Decision 25369-D01-2020
AltaLink Management Ltd. and TransAlta Corporation
Direct Assigned Capital Deferral Account for the Edmonton Region Project
December 10, 2020
Alberta Utilities Commission Decision 25369-D01-2020 AltaLink Management Ltd. and TransAlta Corporation Direct Assigned Capital Deferral Account for the Edmonton Region Project Proceeding 25369
December 10, 2020
Published by the: Alberta Utilities Commission Eau Claire Tower 1400, 600 Third Avenue S.W. Calgary, Alberta T2P 0G5
Telephone: 310-4AUC (310-4282 in Alberta) 1-833-511-4AUC (1-833-511-4282 outside Alberta) Email: [email protected] Website: www.auc.ab.ca
The Commission may, within 30 days of the date of this decision and without notice, correct typographical, spelling and calculation errors and other similar types of errors and post the corrected decision on its website.
Contents
1 Decision summary ...... 1
2 Background ...... 1 2.1 Project description ...... 1 2.2 Direct assigned capital deferral account application ...... 3 2.3 Cost summary ...... 4
3 Prudency assessment of costs ...... 5 3.1 1043L – Facilities not on the reserve ...... 5 3.2 1043L-Reserve – Facilities on the reserve ...... 6 3.2.1 Pre-application stage ...... 7 3.2.2 Facilities application stage ...... 8 3.2.3 Pre-construction stage ...... 8 3.2.4 Construction stage ...... 9 3.2.5 Stop work order...... 10 3.2.6 Memorandum of Understanding negotiations stage ...... 12 3.2.7 Cooperation Agreement stage ...... 12 3.2.8 1043L-Reserve – Construction work on the reserve...... 14 3.2.9 Allowances for funds used during construction...... 15 3.2.10 Commission findings ...... 16
4 Procedural fairness concerns ...... 21
5 Order ...... 23
Appendix 1 – Proceeding participants ...... 25
Appendix 2 – Project map ...... 26
Appendix 3 – Summary of Commission directions ...... 27
List of tables
Table 1. AFUDC project costs ...... 15
Table 2. AFUDC project costs under the hypothetical scenario where suspension of work did not occur in May 2012 and assets put into service in 2013 ...... 16
Decision 25369-D01-2020 (December 10, 2020) i
Alberta Utilities Commission Calgary, Alberta
AltaLink Management Ltd. and TransAlta Corporation Direct Assigned Capital Deferral Account for Decision 25369-D01-2020 the Edmonton Region Project Proceeding 25369
1 Decision summary
1. In this decision, the Alberta Utilities Commission finds that some of the costs applied for in AltaLink Management Ltd.’s and TransAlta Corporation’s deferral account reconciliation application for approval were not prudently incurred and, therefore, not all of the applied-for rate base capital additions for the Edmonton Region 240 kilovolt (kV) Upgrades Project (the Project) were approved.
2. In the application, AltaLink and TransAlta requested final cost approval of $112.5 million in capital costs: $90.9 million in costs for AltaLink and $21.6 million for TransAlta Corporation for the Project. This latter cost, $21.6 million, included $1.15 million attributable to a Cooperation Agreement reached with the Enoch Cree Nation (Enoch).
3. The Commission found AltaLink and TransAlta to have prudently planned and executed the majority of this Project, with the exception of the execution of the 8 kilometre (km) of transmission line constructed (rebuilt) across Stoney Plain Reserve #135. Fifteen per cent of these costs, net of the costs of the Cooperation Agreement, were disallowed. Additionally, the Commission disallowed a similar percentage of the costs incurred by the utilities to negotiate and conclude the Cooperation Agreement. The Commission allowed the utilities to determine amongst themselves the appropriate division of the disallowance. The total amount of the project costs disallowed in the decision is approximately $3 million, which represents slightly less than one per cent of the total capital additions requested.
4. TransAlta and AltaLink are directed to provide a compliance filing to this decision and in conjunction with the decision in Proceeding 24681 (if so directed) on or before January 29, 2021.
2 Background
2.1 Project description 5. The Project consisted of the construction of a new 240 kV transmission line 1043L1 located between Keephills 320P Substation and the Jack Fish Lake area west of Edmonton (Proceeding 754). A map of this transmission project can be found in Appendix 2 of this decision.
1 Decision 2011-340: Alberta Electric System Operator, Needs Identification Document Amendment, AltaLink Management Ltd., New Transmission Line 1043L and Alteration of Transmission Line 904L West of Edmonton/Jackfish Lake Area, EPCOR Distribution & Transmission Inc., Conductor Replacement and New Structure on Existing Transmission Lines 904LE/904LW in the Edmonton Area, Proceeding 754, August 12, 2011, paragraph 103, both the 12 km new and 50 km rebuild were given the name 1043L.
Decision 25369-D01-2020 (December 10, 2020) 1 Direct Assigned Capital Deferral Account for the Edmonton Region Project AltaLink Management Ltd. and TransAlta Corporation
6. The portion of the Project that is the subject of this application, the 1043L line, includes:2
• A new 12 km 1043L double-circuit 240 kV line from 240 kV junction (Keephills 320P Substation) to Jackfish Lake. (This is referred to as the preferred transmission route 1043L in Appendix 2 of this decision and is represented by the dotted line from Keephills 320P Substation to Jack Fish Lake Point 2 on the map.) Point 2 was the western terminus of what was known as line 904L.
• A rebuild of 904L consisting of 50 km of single-circuit 240 kV H‐Frame line from Jackfish Lake to Petrolia 816S Substation. (This is identified by the solid line from EPCOR Petrolia E816S Substation to Point 2 on the map in Appendix 2 of this decision.) The rebuild portion of the project scope included the 8 km of line within the existing right of way (ROW) on the Stony Plain Reserve #135 (the reserve). The rebuild of transmission line 904L was renamed 1043L.
7. For the purposes of this proceeding, the Project and associated costs are divided into two portions: 1043L (the portion of the Project not on the reserve, 54 km) and 1043L-Reserve (the 8 km portion of the Project on the reserve).
8. The reserve encompasses federal lands that were set aside for Enoch by the Government of Canada under Treaty 6. Enoch’s Chief and Council has the jurisdictional authority (powers, duties and functions) to manage the reserve lands on behalf of the band members subject to the terms of the Indian Act, and with oversight of the Minister of Indigenous Services Canada.
9. TransAlta is the transmission facility owner (TFO) of 1043L-Reserve. The original ROW was granted to a predecessor of TransAlta (Calgary Power Ltd.) under an Easement Agreement with Canada dated April 18, 1956. In 1981, TransAlta was issued a permit pursuant to Section 28(2) of the Indian Act, which permit was consented to by Enoch.3
10. AltaLink and TransAlta have an Operations and Maintenance Agreement in which AltaLink provides certain operation and maintenance services for transmission facilities located on First Nations’ reserves including the Enoch Cree First Nation’s reserve.4 AltaLink plans and provides all operational and maintenance services, including repairing and replacing assets, maintaining appropriate records, as well as preparing and filing applications on behalf of TransAlta.
11. On July 28, 2010, AltaLink filed the facilities application with the AUC for the Project. The Commission approved the facilities application in Decision 2011-340. The initial permits stated that the approved construction or alterations were to be completed by August 23, 2012.5
12. Construction on 1043L, excluding the portion on the reserve, began in October 2011 and was 93 per cent complete by September 2012.6
2 Exhibit 25369-X0020, pages 2-3, see also Decision 2011-340, Appendix A, page 36. 3 Exhibit 25369-X0157, page 35. 4 Exhibit 25369-X0016: Appendix 4, Operations and Maintenance Agreement dated April 29, 2002. 5 Permit and License U2011-291; Permit and License U2011-292; Permit and License U2011-300; Permit and License U2011-301. 6 AESO Monthly Report, Appendix 8-6, September 2012, PDF page 306.
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13. Construction on 1043L-Reserve began in December 2011 and stopped in May 2012 at the request of Enoch’s Chief and Council, who stated they had concerns about the Project.
14. The suspension of construction of TransAlta’s segment of the Project on the reserve (1043L-Reserve) on May 8, 2012, and its continuation as time went by, triggered a number of applications filed by AltaLink on its own and on behalf of TransAlta for time extensions to complete construction (Proceeding 2085,7 Proceeding 2336,8 Proceeding 2914,9 Proceeding 2059810).
