FortisAlberta Inc v EQUS REA Ltd, 2016 ABQB 307

Court of Queen ’ s Bench of Alberta Citation: FortisAlberta Inc v EQUS REA Ltd, 2016 ABQB 307 Date: 20160601 Docket: 1501 03895 Registry: Calgary Between: FortisAlberta Inc. Applicant - and - EQUS REA Ltd. Respondent _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice J.T. McCarthy _______________________________________________________ Introduction [ 1 ] The Applicant applies to set aside a partial arbitration award on the basis that it exceeds the arbitrator’s jurisdiction pursuant to either section17 or

section 45 of the Arbitration Act .

Background [ 2 ] FortisAlberta Inc., the applicant in this proceeding, is an investor owned utility that operates electrical distribution facilities in many parts of Alberta. [ 3 ] EQUS REA Ltd. (“EQUS”), the respondent in this proceeding, is a rural electrification association (“REA”). EQUS is owned by its members and distributes electricity to those members within its service area.

It was originally incorporated under the Cooperatives Act and has continued under the Rural Utilities Act, RSA 2000, c R-21 (the “RUA” ). [ 4 ] The Alberta Utilities Commission (AUC) issues service area approvals that designate geographic regions in which both parties operate. In this case EQUS and FortisAlberta received regulatory approval for overlapping geographic service areas. Electricity customers in the overlapping areas have been divided up based on statutory provisions that require REAs and public distribution utilities to enter into operating agreements.

Approvals for all REAs included the limitation that REAs can provide electric service only to their members. [ 5 ] EQUS’ predecessor (Carea) purchased power from Trans Alta (the predecessor of FortisAlberta) until 2001, when electricity generation in Alberta became deregulated.

After deregulation, Carea (now EQUS) obtained its electricity supply from elsewhere i.e. other than Trans Alta (FortisAlberta) and it operates its own electric distribution system. [ 6 ] As it now stands, FortisAlberta and EQUS are owners of electric distribution facilities whose electrical facilities are interconnected in the same geographic region. They are required to have an Integrated Operations Agreement (IOA) to govern operational aspects of their interconnected electrical system pursuant to the “ Roles, Relationships and Responsibilities Regulation ” 2003, Alta Reg 169/2003 (the “ RRR Regulation ”).

The governing statute is the Electric Utilities Act, RSA 2003 , c E-5.1 (the “ EUA ” ). [ 7 ] The parties (through their predecessors) had entered into agreements for decades which dealt with their overlapping service areas. Prior to this dispute, the parties were operating under the 1997 Operating Agreement. When the time came to replace the 1997 Agreement the parties were unable to agree.

The RRR Regulation provided that if the parties could not agree on a new IOA six months before the expiry of the existing agreement, the matter must be referred to arbitration under the Arbitration Act . [ 8 ] This court appointed W. Paul Sharek Q.C. as arbitrator (the “Arbitrator”), and a three week arbitration occurred in the fall of 2014.

The Arbitrator issued a 93 page partial award dealing with one issue which can be described as follows: “Should the IOA contain provisions which define which customers or consumers are eligible to be provided electric service by EQUS.” Other issues are to be dealt with by the arbitrator after this central issue has been resolved. [ 9 ] At paragraph 31 of his award, the Arbitrator elaborated on the issue: “As referred to earlier, EQUS and FortisAlberta used different terminology to describe a provision in an agreement between them which prescribes who EQUS can serve and who EQUS cannot serve.

EQUS characterizes this clause as a ‘market restriction’. FortisAlberta refers to it as an ‘eligibility clause’, or the concept of ‘meaningful eligibility criteria’.” [ 10 ] At the arbitration it was clear that the parties agree EQUS is restricted to serving only its members. The difference between the parties was that EQUS advanced the position that membership was the only requirement. Fortis argued that mere membership is not sufficient to permit EQUS to serve a customer or consumer. It argued that membership must be accompanied by additional eligibility criteria which specify which customers EQUS can serve.

