2012 NLCA 38, 2012 NLCA 38

Date: 20120619 Docket: 10/113 Citation: Newfoundland and Labrador Hydro v. Newfoundland and Labrador (Board of Commissioners of Public Utilities) , 2012 NLCA 38 IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR COURT OF APPEAL BETWEEN : NEWFOUNDLAND AND LABRADOR HYDRO APPELLANT AND : THE BOARD OF COMMISSIONERS OF PUBLIC UTILITIES FIRST RESPONDENT AND : THE CONSUMER ADVOCATE as represented by THOMAS JOHNSON SECOND RESPONDENT AND : CORNER BROOK PULP AND PAPER LIMITED THIRD RESPONDENT AND : NORTH ATLANTIC REFINING LIMITED FOURTH RESPONDENT

AND : TECK RESOURCES LIMITED FIFTH RESPONDENT AND : VALE NEWFOUNDLAND AND LABRADOR LIMITED SIXTH RESPONDENT AND : ABITIBI CONSOLIDATED COMPANY OF CANADA SEVENTH RESPONDENT AND : NEWFOUNDLAND POWER INC. EIGHTH RESPONDENT AND Docket No. 10/114 BETWEEN : THE CONSUMER ADVOCATE as represented by THOMAS JOHNSON APPELLANT AND : THE BOARD OF COMMISSIONERS OF PUBLIC UTILITIES FIRST RESPONDENT AND : NEWFOUNDLAND AND LABRADOR HYDRO SECOND RESPONDENT AND : CORNER BROOK PULP

AND PAPER LIMITED THIRD RESPONDENT AND : NORTH ATLANTIC REFINING LIMITED FOURTH RESPONDENT AND : TECK RESOURCES LIMITED FIFTH RESPONDENT AND : VALE NEWFOUNDLAND AND LABRADOR LIMITED SIXTH RESPONDENT AND : ABITIBI CONSOLIDATED COMPANY OF CANADA SEVENTH RESPONDENT AND : NEWFOUNDLAND POWER INC. EIGHTH RESPONDENT Coram: Green C.J.N.L., Mercer and Harrington, JJ.A. Appealed From: Newfoundland and Labrador Board of Commissioners of Public Utilities, (Order No. P. U. 25) Appeal Heard: December 9, 10 and 13, 2010 Judgment Rendered: June 19, 2012 Reasons for Judgment by the Court.

Counsel for Newfoundland and Labrador Hydro: Geoffrey Young Counsel for the Consumer Advocate: Thomas Johnson Counsel for Newfoundland and Labrador Board Dan Simmons

of Commissioners of Public Utilities: Jackie Glynn Counsel for Corner Brook Pulp and Paper Limited, North Atlantic Refining Limited, Teck Resources Limited and Vale Newfoundland and Paul Coxworthy Labrador Limited: Dean Porter Counsel for Abitibi Consolidated Company of Canada: Greg Moores Counsel for Newfoundland Power Inc.: Ian Kelly, Q.C. Gerard Hayes By the Court: [ 1 ] Two appeals come before this Court arising from a preliminary decision of the Newfoundland and Labrador Board of Commissioners of Public Utilities (“Board”) in Order No. P.U. 25 (2010) (“Decision”) issued August 26, 2010.

They come directly to this Court under s. 99 of the Public Utilities Act , RSNL 1990, c. P-47 as amended (“ PUB Act ”). [ 2 ] Fundamentally, what is at issue in this appeal is whether certain savings generated in a rate stabilization plan established by the Board can be shared among all residential and industrial power consumers on the island portion of the province or only among industrial customers. The appeal engages the

interpretation of the Board’s governing legislation, in particular, s. 75 of the PUB Act , and whether the Board erred in determining it did not have jurisdiction to allocate savings to customers other than certain industrial customers. [ 3 ] The appellant, Newfoundland and Labrador Hydro (“Hydro”), is a Crown corporation and the appellant, the Consumer Advocate (“Advocate”), is a statutorily appointed representative of the interests of domestic and general service customers of both Hydro and Newfoundland Power Inc. (“Newfoundland Power”) pursuant to s. 117 of the PUB Act .

The Advocate does not represent Hydro’s industrial customers or the utility, Newfoundland Power. A hearing was conducted following written submissions by interested parties regarding a series of preliminary questions posed by the Board.

The questions were raised in the context of a pending general rate application by Hydro affecting its industrial customers to have interim rates for the years 2008, 2009 and 2010 made final (“2009 GRA”). [ 4 ] The appellants allege that the Decision unduly restricts the Board’s authority to deal with the disposition of certain surplus revenue credits or system savings which have been accrued under a rate stabilization plan (“RSP”) in accounts established for tracking cost of service to Hydro’s industrial customers for the three year period under consideration.

As noted, the characterization of these accounts and the determination of whether customers other than industrial customers can benefit from the disposition of these credits either prospectively or retrospectively is at the core of this appeal. [ 5 ] The appellants allege that the Board erred by fettering its jurisdiction when it ruled in its preliminary determination of the scope of Hydro’s 2009 GRA that it was prevented from conferring any benefit from the disposition of systems savings accruing within the RSP for industrial customers on any of its other customers.

Specifically, the Board held that the fact that the rates for Hydro’s non- industrial customers had been made final for the period 2008 to 2010 barred consideration of any claim of entitlement to the systems savings by non-industrial customers when settling the final rates for industrial customers for the three year period affected by the 2009 GRA. BACKGROUND [ 6 ] Hydro established the RSP effective January 1, 1986 under a directive from the Provincial Government. The Board modified and approved the RSP.