15. The land access dispute for 1043L-Reserve went on for four years until TransAlta and Enoch negotiated a Cooperation Agreement (ratified March 2016), and TransAlta and AltaLink signed a Concurrency Agreement (February 2016).
16. AltaLink restarted construction of 1043L-Reserve in August 201611 and construction was completed in September 2016.
17. On September 29, 2016, the Project was completed and 1043L was energized.12
2.2 Direct assigned capital deferral account application 18. On October 23, 2019, AltaLink filed a letter13 informing the Commission that it intended to file its 2016-2018 direct assign capital deferral account (DACDA) application for the Project in the near term. In the same correspondence, AltaLink indicated that it understood that, in accordance with findings set out in Decision 22651-D01-2017,14 TransAlta would be filing an application within the same proceeding.
19. The Commission assigned Proceeding 25015 to consider AltaLink’s advance request for a ruling on confidential treatment of its application documents and approved that request on November 15, 2019.15
20. AltaLink originally filed the Project application on November 22, 2019, 16 requesting approval and any necessary reconciliation of capital additions to December 31, 2018, totalling $90.9 million in respect of the Project. Shortly before AltaLink’s filing, the Commission granted confidentiality to certain information forming part of the AltaLink application, and issued a filing announcement and a notice of application. A number of steps were taken in Proceeding 25015, including the filing of statements of intent to participate by TransAlta, the Consumers’ Coalition of Alberta (CCA) and Enoch. Submissions had also been filed by Enoch.
7 Proceeding 2085, AltaLink Management Ltd., 904L 908L Time extension application. 8 Proceeding 2336, AltaLink Management Ltd., Time extension request – 1043L 240 kV transmission line and 904L rebuild. 9 Proceeding 2914, AltaLink Management Ltd., Transmission Lines 1043L and 904L rebuild time extension 2013. 10 Proceeding 20598, AltaLink Management Ltd., 1043L 240 kV and 904L rebuild time extension. 11 AESO Monthly Report, Appendix 8-6, August 2016, PDF page 789. 12 Exhibit 25369-X0010, page 26. 13 Proceeding 25015, Exhibit 25015-X0001. 14 Decision 22651-D01-2017: TransAlta Corporation, 2015-2016 Transmission General Tariff Application, Proceeding 22651, November 14, 2017. 15 Proceeding 25015, Exhibit 25015-X0010. 16 Proceeding 25015, exhibits 25015-X0013 through 25015-X0084.
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21. TransAlta filed its DACDA application on December 13, 2019.17 18
22. TransAlta’s application was brief, as it was relying on relevant exhibits previously filed within Proceeding 22651, TransAlta’s 2015-2016 general tariff application (GTA), and Proceeding 23905, TransAlta’s 2017-2018 GTA. In addition, TransAlta indicated that it had provided a table of concordance for the exhibits previously filed within those proceedings.19
23. Between the issuing of notice in late November 2019 and the close of record on September 25, 2020, a number of procedural and process steps took place, including a refiling of both AltaLink’s and TransAlta’s applications on February 19, 2020. This refiling took advantage of the Commission’s newly implemented entirely electronic confidential eFiling System and required a transition or continuation from the initial DACDA proceedings to a new proceeding. The transition to a new proceeding also required the reissuance of a filing announcement and notice of the applications, a reapplication for confidentiality and a ruling confirming the request. Other process steps included the issuance of several revised process letters, the exchange of information requests (IRs) and responses among the parties including Commission IRs, extensions to dates for fulfilling IRs, suspension of IRs while a motion for confidentiality was considered, filing of intervener evidence and applicant rebuttal evidence, final argument and reply argument. This process resulted in the proceeding transferring from 25015 to 25369.
24. The Commission considers the record for Proceeding 25369 to have closed on September 25, 2020.
25. In reaching the determinations set out in this decision the Commission has considered all relevant materials comprising the record of this proceeding. References in this decision to specific parts of the record are intended to assist the reader in understanding the Commission’s reasoning relating to a particular matter and should not be taken as an indication that the Commission did not consider all relevant portions of the record with respect to this matter.
2.3 Cost summary 26. For this application, AltaLink is seeking approval of $90.9 million in costs while the TransAlta cost portion is an incremental $21.6 million. A further description of the costs for this Project can be found in sections 3.1 and 3.2 of this decision.
27. As indicated in paragraph 18, this matter is before the Commission because, in an earlier GTA decision (Decision 22651-D01-2017), the Commission directed that TransAlta’s proposed reconciliation of its capital deferral account for the Project be examined in a single proceeding together with AltaLink’s capital costs on the same project. The Commission approved three placeholders for 2016: a capital addition of $19,017,065; a portion for an allowance for funds used during construction (AFUDC); and $280,000 as an operating cost.
28. The $280,000 amount represented an annual payment to Enoch for the 20-year period from 2016 to 2035. The payments are a key part of a Cooperation Agreement with Enoch and
17 The applications were originally filed in Proceeding 25015 (AML 2016-2018 DACDA for Edmonton Region Project). 18 Proceeding 25015, exhibits 25015-X0088 and 25015-X0089. Note that these exhibits were filed by AltaLink on TransAlta’s behalf. 19 Proceeding 25015, Exhibit 25015-X0089, PDF pages 6-7.
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provided compensation for unfettered access to the ROW for construction and ongoing maintenance of all transmission lines across the reserve (as defined in the Cooperation Agreement), road use for access to the transmission lines, and compensation for ongoing normal- course consultation and administrative services that Enoch provides related to these transmission lines.
29. Other capital cost placeholders for the Project were approved by the Commission for 2017 and 2018 in Decision 23905-D01-2019,20 including trailing costs of $23,000 and a credit adjustment of negative $521,000 to reflect that costs originally capitalized to the Project had either been reallocated as salvage costs or reassigned as an AltaLink cost.
30. Also in Decision 23905-D01-2019, the Commission approved TransAlta’s request to include the payments to Enoch in the amount of $280,000 for each of the years 2017 and 2018 as part of its revenue requirement for those years on a placeholder basis.
31. The Project incurred actual costs (total to date) to December 31, 2018, of $135.1 million. AltaLink’s portion of those costs totalled $113.6 million. The Project included the construction of a new transmission line (1043L) and the rebuild of existing transmission line 904L21 and other protection measures of the transmission system west of Edmonton. Segments of the Project’s costs were reviewed in prior AltaLink DACDAs.22
3 Prudency assessment of costs
32. The principal issues considered by the Commission in determining whether the costs incurred by AltaLink and TransAlta for the Project were prudently incurred are set out in the sections that follow.
3.1 1043L – Facilities not on the reserve 33. The costs of the 1043L portion23 of the Project for which approval is being sought in this application are $112.5 million, with $90.9 million being allocated to AltaLink for the 1043L constructed off the reserve, and $21.6 million being allocated to TransAlta, primarily for the portion of the project being constructed on the reserve, 1043L-Reserve.24
34. A variance analysis comparing the proposal to provide service estimate to actual costs was presented in Table 8-1 of the Project Summary Report. This analysis included all costs of the entire Edmonton Region Project, including those parts already reviewed.
35. AltaLink provided detailed analyses of the individual variances on a line-item basis in Section 8 of the report.25
20 Decision 23905-D01-2019: TransAlta Corporation, as manager of the TransAlta General Partnership 2017-2018 Transmission General Tariff Application, Proceeding 23905, March 12, 2019. 21 The TransAlta application (Exhibit 25369-X0084, paragraph 2) refers to the portion of the transmission line on Enoch Cree Nation land as a rebuild of 1043L, previously known as 904L and currently known as 1139L. 22 Specifically AML’s 2010-2011 DACDA (Proceeding 2044) and 2012-2013 DACDA (Proceeding 3585). 23 Exhibit 25369-X0020, page 6. 24 Exhibit 25369-X0020, pages 2-3. 25 Exhibit 25369-X0020, pages 21-28.
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36. The CCA’s recommended disallowances,26 which relate to the construction of the transmission line on the reserve, are dealt with in detail in sections 3.2.8 and 3.2.9 of this decision.
Commission findings 37. The Commission notes that the CCA did not have any substantive comments with respect to that portion of 1043L constructed off reserve. The Commission’s decision on the prudency of construction expenditures for 1043L-Reserve and proposed disallowances are found in sections 3.2.8 and 3.2.9 of this decision.