In other words, there must be restrictions on who EQUS can serve in its service area. [ 11 ] The Arbitrator decided that the prospective IOA would not contain eligibility provisions. The IOA would contain a provision which is consistent with the service area approval of EQUS, which is that it can serve its members, but no one else, and those members must be located in the EQUS service area. Issue [ 12 ] As stated earlier, the issue in this application is whether the Arbitrator’s decision exceeded his jurisdiction, pursuant to either

section 17 or 45 of the Arbitration Act . Analysis [ 13 ] It is important to note that this is not a rehearing of the arbitration. It is not a determination of the correctness of the statutory

interpretation of the award, as that would be a question of law, requiring leave to appeal under

section 44 of the Arbitration Act . In its Memorandum of Argument, FortisAlberta abandoned its application for leave to appeal any question of law under

section 44 of the Arbitration Act . [ 14 ] In its submission, FortisAlberta asked the court to decide the following questions of law:

a) Did the Arbitrator err by concluding that he had jurisdiction to not include “meaningful membership criteria” as a term of the prospective IOA, pursuant to

section 17 of the Arbitration Act?

b) In the alternative, FortisAlberta seeks to set aside the partial award of the Arbitrator under

section 45 of the Arbitration Act and elaborates as follows:

i. Pursuant to

section 45(

c) and 45(e), did the Arbitrator err by issuing an award that was based on the finding that competition exists in the Alberta electric distribution sector, when such issue was not covered by the statutory arbitration agreement, is beyond the scope of that agreement, and is an issue that directly impinges on the realm of public policy? ii. Pursuant to

section 45(

c) and 45(e), did the Arbitrator err by deciding that he would not include meaningful membership criteria in the IOA that comes out of the arbitration when the existence of such criteria in an IOA is beyond the scope of the arbitration agreement, and alternatively, is not capable of being the subject of an arbitration under Alberta law? iii. Pursuant to

section 45(

c) and 45(e), did the Arbitrator err by finding no public policy issues arise if an IOA does not include a meaningful membership term? Further, did the Arbitrator err in considering the issues in the absence of other parties affected by the award? Analysis Roles, Relationships and Responsibilities Regulation ( RRR Regulation ) [ 15 ] Section 9(3) of the Role, Relationships and Responsibilities Regulation outlines the scope of the arbitrator’s mandate in the circumstance:

(3) If one of the parties to a matter referred to arbitration under subsection (2) is a rural electrification association, the arbitrator is responsible for issuing an award deciding the terms of a new integrated operating agreement between the owners as follows:

a) the arbitrator must include in the terms of the agreement anything agreed to by the owners before the award is issued;

b) REPEALED AR 25/2004 s.2

c) the arbitrator must decide the remaining terms of the agreement, whether or not those contested terms are in the then existing agreement. [ 16 ] It is clear that the RRR Regulation gives the arbitrator a mandate to come up with an Integrated Operations Agreement. Section 9(3) of the RRR Regulation is the jurisdictional clause that the Arbitrator followed and for emphasis para 9(3)(

c) states that the arbitrator “must decide” the terms of the agreement, whether or not those terms are in the existing agreement. There is no restriction on what the arbitrator must include in the agreement. [ 17 ] The Arbitrator reviewed the legislative history of

section 9 in his decision, at paragraph 76. Importantly, in 2004 two subsections of

section 9 were repealed. Section 9(3)(

b) once stated: [T]he arbitrator must include the same terms about criteria, eligibility, conditions and qualifications for membership in the rural electrification association as are contained in the then existing agreement, unless the parties have agreed to amend or add to the membership provisions[.] [ 18 ] Subsection 9(4) formerly provided: If one of the parties to a matter referred to arbitration under subsection (2) is a rural electrification association, the arbitrator has no jurisdiction to make any award with respect to membership, except as permitted or required under subsection (3). [ 19 ] The eligibility criteria in the 1997 IOA between the parties had the following membership requirements: 3.01 Within the Service Area of the Association, the Association will provide Electric Service to a consumer who: (

a) is approved as a member of the Association by the Board of Directors; and (

b) has an interest in land where: i. the consumer uses or rents, or within two years intends to use or rent, the land for Agricultural Activity, or ii. the land is 10 acres or greater in size and the consumer or tenant occupies, or within 2 years intends to erect and occupy, a residence in the land.” The association referred to above is EQUS or its predecessor. [ 20 ] If subsections 9(3)(