The object of the RSP was to provide rate stability to Hydro’s customers through a mechanism designed to eliminate volatility in Hydro’s revenue requirements beyond its reasonable expectations. [ 7 ] The RSP provided for adjustments to recover the differences between the forecasted test year costs used to set rates and the actual costs affected by: (

i) differences in the price of bunker C fuel affecting the cost of oil-fired power generation at Holyrood, ii) variation in Hydro’s hydraulic power generation; and iii) major variations in load consumed by its customers. [ 8 ] These appeals directly affect customers who are on the Interconnected System on the island portion of the Province. These include Hydro's one utility customer, Newfoundland Power and in turn all of Newfoundland Power's customers. These appeals also directly affect Hydro’s industrial customers and Hydro's own residential and general service customers on the Island Interconnected System.

[ 9 ] There are two major electrical systems operating within the Province. The Island Interconnected System functions as a stand- alone system comprised of various hydro-electric developments and thermal power generated at the Holyrood Thermal Generating Station (“Holyrood”). The Labrador Interconnected System is supplied by Churchill Falls and is connected to the North American power grid.

The more remote and isolated areas of the Province, whether on the island or in Labrador, are serviced by individual diesel generating facilities owned and operated by Hydro. [ 10 ] The primary source of electrical power and energy for the Island Interconnected System is hydro-electric with the other major source of power being the Holyrood generating plant which burns bunker C oil purchased by Hydro on the world oil markets.

It is much less costly for Hydro to generate electricity on the Island Interconnected System by its hydro-electric sources than it is to generate electricity at Holyrood. [ 11 ] Hydro is the primary generator of electricity in the province. Hydro sells its power to utilities, industrial and its own 35,000 residential and general service customers in over 200 communities across the Province. Newfoundland Power serves over 239,000 residential and commercial customers making up approximately 85% of all electricity customers in the province.

Newfoundland Power purchases approximately 90% of its electricity from Hydro and generates the balance from its own smaller hydro electric stations. [ 12 ] Hydro's overall fuel costs at Holyrood on an annual basis can vary significantly. These fuel costs are affected by:

a) the price of a barrel of oil as determined by the world market;

b) the amount of available hydro-electric energy - which essentially is a function of the amount of precipitation; and

c) the amount of energy consumed by the customers on the Island Interconnected System (referred to as “load”). [ 13 ] Given the variability that can occur in Hydro's annual fuel costs, a mechanism in the form of the RSP was developed to ensure that Hydro's rates are adequately collecting the cost of fuel that it is purchasing to service the needs of the Island Interconnected System customers.

Absent such a mechanism, the rates that are set for Hydro to charge its customers for electricity which are based on forecast costs for the test year, could cause Hydro to lose or gain considerable sums of money in a given year. At Hydro's last general rate application filed in 2006, a 2007 test year was used as the basis for establishing the electricity rates to be charged by Hydro. At that time, it was known that large increases in oil prices or lower than expected hydrology could create a significant revenue shortfall for Hydro.

On the other hand, higher than expected hydrology at its hydro electric generating facilities and lower than expected load consumption by industrial consumers could result in large unexpected revenues. [ 14 ] The RSP provides a mechanism to smooth the effects on rates of increases or decreases in commodity costs over time. The RSP has been modified a number of times since its introduction.

However, the current RSP has been in place since Hydro's general rate application in 2003. [ 15 ] Under the RSP, these variables are tracked for the purpose of calculating RSP adjustment rates for Hydro's utility and industrial customers. In the case of Newfoundland Power, Hydro makes an annual application to the Board for approval of the appropriate RSP adjustment to take effect on July 1st of each year. In the case of the industrial customers, the RSP adjustment takes effect on January 1st of each year.

The amount of the rate adjustment and whether the adjustment will be a decrease or increase on January 1st or July 1st, as the case may be, depends upon the net activity in the RSP as calculated in accordance with its provisions. [ 16 ] The load variation element of the RSP is of particular significance on these appeals.

The load variation - the amount of energy consumed compared to the amount forecast for the test year - works generally in a similar manner to fuel price and hydrology - to the extent that if higher load occurs (i.e., more electrical energy must be generated to meet customers' electricity requirements than was forecast when rates were last set) it results in higher fuel costs at Holyrood and the corresponding amount is owed by customers to the RSP to be recovered in rates in a future period.

However, if the load is lower than the test year forecast, it will result in an amount owing to customers from the RSP. [ 17 ] In another way, the load variation provisions work differently from the fuel price and hydrology elements. Load variation can affect the amount of oil that is required to be burned at Holyrood, thereby affecting Hydro's costs. Load variation also has an impact upon the amount of revenue that Hydro receives from its rates.

At Hydro's 2003 GRA the RSP was amended so as to place the financial consequences of the load variation on the customer class whose actual load varied from the test year load forecast.

Therefore, in a year in which the industrial customers' load was higher than forecast in the last test year, the effect of the variation would be to cause rate increases for the affected class. [ 18 ] Increased industrial customers' load causes higher rates between GRAs because energy rates for this class are based upon Hydro's average costs of electricity production (e.g. reflecting a mix of cheaper hydro power and more expensive Holyrood power).

However, the incremental energy production to actually service the increase in load comes from Holyrood where the cost of production is higher than the average energy cost which the energy rate reflects. Therefore, on each extra kilowatt hour that Hydro sells to fulfill an increased load, Hydro would, without an adjustment mechanism, be actually losing money. While it is collecting more revenue from the industrial customers because of the increased load, the increase in revenue is outstripped by the extra cost to which it is being put in order to supply the extra kilowatt hour.

The load variation provisions in the RSP require that customer class which caused the load increase to bear the burden of those costs in a future period so that Hydro is made whole. [ 19 ] On the other hand, if the industrial customers’ load were to decrease relative to the test year forecast, the opposite would be the case.

