed to keep all of the proceeds. The regulator ordered that the proceeds be shared with Atco's ratepayers, and the Alberta Supreme Court agreed. Both the Alberta Court of Appeal and the Supreme Court of Canada found for Atco. The majority was persuaded that the issue was one of property rights. More precisely, the assets in question belonged to the utility, therefore it could do what it pleased with them so long as the ratepayer was not harmed. And, in any event, the Alberta Energy and Utilities Board (AEUB) did not have jurisdiction to allocate a net gain on the sale of a utility's assets. A minority of judges held that the case was not about property rights at all, but rather about the discretion of the regulator to fairly deal with the issue of how to divide the profits, and found that the AEUB had acted well within historical norms and practices.

Without knowing the leading Court cases in public utility regulation, it is not possible to provide sound strategic and tactical advice to a public utility or intervenor in any type of regulatory proceeding, whether a rate case, a facilities case, or a policy proceeding.

The proceedings of the Board may be more or less "formal" in the sense that sometimes the Board will allow the matter before it to be decided on the basis of written evidence and argument, and not insist on an oral hearing; but even in those cases they produce legally binding orders, or findings, at the end of the day. The "informal proceedings" should be treated with the caution and care that all legal proceedings deserve.

Lawyers can assist their clients in regulatory proceedings, whether formal or informal, in several ways:

By ensuring that the Board staff and the Board proceed in a way that is procedurally fair to all parties in accordance with the principles of natural justice. This does not always happen, and procedural fairness is a legal duty imposed on the Board by its own statute (in Ontario, the Statutory Powers Procedure Act) and the common law. Public utility tribunals, for example the Ontario Energy Board, are, after all, court-like bodies, with many powers of a Court - e.g. to receive evidence under oath, compel parties to testify, issue rules of procedures, award costs, and order substantial financial penalties for non-compliance. In addition, their orders may be enforced by the Courts.

By helping to structure the written argument and the evidence. Lawyers are trained in the art of condensing large amounts of factual and theoretical material into brief, cogent arguments, either written or spoken. That is what advocacy is about. The logical coherence and quality of the party's argument is critical to the success of his or her case.

If the hearing is oral, by conducting the client's case before the Board, including examination-in-chief of the client and cross-examination of the other parties' witnesses.

By using their knowledge of the Board's earlier decisions, and any applicable decision of the Courts on the issues in question as well as decisions of other regulatory tribunals, to ensure that the client's case is well anchored in the public utility law and convention. Original arguments and new approaches are valuable and can be submitted but are most valuable if the departures from the judicial and regulatory precedent are justified and the economic context are clearly explained.

Last, but not least, by fully understanding and explaining to the client the legal meanings of key public utility concepts which are contained in various statutes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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