38. The Commission has reviewed the evidence with respect to the costs incurred by AltaLink to construct the off-reserve portion of 1043L, in particular the Project Summary Report27 (PSR), the Proposal to Provide Service (PPS) Update28 and the Final Cost Report (FCR).29 The Commission notes that the off-reserve portion of the line was constructed on schedule.30 Cost variances for this portion of the line were reasonably explained as increased line labour due to tender prices being higher than budget, substation labour higher due to scope changes and a change in accounting for AFUDC.31 The costs for this portion of the 1043L project are approved.
3.2 1043L-Reserve – Facilities on the reserve 39. TransAlta’s costs associated with 1043L-Reserve are $21.6 million, including the costs for the Cooperation Agreement with Enoch for the ROW access.32
40. The Cooperation Agreement included payments of $250,000 for construction access, $700,000 for a traditional land use and area structure plan as well as a contribution of $150,000 towards the legal costs of Enoch and $50,000 for an annual structure payment study.33
41. The CCA recommended a disallowance of $575,000, or 50 per cent, of these costs.34
42. As indicated earlier, the completion of construction of 1043L-Reserve was delayed because, in the spring of 2012, Enoch denied TransAlta and AltaLink access to the reserve.
43. AltaLink and TransAlta have each provided a summary of the consultation record,35 36 which both companies later updated.37 38
26 Exhibit 25369-X0183, pages 15-17. 27 Exhibit 25369-X0020. 28 Exhibit 25369-X0022, PPS Update. 29 Exhibit 25369-X0025, Final Cost Report. 30 Exhibit 25369-X0020, paragraphs 69-71. 31 Exhibit 25369-X0020, pages 20-22. 32 Exhibit 25369-X0020, page 3. 33 Exhibit 25369-X0209, pages 32-33. 34 Exhibit 25369-X0183, page 17. 35 Exhibit 25369-X0081, AltaLink Appendix 09, Consultation Summary Report. 36 Exhibit 25369-X0084, TransAlta Submission - February 19, 2020. 37 Exhibit 25369-X0131, AML-AUC-2020FEB27-011 Attachments. 38 Exhibits 25369-X0138, 25369-X0149, 25369-X0159, 25369-X0160, 25369-X0187, 25369-X0188, 25369- X0195 and supplemented during the rebuttal evidence stage.
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44. Enoch provided a letter summarizing the dispute and its concerns.39 In the letter, Enoch stated that it had “extensive concerns” about the transmission lines on the reserve and did not believe that they were being addressed, resulting in the confrontations between Enoch and TransAlta and the cease work order in 2012.40 The dispute continued until 2015 when a new Chief and Council were elected and a new law firm was retained by Enoch. Dialogue and negotiations ensued thereafter.
45. Enoch indicated its support and agreement with the submissions of TransAlta and the summary of consultations.41 Enoch also submitted that the costs being claimed by TransAlta were reasonable especially in light of the ongoing project of reconciliation with indigenous peoples of Canada and the importance of productive dialogue and mutual understanding between the parties.
46. When assessing the prudence of the costs for the 1043L-Reserve, the Commission has assessed the reasonableness of the parties’ actions during the different phases or stages of the Project.
3.2.1 Pre-application stage 47. From June 2009 to June 2010, AltaLink consulted with Enoch for the purposes of the AUC facilities application. Key concerns or issues raised by Enoch during this phase of consultation focused on economic compensation/benefits for the community.42 The record of consultation includes at least five entries where Enoch raised its interest in contract and employment opportunities with AltaLink and TransAlta. Enoch also raised compensation for the existing ROW, annual structure payments and land rentals.
48. By January 2010, TransAlta began taking a leading role for consultation and meeting with Chief Harry Sharphead and the Council.43
49. In April 2010, TransAlta and AltaLink met with Enoch’s Chief and Council and committed to identifying opportunities for Enoch members to be involved in the ROW clearing. In follow-up to that meeting, the companies drafted a letter of support for Enoch. The letter committed the companies to traditional land-use assessments, brushing or clearing opportunities, and to ensure continued communication with Enoch during the various stages of the Project.
50. A letter of support dated May 6, 2010, was provided to TransAlta and AltaLink indicating Enoch’s support for the rebuild. The letter was signed by Cody Hodgson, Council Member of Enoch Cree Nation, and was on Tribal Administration letterhead. The letter identifies the plan for future discussions of business opportunities:
We look forward to continuing future discussions related to potential business opportunities and further developing the existing good working relationship between Enoch Cree Nation and TransAlta and AltaLink.44
39 Exhibit 25369-X0088. 40 Exhibit 25369-X0088, page 2. 41 Exhibit 25369-X0088. 42 Exhibit 25369-X0081, pages 3-5. 43 Exhibit 25369-X0081, page 10. 44 Proceeding 754, Exhibit 0017.00.AML-754, AML 1043L Appendix O - Materials to First Nations, PDF page 4.
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51. AltaLink and TransAlta indicated that there was one more meeting with Chief Sharphead and the Council prior to the AUC facilities application. There are no meeting notes, but AltaLink noted that a status update was provided on the Project, and Enoch did not raise any concerns.
3.2.2 Facilities application stage 52. On July 28, 2010, AltaLink filed the facilities application with the AUC for the Project. In the application, AltaLink documented two commitments to Enoch for the Project:
AltaLink will continue discussions with First Nations regarding the Project in an effort to ensure that these groups understand the nature of the Project and any potential effects.45
Prior to construction and maintenance of the Project, AltaLink will notify Enoch and provide them with information regarding construction and maintenance activities and available contracts.46
53. During the regulatory process AltaLink stated that the company did not engage in further consultation with Enoch on 1043L after filing the application.47
54. The Commission approved the facilities application on August 12, 2011, in Decision 2011-340.
3.2.3 Pre-construction stage 55. There is no record of communication with Enoch from a month prior to the facilities application to less than two months before AltaLink began construction on the reserve again, a period of one year and approximately four months. Notably, there is no record of AltaLink informing Enoch of Decision 2011-340, no record of AltaLink requesting to meet and brief the newly elected Chief Ronald Morin and the Council, no record of AltaLink requesting to follow up on Enoch’s concerns, and no record of AltaLink requesting discussions about contract or employment opportunities.48 There is limited evidence of consultation at this stage, with only these entries:
In October 2011, AltaLink mailed a construction notification newsletter to stakeholders along the transmission line rebuild. A copy of the construction notification newsletter was mailed to the ECN [Enoch Cree Nation] Land Representative.
AltaLink engaged an ECN liaison (an ECN member) to be present during the construction on the ECN Reserve. The liaison was to communicate the ECN concerns to AltaLink and AltaLink requests to the ECN. The ECN liaison was arranged through TransAlta.49
56. TransAlta stated in its rebuttal evidence that “TransAlta and AltaLink were in regular contact with the ECN and its representatives at the start of and during Project construction,” and referenced a meeting on October 27, 2011, with representatives from TransAlta, AltaLink, Pioneer Land and the Enoch’s lands manager to discuss the construction schedule, reserve access
45 Proceeding 754, AML 1043L, Exhibit 0001.00.AML-754, application, page 29. 46 Exhibit 25369-X0159, paragraph 89. 47 Exhibit 25369-X0081, page 12. 48 Exhibit 25369-X0081. 49 Exhibit 25369-X0159, page 12.
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and communication protocols (use of liaisons) with Enoch during the Project construction to support its assertion.50 At this meeting, the Enoch lands manager was identified as the primary contact for Enoch, who was to inform band members regarding the construction schedule and would provide liaison names and inform the liaisons of their roles.
57. TransAlta also stated communication with Enoch prior to and during construction included “regular monthly, in-person meetings between Enoch lands manager, TransAlta, AltaLink and Pioneer Land. It stated that these monthly meetings began in October 2011 and occurred every month up until the Work Stoppage.”51 No specific details were provided on the record of this proceeding to substantiate this claim, such as meeting dates beyond October 27 or action items, nor is there a written evidential record to support this assertion, such as emails arranging the meetings, calendar invites, meeting notes or invoices for catering. TransAlta indicated that “the participants to these meetings did not take regular notes of discussion” and that this lack of an evidentiary record was a consequence of staff turnover and document retention practices.52
3.2.4 Construction stage 58. Construction on 1043L-Reserve began in December 2011 and continued until May 8, 2012, when Enoch ordered the work to stop. The work was about 20 per cent complete.53
59. During the construction phase from December 2011 to May 2012, the summary notes of construction provided in the Construction Summary54 contain no entries recording communication or consultation with Enoch and no discussions about concerns or opportunities for contracts or employment, beyond liaisons.