That is to say, a decrease in load would cause Hydro to burn less oil than anticipated thereby being able to supply more of the system's requirements with cheaper hydro energy instead of being required to burn the estimated number of barrels of oil that its rates were based upon in the last GRA. In this instance, while Hydro's revenues from the industrial customers would be decreased, so would Hydro's costs. In fact, the avoided costs vastly outstrip the loss in revenue occasioned by the decrease in load.

The load variation provisions in the RSP assign to the customer class that caused the load decrease the benefit of these cost savings in a future period. It is this load feature of the RSP that is a key aspect in the factual matrix of these appeals.

[ 20 ] At Hydro's 2003 GRA, the participating parties agreed that both the revenue and the fuel amounts related to load variation should be assigned to the customer base within the RSP where the load variation occurred. Previously, revenues were assigned to the RSP based on which customer class caused the load variation but the related fuel costs were allocated between Newfoundland Power and the industrial customers based on the 12 months-to-date energy ratios for each customer class.

The change in customer assignment was considered to improve fairness because costs would now be assigned between Newfoundland Power and industrial customers based on causality. [ 21 ] Hydro’s 2006 GRA resulted in a Settlement Agreement which provided for a further review of the RSP (the "2007 RSP Review"). It was anticipated that any changes resulting from the 2007 RSP Review would be implemented by January 1, 2008. The allocation of load variation transfers was one of the items to be addressed in the review.

Meanwhile, arising out of Hydro's 2006 GRA, final rates were approved for the industrial customers to be effective January 1, 2007 in Order No. P.U. 8 (2007). [ 22 ] Starting in the fall of 2007, significant events were taking place in the province’s pulp and paper sector adversely affecting the load variation of the normal operation of the RSP. In November of 2007, Corner Brook Pulp and Paper Limited shut down a paper machine which resulted in a 22% reduction in load from the industrial customers on the island. In 2008, Abitibi Bowater closed its paper mill at Grand Falls-Windsor.

In anticipation of projected volatility in load during the 3 year rate period, Hydro sought and obtained an order from the Board for interim rates for 2008 and 2009 which were effectively sustaining those that were in place for 2007. [ 23 ] A projected rate change that otherwise would have taken place for industrial customers on January 1, 2008 under the established rules, prompted Hydro to take another approach.

On December 20, 2007 Hydro applied to the Board for an Order "that the Board approve and make an Interim Order that the rates currently in effect for industrial customers, which were approved in Order No. P.U. 8 (2007) and which are set out in

Schedule “A” continue in effect on an interim basis until such time as the Board issues a final order with respect to industrial customers' rates for 2008”. [ 24 ] Hydro provided the Board with its rationale for the requested Order in the following terms: By Order No. P.U. 40 (2003) the Board approved the manner by which the Rate Stabilization Plan (RSP) is calculated and by which RSP adjustments are applied to the rates charged by Hydro to its Island Interconnected Industrial Customers.

Under that Order, Hydro is required to provide an Industrial Customer fuel price projection to the Board and to certain of Hydro's customers by the tenth working day of October each year. Due initially to a projected increase in the RSP rate and subsequently to a significant load change of one of Hydro's Industrial Customers, Hydro determined that there was potential volatility in its Industrial Customers' rates both for 2008 and future years.

The impact of these changes was deemed to be significant and it was judged to be prudent to further analyze and consider their impact, in conjunction with also determining the final level of year end hydraulic balances, prior to making application to the Board with respect to an appropriate treatment of this issue. Hydro wishes to have further opportunity to consider the appropriate means to address Industrial Customers' rates issues.

The Board approved the interim rates requested. [ 25 ] On June 30, 2009, Hydro applied to the Board requesting the finalization of rates charged to industrial customers. [ 26 ] In its cover letter accompanying the application, Hydro stated: Although the attached Application does not contain any proposed changes, the Board may wish to consider suspension of the existing load variation allocation rules and holding in abeyance current and future load variation amounts until such time as Hydro can develop a proposal to address the current anomalies in the RSP.

Hydro anticipates that an application with regard to the RSP load variation can be made prior to the end of 2009. [ 27 ] Since the industrial customers' rates were declared interim effective January 1, 2008 there had been large sums of money accruing in the RSP due to the fuel savings that Hydro was experiencing at Holyrood due to the steep decline in the load of the industrial customers since Hydro's last GRA.

Evidence filed in the proceeding before the Board forecast that over the period 2007 to 2010 some $74 million in system savings tied to load would have accrued, with some $68 million accruing since the industrial customers' rates were declared interim. [ 28 ] The load variation balances that have been assigned to the industrial customers under the interim RSP rules produced rate scenarios well beyond reasonable expectations.

Using the refunding methods provided by the RSP rules, the forecast average rates for industrial customers for 2010 were projected to be negative figures reflecting a scenario where there would be more money to be refunded to customers than energy revenues received from them by Hydro. [ 29 ] The industrial customers claimed entitlement to the entire load variation balance. Based on the available information prior to the preliminary hearing, the current industrial customers were paying approximately $20 million in annual electricity costs.

However, $68 million of load variation transfers were accumulating as system savings on an interim basis since January 1, 2008 which represented approximately three and a half times the annual electricity costs of the current industrial customers. [ 30 ] Hydro, Newfoundland Power and the Consumer Advocate in their evidence recommended that the Board allocate these system savings between the industrial customers and Newfoundland Power using a cost of service approach. [ 31 ] The Board advised all parties that the public hearing respecting the 2009 GRA would not proceed and further advised that the Board wished to hold a preliminary hearing into its jurisdiction and authority.

Counsel for each of the parties and the Board met and developed the preliminary issues that would be addressed by the Board. These issues were then formally posed to the Board by way of a letter from Hydro's counsel dated June 2, 2010.