b) and 9(4) of the Regulation were in place now, the Arbitrator would not have had the jurisdiction to change existing membership criteria, eligibility, conditions and qualifications. Since those provisions have been repealed, the Arbitrator’s jurisdiction over membership is no longer so limited. [ 21 ] The Arbitrator was correct when he stated as follows, at paragraph 99 of his decision: If there were public policy issues which would prevent me from making certain decisions as claimed by FortisAlberta, in my respectful

view the legislative and regulatory scheme as reflected in the RRR Regulation, Sections 9 and 10 specifically provide not only for an arbitrator to decide issues arising out of an operating agreement, but even to prepare an agreement between owners of an inter-connected electric distribution system. This makes it clear that such matters can be entrusted to arbitration. [ 22 ] To repeat, these amendments to the RRR Regulation clearly demonstrate to me that the legislature did not intend to limit an arbitrator’s jurisdiction with regard to membership criteria, eligibility, conditions and qualifications.

As such, I agree with the Arbitrator’s assertion that such membership qualifications are not policy matters that require the stamp of approval of government policy, AUC approval or any further legislative or regulatory mandate. The Arbitrator also noted that the arbitration cases referred to by FortisAlberta pre-dated the legislative regime, the RRR Regulation and the 2012 decisions, at paragraph 98. [ 23 ] The fact that the Arbitrator did not impose any eligibility restrictions for membership is in no way outside the scope of an arbitrator’s jurisdiction.

AUC Service Area Approvals [ 24 ] No electrical distribution system can distribute energy without having a service area approval granted by the AUC under

section 25 of the Hydro and Electric Energy Act, RSA 2000, c H-16 (“ HEEA” ). For years, EQUS and its predecessor had service area approvals which were determined by the AUC to be in the public interest. [ 25 ] The only restriction the AUC has placed on FortisAlberta’s service area is that it cannot supply any member of any REA within the service area without the written consent of the REA (underlining is mine). [ 26 ] In terms of EQUS, the only restriction from the AUC is that EQUS may only distribute electricity to its members within its service area.

The AUC did not restrict who could be a member of the EQUS REA. The power supply is therefore divided by membership. [ 27 ] There is in my view nothing in the service area approvals that could be considered a jurisdictional constraint or outside the scope of the arbitration. Rural Utilities Act ( RUA ) [ 28 ] The Rural Utilities Act provides for the formation of REAs and deals with who may be admitted as members and how the REAs are governed and regulated. [ 29 ] The RUA creates the position of the Director of Rural Electrification Associations.

The Director is appointed by the Minister and has certain powers and responsibilities with regard to REAs. In

section 5 of the RUA, the Director has the power to “approve, amend or reject the Memorandum of Association and any supplementary bylaws” that are submitted by the REA. The Director also has the power to approve amendments to the incorporation documents of an Association. Under

section 26 of the Act, the Director may hold an inquiry into the affairs of the REA either on the request of a certain percentage of members, or on direction of the Minister. The Arbitrator in my view correctly notes that there is some oversight of REAs by the Director. [ 30 ] As far as membership is concerned, the RUA provides the rights and conditions of membership in an REA may be prescribed in the REA’s memorandum of association or bylaws pursuant to

section 10 of the Act . Unless an REA’s bylaws provide otherwise, a person who is 16 years of age or older who has an interest in land in the REA may become a member in the REA (pursuant to section 10(3) of the RUA and

section 17 of

Schedule 3 of the Rural Utilities Regulation , Alta Reg 151/2000). [ 31 ] At paragraph 68 of the award the Arbitrator deals with membership in an REA, referring to

section 10 of the RUA : ... 10(2) The rights and conditions of membership in an association may be prescribed in the memorandum of association or the bylaws or partly in one and partly in the other. 10(3) Unless provision is made in the memorandum or bylaws of an association to the contrary, a person of the age of 16 years and over (

a) may be a member; and (

b) may, subject to the bylaws enjoy all the rights of a member and execute all instruments and give all acquittances necessary to be executed or given under the bylaws. but no member under the age of 18 years may be a director, manager or treasurer of the association. [ 32 ] In this case, EQUS’ bylaws did not impose any additional membership requirements other than the consumer must make arrangements to receive electrical services from EQUS.