60. AltaLink and TransAlta stated that they thoroughly consulted with Enoch prior to the permit and licence, and kept Enoch informed throughout construction.55 A key component of the continuing consultation during construction was the use of Enoch’s liaisons.56 As noted above, the use of liaisons was discussed with Enoch during the Participant Involvement Program (PIP) (pre-application stage) and it was arranged as an outcome of the October 27, 2011, meeting with the Enoch lands manager as the coordinator.
61. There are various references in the record about the liaisons and their roles. Enoch submitted the role of the liaison to be “important stewards and protectors of its lands. This is, in fact, the key role of a liaison.”57 AltaLink and TransAlta indicated that the liaisons are an important communication mechanism critical for obtaining access to the reserve.58
50 Exhibit 25369-X0195, page 7. 51 Exhibit 25369-X0195, page 8. 52 Exhibit 25369-X0195, pages 8-9. 53 Exhibit 25369-X0081, page 13. 54 Exhibit 25369-X0081. 55 Exhibit 25369-X0195, page 8; Exhibit 25369-X0187, pages 6-7. 56 Exhibit 25369-X0187, page 8 57 Exhibit 25369-X0217, Enoch response. 58 Exhibit 25369-X0187, page 8.
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62. In the rebuttal evidence, TransAlta indicated that Enoch liaisons were involved with the Project from October 2011 to May 2012. Their roles included overseeing soil sampling and preparation of the ROW, salvage and other transmission line construction activities. 59
63. The invoices on record reveal that from the start of construction (December 2011) to February 2012 there were two liaisons: one liaison was onsite for a total 13 days, 111.5 hours; and the second liaison was onsite for one day, 6.5 hours.60 The invoices reveal that the last date a liaison was onsite was February 7, 2012, three months before the stop work order. Neither AltaLink nor TransAlta has been able to locate further liaison invoices.61
3.2.5 Stop work order 64. On May 8, 2012, TransAlta received an email from the Enoch lands manager advising that the “Chief and Council instructed to put a stop to any work on the Nation until such time TransAlta comes to meet with them. They have questions in regards to the original agreements and the right of entry.” 62 The request was made at Enoch’s Chief and Council meeting that occurred that day. There are no meeting notes on the record. There was a supporting email from TransAlta’s technical manager, transmission, that notes the company representatives in attendance were SNC Lavalin, HVE Ltd., Pioneer, as well as the Enoch lands manager.
65. TransAlta stated that on May 10, 2012, its understanding was that the work stoppage occurred due to Enoch’s concerns about the consultation process followed for the Project.
66. On May 11, 2012, TransAlta wrote a letter to Chief Ronald Morin agreeing to the request to suspend work on the Project for a two-week period, and attached the detailed record of consultation; the May 6, 2010, letter of support from Councillor Hodgson; AltaLink’s November 2, 2009, Consultation Response Letter addressing concerns and questions of the previous Chief and Council; and consultation records.63 TransAlta requested that the review be completed by May 22, 2012.64
67. On May 29, 2012, AltaLink emailed Indigenous Services Canada (ISC) 65 requesting support to resolve the reserve access issues and specifically requested ISC to enforce the existing ROW agreement. A further email was sent on June 5, 2012, to ISC requesting assistance. ISC responded that it was unable or unwilling to enforce the permit.66
68. On July 10, 2012, TransAlta sent a letter to Enoch advising that it would recommence work on July 20, 2012, unless it heard from Enoch.
69. On July 20, 2012, TransAlta received a letter from Enoch’s counsel that identified concerns about consultation, damage to the environment, health concerns and the ROW permit. Regarding the May 6, 2010, letter of support signed by Councillor Hodgson, Enoch stated that Councillor Hodgson “lacked the authority to unilaterally speak for the Nation” and it expressed
59 Exhibit 25369-X0129, AML-AUC-2020FEB27-009(h), PDF page 14. Exhibit 25369-X0195, page 8. 60 Exhibit 25369-X0203. 61 Exhibit 25369-X0129, AML-AUC-2020FEB27-009(h), PDF page 14. Exhibit 25369-X0195, page 8. 62 Exhibit 25369-X0159, page 13. Exhibit 25369-X0129, AML-AUC-2020FEB27-009(h), PDF page 1. 63 Exhibit 25369-X0154, PDF page 16. 64 Exhibit 25369-X0081, page 13. 65 As the department is now called. 66 Exhibit 25369-X0081, page 14; Exhibit 25369-X0154, PDF page 71, Exhibit 25369-X0129, PDF page 2.
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concern that AltaLink proceeded “when they knew they should have and did not have a BCR [Band Council Resolution].”67
70. Enoch articulated its expectations for consultation (meetings must be documented and must be more substantive for those most directly affected). Enoch requested copies of all documents that were provided to individual members by AltaLink, and for an environmental assessment impact study to be completed (if not already completed) and provided to the Nation. Enoch requested clarification about the relationship between AltaLink and TransAlta. Chief and Council appointed a councillor as the lead contact person for TransAlta.68
71. In TransAlta’s rebuttal evidence, the company stated that “… the concerns raised by the ECN were vague and non-specifically related to the ‘consultation process’ and the original 1956 permit.”69 TransAlta’s consideration of Enoch’s concerns is reflected in the July 20, 2012, email from TransAlta to AltaLink. TransAlta’s proposed response was to provide the consultation background materials and to “advise Enoch that we will resume the 904L work on a specified date. It is our belief that the work can continue in parallel to addressing these concerns.”70
72. On July 27, 2012, TransAlta responded to Enoch’s letter.71 It provided background information and responses to concerns raised, and requested a meeting with Councillor Nola Wanuch. TransAlta also notified Enoch that it would be reinitiating work on August 27, 2012, having considered that it had provided “significant time” to review the additional consultation materials it had previously provided to Enoch on May 11, 2012, and July 10, 2012.72 The consultation references that TransAlta provided in its response concerned consultation with Chief and Council in 2009 and 2010. No examples were provided to Enoch of consultation with the current Chief and Council, who were elected after receipt of the facilities’ approval in Decision 2011-340, dated August 12, 2011.
73. On August 15, 2012, a meeting was held between TransAlta, AltaLink and Enoch’s Chief and Council, and their legal counsel. Email notes from AltaLink’s aboriginal relations manager to TransAlta revealed that they considered the concern of Enoch to mostly revolve around consultation and compensation for the ROW.73
74. The evidence on record indicates that both TransAlta and Enoch became entrenched in their positions. The positions of the parties is described in an email from AltaLink to TransAlta summarizing the August 15, 2012, meeting.74 At the meeting, Enoch’s position was that fair compensation had not been paid to Enoch, that it had been “taken advantage of,” and that it was intent on “holding up this [project] for 10 years if that what it takes to get what we want.”75 TransAlta and AltaLink took the position that the companies “were not in a position to respond
67 Exhibit 25369-X0154, PDF page 79. 68 Exhibit 25369-X0154, PDF pages 79-80. 69 Exhibit 25369-X0195, PDF page 16. 70 Exhibit 25369-X0154, PDF page 77. 71 Exhibit 25369-X0154, PDF page 87. 72 Exhibit 25369-X0154, PDF page 87. 73 Exhibit 25369-X0129, PDF page 16. 74 Exhibit 25369-X0129, PDF page 16-17. 75 Exhibit 25369-X0129, PDF page 16-17.
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to issues of accommodation” and that this was the responsibility of the federal and provincial governments.76
75. The record shows that on August 23, 2012, the Project proponents had determined that the Project plan was to force commencement of the on-reserve work and to prepare for a court injunction.77 In an email on August 23, 2012, TransAlta asked AltaLink to recommence work on the 1043L-Reserve.
My request to re-commence work is based on the understanding, which both TransAlta and AltaLink share, that we, TransAlta and AltaLink as a team, have adequately responded to the concerns of the Enoch Cree Nation Chief and Council on the 904L Rebuild Project [1043L-Reserve] and explained our responses to a reasonable detail to the Chief and Council during our meeting with them on Wednesday, 15 August 2012.78
76. On August 23, 2012, TransAlta sent a letter to Chief Ronald Morin, copying ISC, indicating the intention to “exercise our legal right of access to our existing 904L right of way on the Enoch Reserve Lands on Monday August 27, 2012, to re-commence work on the Project, in order to fulfill our regulatory requirement to complete works associated with the Project.”79
77. On August 27, 2012, AltaLink commenced work without Enoch’s approval. Three days later, AltaLink and its subcontractors were asked to leave the reserve.80
3.2.6 Memorandum of Understanding negotiations stage 78. For the next two years and eight months, from September 2012 to May 27, 2015, TransAlta and Enoch started and stopped Memorandum of Understanding negotiations, pursued legal actions, and began the initial steps to undertake arbitration. The foundation of the dispute was the disagreement around the validity of the 1981 ROW agreement and the amount of financial compensation that should be paid to Enoch for the company’s use of the reserve lands. Parties also discussed, with little disagreement, TransAlta funding an environmental assessment and traditional land use study. The compensation sought by Enoch increased substantially over this time period.
