CANADIAN GAS ASSOCIATION 2020 CGA ENERGY REGULATION COURSE OTTAWA, MARCH 3, 2020 ❖ ADVOCACY BEFORE ENERGY REGULATORS ❖ GORDON KAISER, MARKET SURVEILLANCE ADMINISTRATOR, ALBERTA FORMER VICE CHAIR, ONTARIO ENERGY BOARD ADVOCACY BEFORE ENERGY REGULATORS A. ARGUING THE CASE B. APPLYING THE LAW C. SETTLING THE CASE D. CONDUCTING THE HEARING • Article by David Mullan • Article by Phil Tunley E. WRITING THE DECISION • Article by Hon. David Brown 2 ADVOCACY BEFORE ENERGY REGULATORS A. ARGUING THE CASE INTRODUCTION A regulatory hearing is not a trial. Rarely are the rules of evidence used. There are rules of procedure but they are relatively simple. The law is not the dominant factor. This is not a court. Proceedings can be fact intensive and usually involve expert witnesses. The following are guidelines that will help you argue effectively. However, as in all litigation, preparation is the key. Regulatory hearings are unique in that you will often appear before the same panel. In these circumstances it is important not to misstate the facts. Counsel must build credibility before the panel. It will serve you well in future cases. THE OPENING • Use it – most planes crash on takeoff. • Do not assume that the panel knows what this case is about. • Explain to the panel (and to yourself) what the issues are, what you have to prove and how you intend to do it. • Do not read. • Get the facts right. Forget the law. It will take care of itself. If some facts go against you, tell the panel. Do not assume they will go away. • Do not start with procedural crap. • The opening is a huge opportunity. Do not waste it. DIRECT EXAMINATION • Use direct. Do not dump and run. Get your witnesses comfortable. • Use a panel. But pick a quarterback. And a cleanup batter. 3 WITNESS CONDUCT • Answer the question. Do not be evasive. • Do not argue. Leave that to the lawyers. • Do not let the lawyers write the evidence • Know what issues you are responsible for. And stick to them. • Do not guess. • Determine upfront if there is any prior evidence that conflicts with the current testimony. If there is both, you and your witness will go down in flames. Make sure you get a copy of all prior testimony. • Avoid conflicts of interest. CROSS EXAMINATION • Use the Technical Conference to get the facts. • Use a Compendium. • Do not ambush. • Keep it short. • Do not argue. • Ask for Undertakings. But be clear what you want. And follow-up when you get it. • Be polite. No one likes a jerk. Particularly panel members who are non-lawyers. • Remember the Rules of professional conduct FINAL ARGUMENT • If oral, provide a written outline. • Use a Compendium. Include copies of relevant transcript pages and authorities. • If written, remember this is what is on the panel members desk when they are writing the decision. • Use a red pen. Often. • Be fair. Do not misstate. • Do not go down with the ship. Recognize a stupid argument. 4 • Remember reputation is everything. This is not a judge that you’ll never see again. You will be back before these panel members many times over the next few years. • Pay attention to onus but make sure it is the law not just convention. • Remember these proceedings have a strong public interest component. REPLY • Keep it short. • Do not read. • Use a Compendium. • Have answers to questions ready. You know the questions by now. • If the members do not ask you the question, answer it anyway. 5 B. APPLYING THE LAW INTRODUCTION The most basic question counsel face in energy cases is what is the jurisdiction of the Board? As indicated below expert tribunals like energy Boards are granted substantial deference by courts. The other unique aspect of energy hearings is that there is a body of regulatory law or public utility law that has developed over many years. These are set out below. However the recent decision of Mr. Justice Rothstein in the Ontario Power Generation1 case points out that tribunals are not courts and public utility law is not comparable to the common law. Principles of public utility law are not binding on tribunals. At best they can be seen as a procedural guide. They are important, but you cannot take it to the bank. The one exception may be the principle established by the Supreme Court of Canada in Stores Block.2 There, the Alberta Commission allocated the gain on the sale of a building in Calgary between the ratepayers and the utility. The utility objected. The Court held that as a matter of property law the customers or ratepayers have no property interest in the assets of utility and therefore no entitlement to a share of the profits on the sale of the building. That issue has now come full circle. Do the customers have a share of the losses relating to