[32] The questions posed were: Does the Board have the jurisdiction to issue an order which changes how the Rate Stabilization Plan (RSP) operated before the date ofthe order and, if so, does this jurisdiction extend to any aspect of the operation of the RSP, including the rate charged to customers, thedetermination of the balance(

s) in the RSP, and how these balances are allocated to customers or customer classes? In particular: - Does legislation or common law give the Board any specific relevant authority or alternatively, restrict the Board's authority? - What would generally accepted sound public utility practice as set out in s. 4 of the EPCA require? - Are there any concerns in relation to vested rights, i.e. does the language of the RSP create a right/obligation in each of thecustomers or customer classes? If so, at what point does this right/obligation accrue?

Does this mean that credits/debits allocated to eachcustomer in accordance with the plan are the responsibility of or to the benefit of customers in the class at the time of the accumulationor does the Board have the jurisdiction to order alternative disbursements of the balances? - Does the issuance of Order Nos. P.U. 34 (2007), P.U. 37 (2008), P.U. 6 (2009), the filing of Hydro's application on June 30,2009, or any other order of the Board impact the jurisdiction of the Board?

THE BOARD DECISION [33] The written decision of the Board issued August 26, 2010 was divided into a discussion of deferral accounts and interim orders.The deferral account

section dealt primarily with the Board's general jurisdiction over the disposition of balances accumulated in deferralaccounts, such as the RSPs. The interim order

section dealt more specifically with the Board's jurisdiction under

section 75 of the PUBAct to deal with balances accumulated due to a difference between interim and final rates. [34] The Board considered the RSP to be an example of a deferral account. Such an account is used for various purposes in publicutility rate regulation to, amongst other things, allow a public utility to maintain its approved rate of return when actual revenues orexpenses vary from those that were forecast when rates were set.

This would reduce fluctuations in rates charged to consumers of powerif such variances were not spread over longer periods of time. [35] With respect to its jurisdiction over deferral accounts generally the Board stated at p. 8: While the Board has jurisdiction in relation to deferral accounts the Board has stated that it views the use of these accounts to be anextraordinary measure … The Board believes that its jurisdiction with respect to deferral accounts is limited by the principles ofpredictability and fairness, as discussed by the Alberta Court of Appeal in ATCO [Calgary (City) v.

Alberta (Energy and Utilities Board,2010 ABCA 132], and does not necessarily extend to changing how balances are calculated and allocated in the past. [36] The Board continued at p. 9: In the Board's view changing how the RSP operated in prior years would be analogous to the situation that Mr. Justice Green suggestedmight constitute retroactive regulation in Reference: re s. 101 of the Public Utilities Act (Nfld) (1998), (NL CA), 164Nfld & PEIR 60 (Nfld.

C.A.) at paragraph 91: The issue, therefore, is not whether the Board may revise the definition of excess revenue and then apply the revised definition to theresults of previous years.

That might well engage the principle of non-retroactivity. (Emphasis in original.) [37] The Board determined that the interim orders gave the Board the full jurisdiction to change all aspects of the industrialcustomers' rate, including the power to change the rules and regulations affecting the RSP. [38] However, having noted that the Hydro applications for interim rates and its 2009 GRA seeking the approval of a final rate forindustrial customers had not sought any changes to the RSP, the Board held at p. 9 that the RSP rules applying to allocation of loadvariations continued to apply: In the absence of an application, the Board did not take it upon itself to consider suspending the operation of the load variation allocationrules as suggested by Hydro in its correspondence [that accompanied the June 20, 2009 application for final rates]. [39] The Board then considered the effect on its jurisdiction of the interim rate orders and

section 75 of the PUB Act which providesin pertinent part: 75.

(1) The board may make an interim order unilaterally and without public hearing or notice, approving with or without modification, aschedule of rates, tolls and charges submitted by a public utility, upon the terms and conditions that it may decide. ….

(3) The board may order that the excess revenue that was earned as a result of an interim order made under subsection (1) and notconfirmed by the board be (

a) refunded to the customers of the public utility; or (

b) placed in a reserve fund for the purpose that may be approved by the board.

[40] Addressing the position of Hydro, Newfoundland Power and the Consumer Advocate, the Board stated: Hydro, Newfoundland Power and the Consumer Advocate suggest that [s. 75] permits the Board to place any excess revenue paid by theIndustrial Customer group as a result of the interim rates into an account for the possible benefit of [another] customer group. Thisinterpretation would not appear to be consistent with the scheme of the legislation generally or with generally accepted sound publicutility practice which requires that rates be just and reasonable and not unjustly discriminatory.

The Board has reference to thecomments of Mr. Justice Green in Reference Re: s. 101 of the Public Utilities Act (Nfld.) (1998), (NL CA), 164Nfld. & P.E.I.R. 60 (Nfld. CA) … at paragraph 18 … [41] The Board then concluded at pp. 11-12: Reading s. 75 in the overall context of the legislation and regulatory structure the Board believes that a purposeful

interpretation wouldrequire that the refund or the reserve fund must, to the extent possible, be for the benefit of the customer group which was found to havepaid the excess revenue. There may be times when it is not practical to refund to the customers that paid the excess, for example wherethe amount is nominal or the customers cannot be found.

The Board believes that, in the absence of extraordinary circumstances, afinding that interim rates for a group of customers were in excess of reasonable rates would require that the same customer group beeffectively charged the reasonable rates through a refund or the use of a reserve account. [42] In response to the position of the industrial customers that the ability to set final rates under s. 75 of the PUB Act did notauthorize the Board to revise the RSP rules that applied to the industrial customers, the Board concluded at p. 13: The interim orders clearly provide the Board with the full jurisdiction to, in the words of the Supreme Court of Canada, "modify in itsentirety the rate structure" for the Industrial Customer group, which includes all aspects of the Industrial Customers' rate, including theRSP rate.