79. TransAlta indicated that by the end of 2012 and into 2013, the land access dispute became strained and there was potential for violence.81
3.2.7 Cooperation Agreement stage 80. After two years without resolution, two key events shifted the negotiations:
(i) Enoch’s election of new leadership, Chief Billy Morin and the Council (June 2015), and the subsequent change in legal representative/solicitors (November 2015); and
76 Exhibit 25369-X0129, PDF page 17. 77 Exhibit 25369-X0154, PDF page 155. 78 Exhibit 25369-X0154, PDF page 155. 79 Exhibit 25369-X0154, PDF page 157. 80 Exhibit 25369-X0159, page 18. 81 Exhibit 25369-X0160, pages 22-23.
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(ii) Decision 20598-D01-2016,82 which declined to extend TransAlta’s permit and licence beyond February 1, 2016, unless a negotiated settlement was reached with Enoch by that date.83
81. After these two events, the record demonstrated that both TransAlta and Enoch committed to meeting frequently and to adjusting their negotiation strategies to seek mutual benefit.
82. On February 18, 2016,84 the Chief Billy Morin and the Council passed a BCR approving the term sheet that would form the basis of the Cooperation Agreement.
83. A 20-year Cooperation Agreement was signed on March 3, 2016 that, according to Enoch, “led to both dialogue and benefits for all parties involved.”85 The agreement provides TransAlta and TransAlta’s contractor (AltaLink) with unimpeded access to the ROW containing all transmission lines in accordance with the existing ROW agreements. Compensation in the agreement is broken down into two key components: Financial Compensation, and Construction Employment and Contracting Opportunities.86
The one-time costs for the Cooperation Agreement were $1.15 million, with payments of $280,000 per year over 20 years. It also ensured that the other lines located on the ECN reserve lands can continue to operate, and be accessible for maintenance. Finally, the Cooperation Agreement led to a settlement of the ECN claim against TransAlta, AltaLink, the AUC, Alberta, and Canada, and secured ECN’s assistance in addressing claims by Certificate of Possession holders. This has saved significant legal costs and resources for all other parties going forward.87
84. TransAlta and AltaLink entered into a letter of agreement in respect of Enoch and line 104L-Reserve on February 29, 2016. The agreement outlined construction and employment opportunities, an electric and magnetic fields (EMF) monitoring program and a pro-rated share of Enoch’s legal costs.88
In the Concurrence Agreement AltaLink confirms the following commitments that were made on its behalf in the Cooperation Agreement:
• Provide construction and employment opportunities with an estimated value of $2,628,000 including remaining line construction work, welding work, hauling and disposing work, access matting, reclamation, survey, third party location services and brushing work;
82 Decision 20598-D10-2016: Time Extension Request for Transmission Lines 909L and 1043L, AltaLink Management Ltd., Time Extension Application, Applications 20598-A001 and 20598-A003, TransAlta Corporation, Time Extension Application, Applications 20598-A002 and 20598-A004, Proceeding 20598, January 22, 2016. 83 Exhibit 25369-X0132, page 3. 84 The Cooperation Agreement was ratified on March 3, 2016. 85 Exhibit 25369-X0088, page 2. 86 Exhibit 25369-X0084, page 13. 87 Exhibit 25369-X0084, page17. 88 Exhibit 25369-X0080.
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• Annual EMF monitoring program including providing the ECN with a gauss meter used to measure field levels and training the ECN on its proper use; and
• Pay its prorated share of the ECN’s reasonable legal costs associated with the work to discontinue certain legal actions.89 [footnotes removed]
85. Enoch’s view is that many of the costs incurred by TransAlta in this dispute resulted in extensive dialogue and mutual understanding between the parties and are of enduring value to its relationship with TransAlta and AltaLink.90
3.2.8 1043L-Reserve – Construction work on the reserve 86. The CCA argued that (i) rutting was the root cause of the construction shut down; (ii) the Project should have been constructed in the winter season; (iii) the sourcing and use of mats was improper and contributed to the damage to the land; (iv) the Alberta Electric System Operator (AESO) was not kept apprised of developments in a timely way; and (v) re-routing would have been a simpler and less costly option that should have been pursued. It asserted that AltaLink’s consultation prior to and during construction was deficient and recommended a disallowance of a portion of the costs that arose as a result of the four-year delay to completion of 1043L.
87. The CCA noted that, after passage of significant time, the agreement was signed with Enoch in March 2016.91 This once again resulted in construction extending through the summer, leading to an additional $3.4 million in costs necessitated by soil protection and heavy mat usage and washing. The CCA referred to a letter from Enoch to AltaLink, which was highly critical of the damage to the land caused by rutting.92
88. The CCA maintained that the failure of the applicants to request a re-routing of the Project, after it had become apparent there would be no easy solution to the impasse between the parties, showed a lack of regard for overall project costs and supported a finding by the Commission that the conduct was unreasonable.
89. AltaLink reiterated that it followed identified practices to appropriately manage the ROW access requirements, including protecting ground conditions. Further, AltaLink claimed that it had no reason to anticipate any access issues prior to Enoch ordering AltaLink and TransAlta to cease construction activities in May 2012, as TransAlta had received a letter of support from Enoch prior to the Commission issuing the permit and licence. AltaLink had conducted construction activities on the reserve for several months prior to any concerns being raised regarding the Project.
90. AltaLink and TransAlta also stated that because there were system constraints that had to be optimised, the PPS schedule did not plan for winter construction. They added that matting resources were properly resourced, the root cause of the shut-down was the dispute concerning the existing ROW, the parties were in regular contact with the AESO following the suspension,
89 Exhibit 25369-X0159, pages 36-37. 90 Exhibit 25369-X0088, page.3. 91 Proceeding 22651, Exhibit 22651-X0017, Agreement signed March 3, 2016. 92 Exhibit 25369-X0162, TAC-CCA-2020FEB27-003(b).
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work was prudently continued on the Project off the reserve, and it would have been much costlier to re-route around the reserve.
3.2.9 Allowances for funds used during construction 91. AltaLink and TransAlta applied to include the following AFUDC amounts in their respective portions of the Project.
Table 1. AFUDC project costs
AltaLink TransAlta Total ($ million) Actual costs - AFUDC 16.8 4.8 21.6 Source: Exhibit 25369-X0012, Appendix 02 Project Summary Schedule (D.0213 Edmonton Region).
92. The CCA maintained that the long work stoppage on the Project led to huge and unreasonable AFUDC costs that ratepayers should not be liable for in their rates when the majority of the work was completed and energized or able to be energized. The CCA relied on its Hypothetical Incurred costs schedule,93 which provided a comparison of actual project costs to a hypothetically reasonably executed project. Using this analysis, the CCA recommended a disallowance of $3.69 million for AltaLink and $3.46 million for TransAlta.
93. Both AltaLink and TransAlta argued that the calculation of AFUDC was correctly applied on a mid-year basis and, since the Project was not cancelled by the AESO, it was appropriate for AFUDC to be accrued and included as part of the Project cost during the period of time that work was suspended.