The Arbitrator did not impose any additional eligibility criteria for membership in EQUS, and in my view he was well within his jurisdiction to do that. [ 33 ] I find the membership requirements of the EQUS REA are consistent with the statutory requirements just set out. They are very simple membership requirements. In effect, if you want service from the EQUS REA, you become a member and make appropriate arrangements to get service. The only restriction on service by the EQUS REA in the AUC approval is that it cannot serve anyone but its members.

Again I see nothing in the RUA that constitutes a jurisdictional constraint on the arbitrator in deciding the terms of the IOA.

Market Competition [ 34 ] FortisAlberta argues in essence that competition in the electric distribution system in Alberta does not and cannot exist. It argues that market competition under the Electric Utilities Act is limited to electricity generation and retail. [ 35 ] FortisAlberta’s argument fails to take into account that

definitions in the Electric Utilities Act do include electric distribution services. [ 36 ]

Section 1 (

q) of the EUA states in part: “electricity services” means the services associated with providing electricity to a person, including the following --- --- (iii) electric distribution service; [ 37 ]

Section 1(dd) of the Act defines “market” as follows: (dd) “market” – means any type of market through or under which an offer, purchase, sale, trade or exchange of electricity, electric energy, electric services or ancillary services takes place in relation to the production or consumption of electricity, electric energy, electricity services or ancillary services; [ 38 ] The definition of “market participant” in

section 1(ee) includes: “market participant” means i. any person that supplies, generates, transmits, distributes, trades, exchanges, purchases or sells electricity, electric energy, electricity services or ancillary services, or ... [ 39 ] Further, sections of the Act emphasize competition for market participants. For example,

section 5 (

c) of the EUA states one of the purposes of the Act is: [T]o provide for rules so that an efficient market for electricity based on fair and open competition can develop in which neither the market nor the structure of the Alberta electric industry is distorted by unfair advantages of government–owned participants or any other participant; [ 40 ]

Section 6 of the Electric Utilities Act states the following under the heading “Expectations of market participants”: Market participants are to conduct themselves in a manner that supports the fair, efficient and openly competitive operation of the market. [ 41 ] Finally, under this Act is the Fair, Efficient and Open Competition Regulation , Alta Reg 159/2009, which requires participants to act in ways that support the efficient and openly competitive operation of the electricity market. [ 42 ] I agree with the Arbitrator when he states the following regarding competition at paragraph 161, with reference to ATCO Energy Limited v Alberta Energy and Utility Board , 2004 ABCA 215 : Therefore, the Court of Appeal has expressly confirmed that

Section 6 of the EUA applies to distribution, and it is not possible to accept FortisAlberta’s assertion that competition at the distribution level is contrary to Alberta’s legislative intent. [ 43 ] Also, the following passages in ATCO are helpful as they discuss competition where the number of market players is limited, and were pointed out by counsel for EQUS, at paras 24 and 120 of the decision: 24 For purpose of this appeal, the most important point to understand is the critical role that competition is designed to play in the restructured electrical industry in Alberta.

Competition is the touchstone running through all aspects of the legislative scheme governing the electrical industry now in effect in Alberta. Accordingly, in interpreting relevant legislation - and that most certainly includes the Board’s role and responsibilities in respect of negotiated settlements – this core objective must necessarily inform and guide that analysis. --- 120 ... Even where utilities continue to be regulated – and the number of market players is limited - competition still plays a key role.

While these limited numbers might restrict the effectiveness of the competition, they do not constrain the scope of what can be dealt with in a negotiated settlement, nor the substantive terms and conditions agreed to by a utility and its customers.

In this regard, s. 6 of the EU Act provides that market participants, and that includes any person who distributes or sells electric energy, will “conduct themselves in a manner that supports the fair, efficient, and openly competitive operation of the market.” ... [ 44 ] Importantly, the Arbitrator correctly stated the following, at para 275 “...[t]his arbitration does not purport to determine competition issues in the Province of Alberta generally with respect to electric distribution, or determine terms of relationships with respect to any parties except those who are involved in this arbitration.”