The Board does not accept the position of the Industrial Customers that the Board has no power to change the rules andregulations affecting the RSP. [43] However, the Board held at p. 14 that: (

i) it has jurisdiction to set “just and reasonable rates” for the Industrial Customers for 2008 and 2009, including the determination ofthe industrial customers’ RSP rates and the manner of operation of the Industrial Customer RSP for those years, (ii) “given the manner in which this matter was brought forward”, it has no jurisdiction to change the manner in which theNewfoundland Power RSP operated in prior years, either in terms of the rates charged or the resulting balances, and (iii) it has jurisdiction to determine whether overpayments by the Industrial Customers resulting from the interim rates should berefunded to the industrial customer group or placed in a reserve account to the benefit of that customer group. [44] Although the Board ultimately determined that its jurisdiction to deal with the RSP balance was limited to determining"...whether any overpayment as a result of the interim rates is to be refunded to the Industrial Customer group or placed in a reserveaccount to the benefit of the Industrial Customer group", the Board essentially determined that the accrued balance of system savings hadto be used for the benefit of the Industrial Customer class only and could not be applied to the benefit of other customers on the IslandInterconnected System or used for other purposes in connection with the operation of the Island Interconnected System.

LEAVE TO APPEAL [45]

Section 99 of the PUB Act provides that an appeal from an order of the Board can be taken directly to the Court of Appeal upona question of the Board’s jurisdiction or upon a question of law, but only with leave of a judge of the Court. [46] Leave to appeal will only be granted: (

i) where it is apparent that the question on appeal is one of jurisdiction or law; and (ii)where the appellant can show “a reasonably arguable case for success” on the appeal: Consumer Advocate v. Newfoundland Power Inc.,2006 NLCA 20, 255 Nfld. & P.E.I.R. 234, per Cameron J.A. at para. 10; Labrador City (Town) et al. v.

Newfoundland and LabradorHydro Inc. (2004), 2004 NLCA 61 , 241 Nfld. & P.E.I.R. 81 (NLCA) at para. 5. [47] It is manifest from the notices of appeal that have been filed that each of the stated issues involves a question as to whether theBoard erred in determining its jurisdiction or erred in law in reaching the Decision it did.

Given the position taken by the respondents andthe Board in not opposing leave, it can be presumed that there is a reasonably arguable case to be made on appeal. [48] In this case, on the application for leave, all parties, except the Board, who were provided with notice pursuant to s. 99 (2),consented to leave being granted and, in the case of the Board, it stated that it “does not object” to the granting of leave. Accordingly, ona preliminary application, both the Consumer Advocate and Hydro were granted leave to appeal. [49] Newfoundland Power supports Hydro and the Consumer Advocate on these appeals.

Various industrial customers support thedecision of the Board. The Board itself was also represented by counsel in support of the Decision. ISSUES [50] The following issues arise on these appeals: (

a) What is the appropriate standard of review to be applied to the Board's decision? (

b) What is the extent of the Board's jurisdiction to change the operation of the RSP, particularly with respect to the operation of theload variation component, and to allocate load variation balances accrued to Industrial Customers before and after the interim ordereffective January 1, 2008 for the benefit of other customers on the Island Interconnected System? (

c) Is the Board's jurisdiction limited to determining whether any overpayment as a result of the interim rates is to be refunded to the

industrial customer group or placed in a reserve account for the benefit of the industrial customer group? [51] The main focus of this appeal is the Board's determination that it did not have the jurisdiction to allocate balances accruedunder the RSP rules, while the industrial customer rates were interim, to other customer classes. The practical effect of this determinationis that the system savings which accrued in what was characterized as a “deferral account” while rates were interim must flow to theexclusive benefit of the industrial customers. ANALYSIS (

a) Statutory Framework and Basic Principles [52] An outline of the Board’s statutory framework and the nature of deferred accounts and interim rates will assist in the resolutionof the issues before the Court. [53] In Reference Re

Section 101 of the Public Utilities Act (Nfld.) (1998), (NL CA), 164 Nfld. & P.E.I.R. 60(Nfld.C.A.) (“Stated Case”), Green J.A. noted the Board’s statutory basis as follows: [13] The answers to the questions which have been posed must, of course, be given taking account of the legislative framework withinwhich the Board operates.

The Board is a creature of statute and its jurisdiction and powers to deal with matters brought before it, and themanner of dealing with such matters, must be found, either expressly or impliedly, within the statutes conferring jurisdiction on andgoverning the operation of the Board. [54] The Board’s jurisdiction and powers are governed by the PUB Act and the Electrical Power Control Act, 1994, SNL 1994 c. E-5.1 (“EPC Act”). The PUB Act confers on the Board the power for “the general supervision of all public utilities”.

Specifically theBoard has sole authority to approve the rates charged by public utilities – ss. 70(1) and 71 – and the power to approve interim ratesunilaterally – s. 75.

The breadth of the Board’s authority over rates is illustrated by s. 76 which confers the right to rescind or alter rates,s. 82 which confers the right to investigate a rate, where the Board believes that it is unreasonable or unjustly discriminatory, and ss. 84-87 which authorize the Board, following a formal complaint, to investigate and to cancel rates and void contracts where rates are found tobe unjust, unreasonable, insufficient or unjustly discriminatory. [55] In considering the extent of the Board’s powers under the PUB Act reference must be made to s. 118 which states: 118.

(1) This Act shall be interpreted and construed liberally in order to accomplish its purposes, and where a specific power or authorityis given the board by this Act, the enumeration of it shall not be held to exclude or impair a power or authority otherwise in this Actconferred on the board.