94. In Proceeding 22651, the Commission asked TransAlta to provide the calculation of the AFUDC amount included in its portion of the project. TransAlta responded:
(c) AFUDC was recalculated for the 2011-2016 time period as a result of the change from CWIP-in-rate base to AFUDC. As of Dec 8, 2016, the applicable AFUDC for 2011-2016 was $19.0M [million]. AltaLink and TransAlta agreed to allocate the AFUDC proportionately based on the line length ownership of the 1043L (TransAlta ownership is 8 km, and total line length is 50 km, therefore, 16% of this AFUDC was allocated to TransAlta). This resulted in $3.0 M of AFUDC being allocated to TransAlta. TransAlta incurred $ 1.7m of AFUDC for costs carried in TransAlta financials only. Please see TAC-AUC-AUG23-027 Attachment.94
95. In response to a Commission IR, AltaLink confirmed that the arrangement of allocating TransAlta 16 per cent95 of AFUDC was an arrangement between AltaLink and TransAlta, and had not been approved by the Commission.96
93 Exhibit 25369–X0183, AUC IR Round 1 to the CCA, August 5, 2020, PDF page 18, CCA-AUC-2020AUG05- 008. 94 Exhibit 25369-X0084, TransAlta Submission - February 19, 2020, TransAlta IR Responses to TAC-AUC- 2017AUG23-027(c), PDF page 70. 95 8 km / 50 km = 0.16. 96 Exhibit 25369-X0123, AML IR Responses to AUC (1-15), AML-AUC-2020FEB27-002(c), PDF pages 2-11.
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96. The Commission asked AltaLink, in an IR and under the hypothetical scenario where the suspension of work in May 2012 did not occur, to calculate the capital expenditures and AFUDC up to the forecasted/estimated in-service date and trailing costs as if no suspension of work had taken place.
97. In response, AltaLink calculated AFUDC for the hypothetical scenario put forward by the Commission, as summarized in the table below.
Table 2. AFUDC project costs under the hypothetical scenario where suspension of work did not occur in May 2012 and assets put into service in 2013 AltaLink TransAlta Total ($ million) Hypothetical costs - AFUDC 6.6 1.4 8.0
Source: Exhibit 25369-X0124, AML-AUC-2020FEB27-002 Attachment (Edmonton Region Project Costs), AUC-002_b Hypothetical worksheet.
3.2.10 Commission findings 98. There are two principal issues for the Commission to determine in this proceeding. First, were the applicants’ costs of 1043L-Reserve (including all costs attributable to delays in construction) prudently incurred? And second, should all costs of the Cooperation Agreement (including all costs of litigation) be recoverable by the applicants on the grounds that these costs were likewise prudently incurred? The Commission finds that while most of the costs of rebuilding line 1043-Reserve were prudently incurred, a disallowance of some of these costs is warranted. The Commission also finds that the payments of $1.15 million97 set out in the Cooperation Agreement were prudently incurred and, hence, should be approved in their entirety, with no disallowance. However, as discussed later in this section, the Commission finds that a disallowance is necessary for the costs incurred by the utilities to negotiate and conclude the Cooperation Agreement.
99. In arriving at its findings on these two closely related issues, the Commission relies on the long-standing, judicially recognized test for prudence; that is, did the applicant(s) act prudently and exercise sound judgment in light of all relevant circumstances, including, especially, what the applicant(s) knew or reasonably ought to have known, at the time the conduct in question took place and the expenditures for which recovery is being sought were incurred? It is important to observe that the onus of establishing prudence lies with the applicant(s) and that the evidentiary burden to be met is proof on the balance of probabilities. The Commission also notes that hindsight is not permitted in evaluating prudence. Rather, the Commission is restricted to assessing the prudence of the applicant(s)’ conduct and all expenditures directly or indirectly attributable thereto at the time such expenditures were incurred and such conduct took place.
100. Given the circumstances of this case, the Commission’s focus, of necessity, is not limited to the applicants’ conduct while engaged in construction-related activities on the reserve. The Commission is also very much concerned with whether and, if so, to what extent the applicants’ consultation-related conduct prior to and coincident with the first few months of construction on the reserve (i.e., prior to the initial work stoppage) might have affected the overall level of costs
97 Exhibit 25369-X0084, page 18
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actually incurred on the reserve portion of the Project. In particular, the Commission’s concern here is whether the applicants’ consultations with Enoch were prudent and the extent to which, if any, it could reasonably have been foreseen or anticipated from their consultation-related conduct, at the time it took place, based on the knowledge possessed or which ought to have been possessed by the applicants at that time, that their conduct was more likely than not to have an adverse impact on the overall cost of the on-reserve portion of the Project, as well as the time likely required to complete it.
101. For a prudence application to fail, it is unnecessary for there to be proof, on a balance of probabilities, of imprudence. It is sufficient for there to be a lack of evidence, or inadequate evidence, to establish prudence on a balance of probabilities. The Commission notes, in this regard, that, as a general proposition, it can be difficult to establish that an expenditure was imprudently incurred. This is because evidence of the actual (adverse or negative) consequences of imprudent conduct cannot be relied upon, in and of itself, to establish that the conduct producing those outcomes was imprudent. Doing so would amount to relying on hindsight to assess the prudence of the conduct in question. Relying on hindsight, in turn, is impermissible because it involves second-guessing conduct at a time when more information exists than was available at the time decisions were made and conduct was engaged in. Reliance on hindsight is also impermissible because even prudent conduct can lead to adverse, negative or undesirable consequences for reasons that are unforeseen and unrelated to the conduct itself. Consequently, proof of imprudence requires something more than proof of adverse consequences. It requires proof that the impugned conduct was unreasonable or contrary to sound judgment. And that, in turn, requires a compelling explanation of why the impugned conduct was, in fact, unreasonable or reflected bad or unsound judgment at the time the conduct took place
102. It must be emphasized at the same time, however, that for an applicant to establish prudence, on the balance of probabilities, requires something more than merely (i) asserting prudence (without anything more in support of that proposition); and (ii) arguing that the reliance by interveners (or any other party) on potential evidence of imprudence (such as adverse or undesirable consequences of the impugned conduct) arising after the fact constitutes impermissible reliance on hindsight. That being said, it would be entirely proper for an applicant to argue that its conduct was prudent if a “reasonable person” in the same circumstances, and possessed of the same knowledge and information at the relevant (i.e., same) time, could reasonably conclude that the conduct in question was reasonable, reflected sound judgment, and was likely to lead to the stated objective or desired outcome.
103. The Commission finds, however, that the applicants in this proceeding have failed to establish, on the balance of probabilities, that all of their costs (as opposed to only some of their costs) of rebuilding transmission line 1043L on the reserve (1043L-Reserve) (including all costs attributable to delays in construction) were prudently incurred. Nor, equivalently, were the applicants able to establish on the balance of probabilities that a “reasonable person” in their circumstances (and possessed of the same knowledge and information at the relevant time) could reasonably conclude that their conduct, as it related to consulting with Enoch, was at all applicable times prudent or reasonable and likely to lead to the completion of construction of 1043L-Reserve on budget and on time.
104. The failure of the applicants to establish, on the balance of probabilities, that all costs related to on-reserve activities sought to be recovered in this proceeding were prudently incurred arises primarily on account of their failure to adequately demonstrate that they met the
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consultation requirements, as set out in Rule 007,98 applicable to every entity preparing to make a facilities application before the Commission.
105. Effective consultation achieves three purposes: (i) it allows parties to understand the nature of a proposed project; (ii) it allows the applicant and the intervener to identify areas of concern; and (iii) it provides a reasonable opportunity for the parties to engage in meaningful dialogue and discussion with the goal of eliminating or mitigating to an acceptable degree the affected parties’ concerns about the project.99
106. Meaningful consultation is founded on trust, with both parties earnestly engaging in the process and attempting to develop and maintain a positive relationship. Applicants must be prepared to listen to the concerns of parties affected by the project, be open to making changes or concessions where reasonable, and provide a rationale where a project proponent asserts that accommodations cannot be made.100
107. Appendix A of Rule 007 (March 24, 2009, version, pages 40-43) deals expressly with the documentation requirements applicable to the PIP, which, in turn, sets out the obligations of project proponents to consult with affected parties. Documentation requirements include the following:
• The applicant must indicate any outstanding objections or concerns that it is aware of, and must attach a written summary of the outstanding issues when submitting an application. (page 40)
• The applicant must always close the participant involvement loop, even if the application is withdrawn. This means that all persons included in the participant involvement program must continue to be included in all correspondence and information updates during the development, implementation, and outcome of the proposed project. (page 40)
• Should a dispute arise, the Commission expects the parties to discuss the issues and options for resolution and encourages the use of third-party mediators. (page 40)
• It is in the applicant’s best interest to understand the audit requirements for participant involvement. The applicant should develop an audit documentation package early and build it throughout the process. The applicant must retain communication logs, registered mail/courier tracking, and personal consultation and notification documents for audit purposes. The applicant must retain documentation of potential mitigation for concerns/objections that were received through the notification and consultation process prior to filing an application. (page 40)
• The applicant is expected to document consultation commitments made and have a process in place to monitor and follow up on commitments. (page 43)
98 Rule 007: Applications for Power Plants, Substations, Transmission Lines, Industrial System Designations and Hydro Developments. 99 Decision 2011-436: AltaLink Management Ltd. and EPCOR Distribution & Transmission Inc., Heartland Transmission Project, Proceeding 457, Application 1606609-1, November 1, 2011. 100 Decision 2011-436.