[ 45 ] He also pointedly notes the following, at para 276, “[i]t is argued that restrictive and exclusionist eligibility criteria are necessary to foster co-operation between the parties. I have been given no reason to believe that the inclusion of such requirements will create co-operation between the parties. The experience has been the opposite, given even less complex and restrictive provisions in the 1997 Agreement.” [ 46 ] I further find that FortisAlberta is not helped by the concept of the “regulatory compact”.

FortisAlberta refers to of a decision of the Court of Appeal of Alberta, FortisAlberta v Alberta Utilities Commission , 2015 ABCA 295 , which explains the “regulatory compact” at para 10: The foundational principal of public utility regulation is often called the “regulatory compact”.

Although there are disagreements as to what is included in terms of rights and obligations under that rubric, the general understanding can be stated as follows: The utility is granted the right to provide the service in a particular area with the opportunity to earn a reasonable return on its investments and to recover its prudently incurred expenses.

The utility must provide that service to all in a consistent, non-discriminatory manner at a fair and reasonable cost. [ 47 ] In the case at bar, this means that however many members EQUS has, or does not have, FortisAlberta will be entitled to a reasonable return on its investment in the service area in question. FortisAlberta must provide service to all those in the service area who are not members of EQUS.

Those who are not members of EQUS can only get service from FortisAlberta. [ 48 ] In para 13 of the same decision it states as follows: Or, as stated more recently by Fraser CJA in ATCO Gas and Pipelines Ltd v Alberta (Utilities Commission), 2014 ABCA 397 (ATCO Costs Decision), at para 3 : ...the terms of the regulatory compact have always been subject to evolution and the rebalancing of competing interests of consumers and utility companies when time and circumstances changed. This is as it should be, especially in this era of deregulation of the gas and electrical sectors in Alberta.

There is no industry today that is immune to change. Or that enjoys the right to be protected from the consequences of change whether those arose from legislative choices, deregulation or court decisions. [ 49 ] The Arbitrator’s decision reflects the changing times and in this specific instance, EQUS can serve its members within the service area approval of EQUS and no one else. The Arbitrator’s determination that membership in EQUS will contain no eligibility provisions other than what is in the REA bylaws and

section 10 of the RUA , previously reviewed herein, is clearly within his jurisdiction. [ 50 ] Nothing in the case law reviewed above could affect or in any way constrain the jurisdictional limit of the arbitrator in this case, particularly with regard to whether membership should contain eligibility criteria. Meaningful membership [ 51 ] The Arbitrator’s decision does not result in membership in the EQUS REA being meaningless. [ 52 ] The voluntary nature of membership is important to note.

In the past REAs have taken the position that if a person satisfied criteria for membership in a REA, that person must become a member of the REA. This is not so in the case before me now. Membership is totally voluntary and people cannot be forced to become a member of an REA.

In this case, if they choose not to they must be served by FortisAlberta which has a monopoly for service to non EQUS members in the service area in question. [ 53 ] The AUC in Central Alberta Rural Electrification Association Limited Application for a Declaration under the Hydro and Electric Energy Act (July 04, 2012), AUC 2012-181 [the “ AUC 2012-181 Decision” ] decided that a person could not be forced to become a member of an REA.

It stated as follows, at para 78: Finally, the provisions of the Rural Utilities Act, which establish the rights and obligations of membership, clearly demonstrate that on becoming a member, the member has a vested interest in the ownership of the electric distribution system. This is not the case with a public utility. Customers of a public utility do not have any ownership interest in the assets of the utility.

An REA is not simply an owner of an electric distribution system, its customers are the owners of the electric distribution system and as such, this membership requirement puts these customers in a similar position of self-supply as that of other consumers who are choosing to serve themselves under other statutory provisions. [ 54 ] FortisAlberta relies on paragraph 63 of the AUC 2012-181 Decision to argue for eligibility criteria in membership: Rural electrification association service area approvals must be considered in accordance with the provisions of the Hydro and Electric Energy Act ,

Section 101 and the definition of service area under Sections 1(1)(ww) of the Electric Utilities Act, and

Section 10 of the Roles, Relationships and Responsibilities Regulation, all of which recognize membership as a defining characteristic of the service area of an REA.