(2) The board created has, in addition to the powers specified in this Act, all additional, implied and incidental powers which may beappropriate or necessary to carry out all the powers specified in this Act. ….. [56] The EPC Act states the electrical power policy of the province in s. 3. It obligates the Board to implement that policy as itcarries out its duties and exercises its powers under the PUB Act and in so doing s. 4 requires the Board to apply tests which areconsistent with “generally accepted sound public utility practice”. [57] In the Stated Case Green J.A. stated some of the general principles applicable to the

interpretation of the PUB Act and EPC Actas follows: [36] … 1. The Act (PUB Act) should be given a broad and liberal

interpretation to achieve its purposes as well as the implementation of thepower policy of the province; 2. The Board has a broad discretion, and hence a large jurisdiction, in its choice of the methodologies and approaches to be adoptedto achieve the purposes of the legislation and to implement provincial power policy; 3.

The failure to identify a specific statutory power in the Board to undertake a particular impugned action does not mean that thejurisdiction of the Board is thereby circumscribed; so long as the contemplated action can be said to be "appropriate or necessary" tocarry out an identified statutory power and can be broadly said to advance the purposes and policies of the legislation, the Board willgenerally be regarded as having such an implied or incidental power; 4.

In carrying out its functions under the Act, the Board is circumscribed by the requirement to balance the interests, as identified inthe legislation, of the utility against those of the consuming public; 5. The setting of a "just and reasonable" rate of return is of fundamental importance to the utility and must always be an importantfocus of the Board's deliberations; however, the "entitlement" of the utility to a just and reasonable rate of return does not guarantee itthat level of return.

The "entitlement" is to have the Board address that issue and to make its best prospective estimate, based on its fullconsideration of all available evidence, for the purpose of setting rates, tolls and charges. 6.

The Board has jurisdiction, which will not generally be interfered with on judicial review, to make a determination of what is ajust and reasonable rate of return within a "zone of reasonableness" and in so doing is not constrained in its choice of applicablemethodologies, so long as they can be rationally justified in accordance with sound utility practice and are not inconsistent with theachievement of the purposes and policies of the legislation. [58] Though the Stated Case concerned a utility’s rate of return, the principles stated above, including those in sub-paragraphs 5 and

6, apply in a similar manner to the determination of rates for a utility’s customers. [59] The EPC Act requires that, wherever practicable, rates are to be established based on forecast costs – s. 3(a)(ii) – and utilizingtests which are consistent with “generally accepted sound public utility practice” – s. 4. The rates policy stipulated in s. 3 of the EPC Actis consistent with the widely accepted principle of ratemaking that rates should be set prospectively, i.e., retroactive ratemaking shouldgenerally not be permitted.

That principle and the distinction between retroactive and retrospective ratemaking were summarizedrecently in Calgary (City) v. Alberta (Energy and Utilities Board), 2010 ABCA 132 (“Atco Gas”) in the following paragraphs of themajority decision: [46] A brief overview of some central principles of ratemaking, including the related concepts of retroactive and retrospectiveratemaking, is necessary. Generally, ratemaking and rates must be prospective: Coseka Resources Ltd. v. Saratoga Processing Co.(1981), 1981 ABCA 180 , 31 A.R. 541 at para. 29, 16 Alta. L.R. (2d) 60 (C.A.).

A utility’s past financial results can be used toforecast future expenses, but a regulator cannot design future rates to recover past revenue deficiencies: Northwestern Utilities Ltd. andal. v. Edmonton, (SCC), [1979] 1 S.C.R. 684 at 691 and 699 (“Northwestern Utilities”). [47] Retroactive ratemaking “establish[es] rates to replace or be substituted to those which were charged during that period”: BellCanada v. Canada (Canadian Radio-Television and Telecommunications Commission), (SCC), [1989] 1 S.C.R. 1722 at1749 (“Bell Canada 1989”).

Utility regulators cannot retroactively change rates (Stores Block at para. 71) because it creates a lack ofcertainty for utility consumers. If a regulator could retroactively change rates, consumers would never be assured of the finality of ratesthey paid for utility services. [48] Retrospective ratemaking, in contrast, imposes on the utility’s current consumers shortfalls (or surpluses) incurred by previousgenerations of consumers.

It is generally prohibited because it creates inequities or improper subsidizations as between past and presentconsumers (who may not be the same). “[T]oday’s customers ought not to be held responsible for expenses associated with servicesprovided to yesterday’s customers”: Yvonne Penning, “The 1986 Bell Rate Case: Can Economic Policy and Legal Formalism beReconciled” (1989), 47(2) U.T. Fac. L. Rev. 607 at 610.

This is sometimes referred to as the problem of inter-generational equity (whichthe Board discusses at p. 12 of the Limitations Decision reproduced at para. 23). [49] Sometimes retrospective ratemaking is referred to as retroactive ratemaking. This is because rates imposed on a future generationof consumers, while prospective, create obligations in respect of past transactions, and in this sense they are retroactive: City ofEdmonton at 402.

See also Stated Case, paragraphs 33 and 80. [60] It is nevertheless clear from the authorities that the above noted principle of prospective ratemaking cannot bar the use of twowidely used regulatory tools authorized by applicable legislation though the same may be thought to have an element of retrospectivity. These two are interim rates and deferral accounts. See Bell Canada v. Canada (Canadian Radio-television & TelecommunicationsCommission), (SCC), [1989] 1 S.C.R. 1722 (Bell Canada 1989); Bell Canada v.

Bell Aliant Regional Communications,2009 SCC 40, [2009] 2 S.C.R. 764 (Bell Canada 2009). [61] The power of the Board to authorize interim rates is granted in s. 75 of the PUB Act. That

section allows the board to set ratesexpeditiously without full evidence and submissions, such rates being subject to review and possible modification in the final order of theBoard, as is expressly provided for in subsections 75(2) and (3). Depending on the nature of the final order of the board it may have aretroactive or retrospective effect.