property no longer useful? Today the largest issue facing utilities is that question - who will pay for stranded costs? The first major decision came in TransCanada MainLine3 before the National Energy Board. There, TransCanada sought to write off (and charge the ratepayers) the stranded asset costs. The stranded asset costs were substantial because shipments on the pipeline had fallen by 50% in six years due to the growth of shale gas in Eastern United States. The pipeline was built 60 years ago to serve Eastern industrials. These customers had local gas next door. They no longer had toe to ship it from Western Canada. Many utilities across Canada now face stranded costs largely driven by technological change and the rapid development of customer owned generation. The driver is CNP - technology that uses gas to generate electricity locally to supply one customer or a group of customers. This can have a dramatic impact on the usage of traditional local distribution systems. 1 Ontario Energy Board v. Ontario Power Generation, 2015 SCC 44 2 ATCO Gas and Pipelines Ltd. v. Alberta, [2016] SCR 140 3 National Energy Board v. TransCanada Pipelines Limited, RH-003-2011 (March 2013) 6 DOES THE BOARD HAVE JURISDICTION? A tribunal only has the powers stated in its governing statute or those which arise by ‘necessary implication’ from the wording of the statute, its structure and its purpose.4 The Ontario Board’s jurisdiction to fix ‘just and reasonable’ rates is found in section 36(2) of the Ontario Energy Board Act, 1998: The Board may make orders approving or fixing just and reasonable rates for the sale of gas by gas transmitters, gas distributors and storage companies, and for the transmission, distribution and storage of gas. This is standard language in all public utility legislation. It is generally accepted that an energy regulator’s jurisdiction is very broad. In Union Gas Ltd. v. Township of Dawn, the Ontario Divisional Court in 1977 stated: this statute makes it crystal clear that all matters relating to or incidental to the production, distribution, transmission or storage of natural gas, including the setting of rates, location of lines and appurtenances, expropriation of necessary lands and easements, are under the exclusive jurisdiction of the Ontario Energy Board and are not subject to legislative authority by municipal courts under the Planning Act. These are all matters that are to be considered in light of the general public interest and not local or parochial interests. The words ‘in the public interest’ which appear, for example, in s. 40(8), s. 41(3) and s. 43(3), which I have quoted, would seem to leave no room for doubt that it is broad public interest that must be served.5 The same Court in 2005 issued two important decisions. The Court stated in the NRG case: The Board’s mandate to fix just and reasonable rates under section 36(3) of the Ontario Energy Board Act, 1998 is unconditioned by directed criteria and is broad; the Board is expressly allowed to adopt any method it considers appropriate.6 The ruling in the Enbridge case decided that the Board in fixing just and reasonable rates can consider matters of ‘broad public policy’: the expertise of the tribunal in regulatory matters is unquestioned. This is a highly specialized and technical area of expertise. It is also recognized that the legislation involves economic regulation of energy resources, including setting prices for energy which are fair to the distributors and the suppliers, while at the 4 ACTO Gas and Pipelines Ltd. v. Alberta (Energy and Utilities Board, [2006] 1 S.C.R. 140, [2006] 2.C.J. 400 at para. 38. See also Bell Canada v. Canada (Canadian Radio-Television and Telecommunications Commission, [1989] 1 S.C.R. 1722. 5 (1977), 15 O.R. (2nd) 722, O.J. No.2223 at paras 28 and 29. 6 Natural Resource Gas Ltd. v. Ontario Energy Board,[2005], O.J. No. 1520 (Div. Ct.) at para. 13. 7 same time are a reasonable cost for the consumer to pay. This will frequently engage the balancing of competing interests, as well as consideration of broad public policy.7 TWO CLOSE CALLS • Toronto Hydro Electric System v. Ontario Energy Board, (2008) 93 OR (3d) 380 (Ont. Div. Ct.) rev (2010) OJ No.1504 (Ont. CA) • Ontario Energy Board Re Rate Affordability Programs, EB-2006-0034 (April 26, 2007) HOW MUCH DISCLOSURE? Public utility cases have a large public interest component. Adequate disclosure is important. The following quote is from the Ontario Energy Board decision in Westcoast * Energy. A public utility in Ontario with a monopoly franchise is not a garden variety corporation. It has special responsibilities which form part of what the courts have described as the “regulatory compact”.