Section 10 of the Roles, Relationships and Responsibilities Regulation specifically requires that membership be addressed in the operating agreement. In the Commission’s view the statutory scheme does not permit an operating agreement to dispense with any membership criteria to effectively remove membership for REA customers. [ 55 ] The Arbitrator correctly points out that there is no reference to eligibility in that portion of the AUC 2012-181 Decision , which reinforces the notion that it is membership, and not eligibility that is critical.

He states at paragraph 92 of his decision: Having reviewed the arguments and the regulations and the excerpts from the AUC decision that both parties have referred to, as well as the endorsement of those passages relied on by FortisAlberta, I accept the submissions made by EQUS that when the AUC or the Court refers to distinguishing customers or defining features of a Service Area, that refers to “membership”. In fact, the passages quoted explicitly say “membership” and while an IOA cannot dispense with membership criteria to effectively

remove membership as a requirement, that does not indicate that eligibility criteria must be in an IOA.

To suggest, as FortisAlberta implies, that the absence of eligibility criteria means that “membership criteria” have been effectively removed contrary to what the AUC has said, in my view is not a sustainable position. [ 56 ] The fact that the Arbitrator did not include eligibility provisions other than what is required by statute or in the bylaws of EQUS does not remove membership as a requirement for REA customers. [ 57 ] FortisAlberta also relies on the AUC 2012-181 Decision for the concept of a natural monopoly, at paragraph 101: The Commission recognizes that the fundamental economic rationale for regulating electrical distribution companies is that there is an assumption that distribution service is a natural monopoly.

As such, it would not be economically efficient for there to be competition and duplication of these services. [ 58 ] However this should be read in conjunction with paragraph 102 which states: Notwithstanding this recognition, rural electrification associations were created and have grown alongside public electric utilities, both of which are now providing distribution services in overlapping geographic areas, although not to same customers.

The distinguishing feature which has enabled both the REAs and the public distribution utilities to determine who would serve a rural customer has always and continues to be whether the customer is a member of an REA. The determination of who is eligible to become a member of an REA has changed over the years from farmers to more general agriculture operations to the current practice of allowing eligibility to be negotiated between the public distribution utility and the REA as part of the operating agreement. [ 59 ] This concept of a natural monopoly does not in my view raise any jurisdictional issues.

It is clear that REAs have a role to play in distribution services. This is recognized by the AUC and by the statutory regime currently in place. In essence, REAs are an exception to the concept of a natural monopoly. Public Policy [ 60 ] I also reject FortisAlberta’s assertion that the issue of eligibility criteria raises issues of public policy beyond the Arbitrator’s mandate under

section 17 of the Arbitration Act . [ 61 ] FortisAlberta argued the following in its Response to the Notice to Arbitration: ...If the Arbitrator adopts the terms within EQUS REA’s proposed IOA - in particular the omission of any and all eligibility criteria for when consumers are eligible to purchase REA electricity - the Arbitrator would be exceeding his mandate and effectively rewriting government policy.

The Arbitrator does not have the jurisdiction to do so and, if he proceeded in such fashion, he would be usurping the role and jurisdiction of the proper regulatory authority in the Alberta Government. [ 62 ] As EQUS submitted, one problem with FortisAlberta’s position is that it did not object to the Arbitrator’s jurisdiction to decide whether eligibility criteria must be included in the IOA. Rather, FortisAlberta suggested that if the Arbitrator did not resolve the question in FortisAlberta’s favour, by finding eligibility criteria are mandatory, then the Arbitrator would be exceeding his jurisdiction.

