Supreme Court

Public Utilities

Utilities Commission did not have obligation to conduct analysis using particular methodology

ATCO Utilities applied to recover, in approved rates, certain pension costs related to annual cost of living adjustment. Alberta Utilities Commission denied approval for recovery of adjustment of 100 per cent of annual consumer price index, instead ruling that recovery of 50 per cent of annual consumer price index was reasonable. ATCO Utilities’ appeals to Alberta Court of Appeal and Supreme Court dismissed. Electric Utilities Act and Gas Utilities Act provide that regulated utility must have opportunity to recover costs and expenses so long as they are prudent. Commission tasked with determining whether utility’s costs are reasonable or prudent. Costs and expenses must be wise or sound to be considered reasonable or prudent. Public utilities bear burden of establishing that proposed tariffs are just and reasonable, which necessarily imposes on them burden of establishing that costs are prudent. Commission considers consumer interests by limiting utility’s recovery to what it reasonably or prudently costs to efficiently provide utility service. Consumers only pay for what is reasonably necessary. Commission does not have obligation to conduct analysis using particular methodology; it has discretion to consider variety of analytical tools and evidence so long as ultimate rates it sets are just and reasonable to both consumers and utility. Commission’s decision in applying its expertise to set rates and approve payment amounts is subject to standard of review of reasonableness. It was not unreasonable for Commission to decide, without applying no-hindsight analysis, that 50 per cent of consumer price index (up to maximum cost of living adjustment of three per cent) represented reasonable level for setting cost of living adjustment amount for purposes of determining pension cost amounts. Use of word “prudent” does not impose on Commission a specific no-hindsight methodology. Disallowed costs were forecast costs and it was therefore reasonable for Commission to direct ATCO Utilities to reduce pension costs incorporated into revenue requirements by restricting annual cost of living adjustment.

ATCO Gas and Pipelines Ltd. v. Alberta (Utilities Commission) (Sep. 25, 2015, S.C.C., McLachlin C.J.C., Abella J., Rothstein J., Cromwell J., Moldaver J., Karakatsanis J., and Gascon J., File No. 35624) Decision at 233 A.C.W.S. (3d) 491 was affirmed.  257 A.C.W.S. (3d) 728.

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