In Bell Canada 1989, Gonthier J. stated: The statutory scheme established by the Railway Act and the National Transportation Act is such that one of the differences betweeninterim and final orders must be that interim decisions may be reviewed and modified in a retrospective manner by a final decision. It isinherent in the nature of interim orders that their effect as well as any discrepancy between the interim order and the final order may bereviewed and remedied by the final order. I hasten to add that the words "further directions" do not have any magical, retrospectivecontent.

Under the Railway Act and the National Transportation Act, final orders are subject to "further [prospective] directions" aswell. It is the interim nature of the order which makes it subject to further retrospective directions. (p. 1752) …The underlying theory behind the rule that a positive approval scheme only gives jurisdiction to make prospective orders is that therates are presumed to be just and reasonable until they are modified because they have been approved by the regulatory authority on thebasis that they were indeed just and reasonable.

However, the power to make interim orders necessarily implies the power to modify inits entirety the rate structure previously established by final order. As a result, it cannot be said that the rate review process begins at thedate of the final hearing; instead, the rate review begins when the appellant sets interim rates pending a final decision on the merits.

Aswas stated in obiter in Re Eurocan Pulp & Paper Co. and British Columbia Energy Commission (1978), (BC CA), 87D.L.R. (3d) 727 (B.C.C.A.), with respect to a similar though not identical legislative scheme, the power to make interim orderseffectively implies the power to make orders effective from the date of the beginning of the proceedings.

In turn, this power mustcomprise the power to make appropriate orders for the purpose of remedying any discrepancy between the rate of return yielded by theinterim rates and the rate of return allowed in the final decision for the period during which they are in effect so as to achieve just andreasonable rates throughout that period. (p. 1761) [62] The statutory scheme of the PUB Act is to the same effect, as noted in the Stated Case as follows: [87] The scenario contemplated by Questions 3 & 4 is unlike the situation which arises where an interim order setting rates, tolls andcharges is subsequently superseded by a final order, resulting in excess revenue being earned in the intervening period because the rates,tolls and charges charged in that period pursuant to the interim order were higher than those which were ultimately found to be justifiedin the final order.

In that situation, if the final order is treated as being operative as and from the date of the interim order that was

superceded, the final order will, indeed, have a retroactive effect. In the context of the Newfoundland legislation, that situation isspecifically contemplated and authorized by s. 75(3) of the Act. [63] The operation of deferral accounts is permissible under the existing regulatory scheme in this province regardless of whether itmight be argued they incidentally have retrospective or retroactive effect.

Deferral accounts are utilized in public utility regulation todeal with the effects of uncertain or volatile costs in a manner that ensures that rates are reasonable, not unjustly discriminatory and thatthe utility earns a just and reasonable return. They permit the recovery or rebate in a subsequent period of any deficiency or excessbetween forecast and actual costs. Regulatory regimes generally permit the operation of deferral accounts. See Bell Canada 2009 atparas. 54-55; Atco Gas at paras. 33-44; City of Edmonton v. Northwestern Utilities Ltd., (SCC), [1961] S.C.R. 392 at p.406.

It was properly acknowledged by all parties that the PUB Act authorizes the utilization of deferral accounts. See Stated Case atparas. 93-98. [64] In Bell Canada 2009 the use of deferral accounts to ensure that rates return to a utility the actual - not forecast - costs,was heldto preclude a finding of retroactivity or retrospectivity: [63] In my view, the credits ordered out of the deferral accounts in the case before us are neither retroactive nor retrospective.

They donot vary the original rate as approved, which included the deferral accounts, nor do they seek to remedy a deficiency in the rate orderthrough later measures, since these credits or reductions were contemplated as a possible disposition of the deferral account balancesfrom the beginning. These funds can properly be characterized as encumbered revenues, because the rates always remained subject tothe deferral accounts mechanism established in the Price Caps Decision. The use of deferral accounts therefore precludes a finding ofretroactivity or retrospectivity.

Furthermore, using deferral accounts to account for the difference between forecast and actual costs andrevenues has traditionally been held not to constitute retroactive rate-setting (EPCOR Generation Inc. v. Energy and Utilities Board,2003 ABCA 374, 346 A.R. 281, at para. 12, and Reference Re

Section 101 of the Public Utilities Act (1998), (NLCA), 164 Nfld. & P.E.I.R. 60 (Nfld. C.A.), at paras. 97-98 and 175). (Emphasis added.) [65] As stated, funds in a deferral account can properly be characterized as encumbered revenues as the rates are subject to thedeferral account mechanisms established by the regulatory authority. (

b) The Regulatory Context [66] This appeal concerns the legal authority of the Board respecting the disposition of amounts accumulating in a deferral account,Hydro’s RSP, while interim orders were in effect from January 1, 2008. [67] Final rates for the Industrial Customers were last approved by the Board in Order No. P.U. 8 (2007) effective January 1, 2007. In the same year final rates for Newfoundland Power were established by Order No. P.U. 11 (2007) effective July 1, 2007.

In thefollowing years prior to the next GRA under the current RSP Hydro would have been expected to make annual applications to the Boardto reflect the appropriate RSP adjustments to the rates. As noted previously, for the Industrial Customers the RSP adjustment would takeeffect as of January 1st each year and for Newfoundland Power the adjustments would take effect as of July 1st each year. [68] Those adjustments have not been made for the Industrial Customers since July 1, 2007.

For the stated reason of needing toassess the effect of significant changes in Industrial Customer load, Hydro applied on December 20, 2007 for the continuation on aninterim basis of the Industrial Customer rates then in effect. By Order No. P.U. 34 (2007) the Board approved the required interim ratesfor 2008. In December 11, 2008 Hydro again applied to the Industrial Customer rates over an interim basis in view of inevitable changesto Industrial Customer load consequent upon closure of a paper mill.