It is not a valid objection to argue that an arbitrator will lose jurisdiction if a legal question central to the dispute is not decided in one’s favour. [ 63 ] FortisAlberta’s position that the failure to include meaningful eligibility criteria is contrary to public policy has been correctly dealt with by the Arbitrator in my view. [ 64 ] In paragraph 96 of his decision, he comments as follows: In that connection, FortisAlberta does not identify any legislative enactment or other specific statement of law or policy from the Alberta Government prescribing that there is a public policy that an IOA must contain eligibility criteria of the nature FortisAlberta seeks to include in the IOA. [ 65 ] I also agree with paragraph 104 of his decision, which states: Finally, if one examines the AUC decision 2012-181 (upon which both parties place reliance) the AUC made it absolutely clear in paragraph 102 that the terms of eligibility can be negotiated between the public distribution utility and the REA as part of the operating agreement.

If those terms can be negotiated, it means that by definition, there are no minimum eligibility requirements. It also means that these are not public policy issues. [ 66 ] I agree with EQUS’ submission that the Arbitrator did not go outside the scope of the statutory arbitration agreement, nor did he undermine public policy by dealing with an issue which was at the heart of the dispute he was appointed to adjudicate.

Section 44 or

section 45 of the Arbitration Act?

[ 67 ] I find that in this case FortisAlberta’s true objection is to the Arbitrator’s disposition of a question of law, not his jurisdiction. FortisAlberta’s appropriate remedy is to seek to appeal the question of law pursuant to

section 44 of the Arbitration Act . This is EQUS’ position and I agree with it. However, FortisAlberta abandoned its remedy under

section 44 of the Act . [ 68 ] FortisAlberta has attempted to challenge the jurisdiction of the Arbitrator pursuant to

section 45 of the Arbitration Act .

Section 45 of the Act allows a party to apply, in limited circumstances, to set aside an arbitration decision without leave of the court where there are serious issues regarding the validity of the arbitration agreement, process or award. [ 69 ] Under

section 45 of the Arbitration Act, the court may intervene where the award deals with a matter in dispute that the arbitration agreement does not cover or where the award contains a decision on a matter in dispute that is beyond the scope of the subject of arbitration agreement (section 45(1)(c)), or where the subject matter of the arbitration is not capable of being the subject of the arbitration under Alberta law (section 45(1)(e)). [ 70 ] In a decision considering the scope of

section 45, this Court quoted from J. Brian Casey, Arbitration Law of Canada: Practice and Procedure , 2nd ed. (Huntington NY: Juris, 2011), at p. 414 in Capital Power Corporation v Lehigh Hanson Materials Limited , 2013 ABQB 413 , at para 52 : ... The provisions for setting aside an award can be likened to a judicial review of procedural matters, not the legal correctness of the decision.

Rather than attacking the tribunal’s judgment, an application to set aside an award is a challenge to the fundamental validity of the arbitral process. [ 71 ] In my view, the Arbitrator’s award does not engage any of these provisions.

The suggestion by FortisAlberta that “the removal” of eligibility criteria is beyond the scope of the Arbitrator is rejected given that the RRR Regulation specifically directs the Arbitrator to decide the terms of an IOA and does not mandate the inclusion of eligibility criteria. [ 72 ] I agree with EQUS’ submission that FortisAlberta is seeking to challenge the Arbitrator’s decision on the question of statutory

interpretation directly related to and arising from the Arbitrator’s core mandate to decide the terms of the IOA. [ 73 ] The issue that FortisAlberta raises constitutes a legal question regarding the Arbitrator’s

interpretation of the RRR Regulation . FortisAlberta therefore must obtain leave of this court to appeal that issue in accordance with

section 44 of the Arbitration Act . As FortisAlberta abandoned its leave to appeal application, there is no basis upon which this court can intervene or interfere with the award. [ 74 ] In the result, the application of FortisAlberta is dismissed. If the parties are unable to agree on costs they may make an application with regard to same. Heard on the 9 th and 10 th days of February, 2016. Dated at the City of Calgary, Alberta this 1 st day of June, 2016. J.T. McCarthy J.C.Q.B.A. Appearances: Judson E. Virtue / Lara Mason / Kaitlin Long

Norton Rose Fulbright Canada LLP for the Applicant Daniel R. Bennett, Q.C. / Thomas J. Moran Bull Housser & Tupper LLP for the Respondent