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108. AltaLink filed its facilities application for the Project with the Commission on July 28, 2010. For a full year prior to that, however, and specifically from June 2009 to June 2010, AltaLink and TransAlta engaged in a series of detailed and relatively comprehensive consultations with representatives of Enoch. The record of these consultations is well documented, as required by Rule 007. Key concerns or issues raised by Enoch during this phase of consultation focused principally on economic compensation and related benefits for the community. As noted above, the record of consultation includes at least five entries in which Enoch raised the community’s interest in contract and employment opportunities with AltaLink and TransAlta. Enoch also raised the issue of compensation for the existing ROW, annual structure payments and land rentals.
109. There can be little doubt that by the end of June 2010, AltaLink and TransAlta had been made well aware by Enoch of its financial interests and concerns, and the types of outcomes it was seeking. The record of this proceeding suggests that while AltaLink and TransAlta were largely non-committal at this stage of the consultations about offering additional compensation to Enoch (including any suggestion of reopening negotiations aimed at increasing the payments for rights-of-way under the then decades-old agreements for same), the applicants appeared more amenable to identifying (and, presumably, then putting forward for Enoch’s consideration) potential employment and business opportunities of the kind Enoch was pursuing.
110. As described more fully in paragraph 52 above, AltaLink documented two commitments to Enoch in its July 28, 2010, facilities application: to “continue discussions with First Nations regarding the Project” and “prior to construction and maintenance of the Project,” it would “notify Enoch and provide them with information regarding construction and maintenance activities and available contracts.”
111. Despite these commitments, there is no record of communication with Enoch from a month prior to the facilities application (June 2010) to just two months before AltaLink restarted construction on the reserve (October 2011), a period of one year and four months.
112. Although TransAlta claimed that both it and AltaLink “were in regular contact with the ECN and its representatives at the start of and during Project construction” (that is, sometime between late October 2011 when construction restarted off-reserve, or possibly even December 2011 when construction re-started on-reserve, and May 8, 2012, the date on which Enoch ordered all work to stop on the project on reserve lands), neither of the applicants was able to substantiate their claims with documentary evidence.
113. TransAlta explained this gap in the evidentiary record as being the result of staff turnover and document retention practices. The Commission observes that this explanation does not transform a failure to act reasonably or prudently in maintaining complete and accurate records as required by Rule 007 into something innocuous or inconsequential. Nor does this excuse in any way assist the applicants in meeting their onus of proving, on the balance of probabilities, that their conduct at all applicable times was prudent or reasonable and likely to lead to the completion of construction of 1043L-Reserve on budget and on time.
114. To the contrary, the significant 16-month lacuna between consultations of any kind – much less any timely follow-up consultations as promised in writing by the applicants, as well as an additional six months during which some meetings may have taken place but about which little information exists on the documentary record, all speak to a failure to act prudently or, at
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the very least, to the absence of evidence demonstrating that, notwithstanding this failure, the conduct of the applicants remained prudent and, at all relevant times, reflected sound judgment. In other words, the applicants, by virtue of failing to build upon a robust record of initial consultations, to establish closer working relationships with Enoch when the opportunity presented itself, and to deliver tangible and timely benefits with respect to contract and employment opportunities – contrary to the expectations they had created in this regard with Enoch, find themselves without compelling evidence that their conduct, including their record of consultations with Enoch, was in all material respects prudent over the full duration of the Project. The evidence in this proceeding, as marshalled by the applicants themselves, in fact, suggests the opposite conclusion. That is, notwithstanding TransAlta’s legal rights to access the ROW on the reserve, had the applicants simply lived up to the written and oral commitments they made to Enoch after the initial set of consultations (between June 2009 and June 2010), there are reasonable grounds to believe that such an approach would have led to a less acrimonious, less expensive and potentially much shorter interregnum before agreement could be reached on the issues dividing the applicants and Enoch.
115. This is not what happened, however. Relations between the applicants and Enoch deteriorated significantly after the initial work stoppage (in May 2012) and grew progressively worse as positions became entrenched and the willingness to seek common ground frayed considerably. For the next several years, little progress was made on the Project. Correspondence between the parties continued, but became more acrimonious at times. Lawyers came to play a greater role in the relations between the applicants and Enoch. Lawsuits were launched and begat counter-lawsuits. Entreaties for assistance were made to a federal agency (but with no success). Negotiations were conducted in fits and starts. Applications for extensions to licences, permits and construction deadlines were made periodically before the Commission and the AESO as construction continued to be deferred, but – and this is important – the applicants and Enoch always continued talking to each other.
116. It is because of this continuous and sustained, if uneven, record of contacts, correspondence, discussions, consultations and negotiations, largely in good faith, between the applicants and Enoch that the Commission is unable to find that the costs attributable to delays in construction following the initial work stoppage on the reserve in early May 2012 were, in their entirety, unreasonably or imprudently incurred. The Commission is likewise, and for the same reasons, unable to find that the costs of the Cooperation Agreement itself (upon being reached), were imprudently incurred.
117. Instead, the Commission limits its findings on the question of whether and to what extent expenditures on the project were prudently incurred to the following. That is, having regard to all of the evidence on the record of this proceeding, and the onus of proof that resides with the applicants, the Commission finds that the applicants have failed to establish, on the balance of probabilities, that the manner in which they conducted their project consultations with Enoch between July 2010 and May 2012 was prudent or reasonable.
118. As a result, the Commission is unable to find that all of the funds expended on the construction of 1043L-Reserve (including AFUDC attributable to TransAlta) were prudently incurred. The Commission further finds and directs that it would be just and reasonable to reduce
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by 15 per cent the amount of expenditures eligible for recovery by the applicants.101 The Commission also finds and directs that it would be just and reasonable for the recoverable amount of legal and related costs incurred by the utilities associated with negotiating and concluding the Cooperation Agreement (as opposed to the costs of the agreement itself) to likewise be reduced by 15 per cent per cent. The basis for doing so is the same, namely, that absent sufficient evidence that the manner in which the applicants conducted their project consultations with Enoch between July 2010 and May 2012 was prudent or reasonable, it is reasonable to conclude that the process of arriving at a Cooperation Agreement was more expensive than it needed to be. The Commission leaves it to the applicants in both cases to determine amongst themselves the appropriate division of the disallowance of funds expended.
119. TransAlta submitted that a re-route within the reserve to curtail or avoid the work stoppage was not a viable option. An analysis of re-routing options was actually conducted by AltaLink. It identified five potential alternative routes.102 TransAlta reiterated that the estimated total cost for the only viable re-route was $60 million,103 which the Commission notes is far in excess of the actual costs incurred in rebuilding the line through the reserve.
120. The CCA recommended a disallowance to the costs incurred with respect to the Cooperation Agreement, stating it was unlikely any of these costs would have been incurred had the AltaLink contractor not caused damage to the reserve lands leading to the work stoppage. TransAlta stated that the Cooperation Agreement reset the relationship between TransAlta and Enoch and enumerated the benefits of the agreement.104
121. In the Commission’s view, the most persuasive evidence as to the need for the agreement is from the submission of Enoch:
By 2012, Enoch had extensive concerns about the Transmission Lines on its Reserve lands. Enoch was of the view that their concerns were not being addressed. As set out in TransAlta’s submissions, this resulted in confrontations between Enoch and TransAlta (or TransAlta’s contractors) when they attended at Enoch and sought to complete work on the Transmission Lines. In 2012, Enoch directed that the work on the Transmission Lines cease.105
122. The Commission considers Enoch to have a unique ownership status. Access to Enoch lands cannot be obtained through the Surface Rights Board process. It is clear from Enoch’s submission that negotiation was necessary to address historical concerns and access issues. When viewed through this lens, the Commission considers the costs of the agreement reasonable.
4 Procedural fairness concerns
123. The CCA raised a concern with procedural fairness in this proceeding. It asserted that the applicants had failed to produce documents the CCA had requested of them in normal course
101 This does not include costs/payments as part of the Cooperation Agreement such as those identified in Section 3.2, paragraph 40. 102 Exhibit 25369-X0207, AML argument, paragraph 147(d), PDF page 41. 103 Exhibit 25369-X0209, TransAlta argument at paragraphs 120 and 190, PDF pages 25 and 38. 104 Exhibit 24369-X0195, page 35. 105 Exhibit 24369-X0088, page 2.
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IRs. Yet, after the CCA had filed its evidence, the applicants unearthed the information they had earlier claimed not to possess and filed these documents in their rebuttal evidence.
124. AltaLink responded that it did not deliberately withhold documents, that it only understood the CCA’s position once intervener evidence was filed and, in the interests of providing a full response, located additional records. It added that the CCA could have, but did not, seek to bring a motion for further disclosure at the time. TransAlta provided a similar response.
125. In its reply argument,106 the CCA identified a further procedural fairness concern; namely, that, in argument, AltaLink had referred to information from Proceeding 24681, a proceeding that is still active. The CCA argued that this practice was unfair, improper and would inevitably lead to an inefficient practice of parties drawing from any record, perhaps of out context and without any ability for a party to respond. It requested that all references and conclusions drawn from these off-the-record sources be given no weight.
Commission findings 126. Procedural fairness is the cornerstone of administrative law and a fundamental objective of all proceedings before the Commission. The key elements of procedural fairness are well known and include the right of a party to be heard; that is, to present its case fully and fairly. The flexible nature of procedural fairness recognizes that meaningful participation can occur in different ways in different circumstances. In each case, the heart of the analysis is whether the party had a meaningful opportunity to present its case fully and fairly and, if not, what is reasonably required in order to ensure that result.
127. The CCA has asserted that issues with information asymmetry are exacerbated by a written proceeding, and procedural fairness dictates that because there is no ability to test new evidence provided in rebuttal evidence, the failure to provide full responses during the interrogatory stage should be taken into consideration.
128. In Decision 2014-283,107 the Commission opined on the issue of information asymmetry in the context of pre-hearing discovery and the onus to be met of an applicant. The Commission stated:
65. The perceived mischief the RPG [Ratepayer Group] complained of in this proceeding is different. The RPG says that interveners are potentially prejudiced by the fact that the TFO possesses all of the evidence by which its conduct will be judged, and is therefore in a position to effectively dictate what evidence will make it onto the record of a proceeding.
66. Information asymmetry is and will remain a challenge for regulatory tribunals, but does not warrant an alteration of the prudence tests undertaken by the Commission. The process employed by the Commission in its consideration of this, and all rate-related applications, incorporates robust pre-hearing discovery mechanisms, which parties are expected to employ to their maximum benefit. The Commission considers that the existing IR process, when engaged in by the parties in a focused manner, and in good
106 Exhibit 25369-X0211. 107 Decision 2014-283: ATCO Electric Ltd., 2012 Transmission Deferral Account and Annual Filing for Adjustment Balances, Application 1609720-1, Proceeding 2683, October 2, 2014.
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faith, provides ample opportunity for the development of an unbiased and complete record, which can be further tested in cross-examination. Where the Commission is not satisfied that the record is satisfactory to make a required determination the Commission has at its disposal other mechanisms, such as post implementation reviews and audits of actual costs and performance.
129. The findings in the above decision were provided following a proceeding that included an oral hearing; however, the Commission does not consider that its pre-hearing discovery mechanisms are any less robust with a written proceeding.
130. The Commission considers that the CCA’s issue is not with the pre-hearing discovery process but with what it considers to be the unfair practice of AltaLink and TransAlta in not fully responding to its IRs and only providing further evidence in rebuttal. The Commission accepts AltaLink’s and TransAlta’s explanations that they were not deliberately engaging in withholding information and did not fully understand the issues until intervener evidence was filed. Nonetheless, when a party, in responding to an IR, claims that it does not have the information requested, as occurred in this proceeding, the party seeking the information has every right to rely on the response.
131. However, as also noted by AltaLink and TransAlta, once further documentation was provided in rebuttal evidence, the CCA could have requested a further round of IRs to test this new evidence. There is certainly precedent for doing so, and the Commission itself sought further evidence following the filing of rebuttal evidence.
132. In view of these circumstances, the Commission cannot conclude that the CCA was denied procedural fairness in this proceeding.
133. With regard to AltaLink’s references in argument to submissions made in other ongoing proceedings, the Commission notes that its determinations in this proceeding are exclusively based on evidence properly filed on the record of this proceeding.
5 Order
134. It is hereby ordered that AltaLink Management Ltd. and TransAlta Corporation provide a compliance filing to this decision that responds to the directions contained herein on or before January 29, 2021. AltaLink and TransAlta are to determine between themselves how any disallowances from this proceeding will be split between themselves.
Decision 25369-D01-2020 (December 10, 2020) 23 Direct Assigned Capital Deferral Account for the Edmonton Region Project AltaLink Management Ltd. and TransAlta Corporation
Dated on December 10, 2020.
Alberta Utilities Commission
(original signed by)
Douglas A Larder, QC Acting Commission Member
(original signed by)
Bohdan (Don) Romaniuk Acting Commission Member
Decision 25369-D01-2020 (December 10, 2020) 24 Direct Assigned Capital Deferral Account for the Edmonton Region Project AltaLink Management Ltd. and TransAlta Corporation
Appendix 1 – Proceeding participants
Name of organization (abbreviation) Company name of counsel or representative
AltaLink Management Ltd. (AltaLink or AML) Borden, Ladner Gervais LLP
TransAlta Corporation (TransAlta) Norton Rose Fulbright Canada LLP
Enoch Cree Nation (Enoch)
Consumers’ Coalition of Alberta (CCA) Bema Enterprises Ltd.
Alberta Utilities Commission
Commission panel D.A. Larder, Acting Commission Member B. Romaniuk, Acting Commission Member
Commission staff C. Wall (Commission counsel) D. Ward A. Spyce C. Strasser J. Halls
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Appendix 2 – Project map108
(return to text)
R.4 R.3 R.2 R.1W.5M. R.28 R.27 R.26 R.25 R.24W.4M. 2 28 BIG LAKE T.53 WABAMUN SPRUCE GROVE 16 STONY R. JOHNNYS PLAIN WABAMUN WABAMUN 19S LAKE 16A LAKE SUBSTATION EDMONTON 628 JACK FISH SPRING LAKE ECN No. T.52 POINT 2 LAKE SASKATCHEWAN POINT 4 779 135 POINT 3 POINT 1 627 EPCOR PETROLIA KEEPHILLS 320P E816S SUBSTATION SUBSTATION 60 T.51 UPGRADED TRANSMISSION LINE 904L BEAUMONT DE-ENERGIZED TRANSMISSION LINE 2 PREFERRED TRANSMISSION LINE ROUTE 1043L NORTH DEVON ALTERNATE TRANSMISSION LINE ROUTE 1043L T.50 SALVAGED TRANSMISSION LINE LEDUC N.T.S.
108 New transmission line 1043L and alteration of transmission line 904L west of Edmonton/Jackfish lake area, and conductor replacement and new structure on existing lines 904LE/904LW in the Edmonton area. From Decision 2011-340, Appendix A, page 37.
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Appendix 3 – Summary of Commission directions
This section is provided for the convenience of readers. In the event of any difference between the directions in this section and those in the main body of the decision, the wording in the main body of the decision shall prevail.
1. TransAlta and AltaLink are directed to provide a compliance filing to this decision and in conjunction with the decision in Proceeding 24681 (if so directed) on or before January 29, 2021...... paragraph 4 2. As a result, the Commission is unable to find that all of the funds expended on the construction of 1043L-Reserve (including AFUDC attributable to TransAlta) were prudently incurred. The Commission further finds and directs that it would be just and reasonable to reduce by 15 per cent the amount of expenditures eligible for recovery by the applicants. The Commission also finds and directs that it would be just and reasonable for the recoverable amount of legal and related costs incurred by the utilities associated with negotiating and concluding the Cooperation Agreement (as opposed to the costs of the agreement itself) to likewise be reduced by 15 per cent per cent. The basis for doing so is the same, namely, that absent sufficient evidence that the manner in which the applicants conducted their project consultations with Enoch between July 2010 and May 2012 was prudent or reasonable, it is reasonable to conclude that the process of arriving at a Cooperation Agreement was more expensive than it needed to be. The Commission leaves it to the applicants in both cases to determine amongst themselves the appropriate division of the disallowance of funds expended...... paragraph 118
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