By Order P.U. 37 (2008) the Board approved the continuation ofthe rates until March 31, 2009, and subsequently under Order No. P.U. 6 (2009) the duration of the interim order was extended to June30, 2009. In the meantime, Newfoundland Power’s rates for its customers had been made final. [69] On June 30, 2009 Hydro applied to have the existing Industrial Customer rates made final.

It was at that point that the issue ofwhether the Board had the legal authority to change the manner of operation of the RSP to benefit customers, other than industrialcustomers, in prior years when those other customers’ rates had already been finalized, arose. (

c) Standard of Review [70] As this tribunal appeal is taken from orders of the Board directly to this Court, it is necessary to apply a standard of reviewanalysis in accordance with the principles in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 and subsequent cases, todetermine the scope of review that this Court may undertake. [71] As Dunsmuir pointed out, it is not necessary to undertake a full standard of review analysis if prior “jurisprudence has alreadydetermined in a satisfactory manner the degree of deference to be accorded with regard to a particular category of question” (paragraph62).

It is only when the inquiry into existing jurisprudence “proves unfruitful” that the court must proceed to a full analysis of the factorsidentified in Dunsmuir that make it possible to identify the proper standard of review. [72] In the case of the Board, there is prior jurisprudence that has addressed the standard of review of Board decisions.

In LabradorCity, Cameron J.A. concluded on an application for leave to appeal, that the issues to be dealt with on the appeal, if leave were to begiven (whether a common rate policy for electrical customers in Labrador was non-discriminatory; and whether the Board erred infailing to consider certain arguments submitted to it) should be reviewed on a standard of reasonableness. In like manner, inNewfoundland Power, Cameron J.A. held, on another application for leave, that an issue involving a contextual

interpretation of aprevious Board order, while involving a question of law, should nevertheless be reviewed on a standard of reasonableness. In both ofthese cases, the judge had to consider whether, as a condition of granting leave, the proposed appellant had a “reasonably arguable case”and in deciding that question, consideration should be given to the standard of review to be applied by the Court, if leave were granted,“in respect of the particular issues raised” (Newfoundland Power, paragraph 10; and Labrador City, paragraph 5).

[73] We do not consider the Newfoundland Power and Labrador City cases to be determinative of the issue of the standard ofreview in this case because: (

i) they were decided before Dunsmuir; (ii) they are not decisions of a full panel; (iii) they were decided inthe context of applications for leave to appeal, where the need for a definitive determination of the issue of standard of review was notdirectly engaged; and (iv) the issues being reviewed in those cases were dissimilar from the particular issues raised in the current case.They nevertheless remain of some assistance, insofar as they express views on the general structure of the legislation and the context inwhich the Board operates. [74] Accordingly, it is necessary to engage in an analysis of the factors that have been identified in other cases to determine theproper standard of review (correctness or reasonableness) in this particular case. [75] There are two statutory mechanisms whereby issues dealt with by the Board can be considered by this Court.

They arecontained in sections 99, 101 and 102 of the PUB Act: 99.

(1) An appeal lies to the Court of Appeal from an order of the board upon a question as to its jurisdiction or upon a question of law … 101. The board may of its own motion or upon the application of a party, …state a case in writing for the opinion of the Court of Appealupon a question which in the opinion of the board is a question of law and a similar reference may also be made at the request of theLieutenant-Governor in Council. 102. The Court of Appeal shall hear and determine the question of law arising in a case stated under

section 101 and remit the matter tothe board with the opinion of the court attached. [76] In matters brought before the Court under both s. 99 and s. 101, the focus is on considerations involving “a question of law”. Ins. 99, there is the additional focus on “a question as to [the board’s] jurisdiction” but that is a specialized form of legal question as well.In references under s. 101, in which the Court’s opinion is sought on questions of law, the Court is obligated, pursuant to s. 102, toprovide its own view on what it considers to be the “correct” answer to the question posed, as was done in the Stated Case.

By enactingss. 101 and 102, the legislature has determined it appropriate for the Board to defer to the Court’s opinion on questions of law, ratherthan the Court deferring to the expertise of the Board in determining those types of questions. [77] On an appeal brought under s. 99 where the focus is also on “a question of law”, the question arises as to whether the samestandard for determining questions of law should be applied or whether something more restrictive – involving a degree of deference tothe original decision-maker – should be employed.

On one viewpoint, it could be said that if the legislature intended, in its similarcharacterization of the types of questions that could be raised under s. 99 and s. 101, that there should be more deference accorded unders. 99, it could have said so, but it did not.

On the other side, it could be said that the process under s. 99 is different, involving as it does,a challenge to decisions of the Board that the Board believes are correct and does not involve the Board itself questioning its own view.In such situations, more deference might be justifiable. [78] That said by way of preliminary observation, it is now necessary to turn to a consideration of the “contextual guideposts” (perFish J. in Nor-Man Regional Health Authority Inc. v.

Manitoba Association of Health Care Professionals, 2011 SCC 59, [2011] 3 S.C.R.616 at paragraph 41) that are to be applied to assist in determining the scope of review. The basic factors to consider were re-iterated inDunsmuir to include: (

i) the presence or absence of a privative clause; (ii) the purpose of the tribunal as determined by

interpretation ofits enabling legislation; (iii) the nature of the question at issue; and (iv) the expertise of the tribunal (paragraph 64). These factors arenon-exhaustive: Nor-Man at paragraph 40. [79] It should be noted at the outset that the contextual factors are designed to assist in determining the intention of the legislatureas to the intended scope of review.

In the end, what is sought is to discern whether the legislature intended to limit the degree of scrutinyof the tribunal’s decision by the court. [80] Turning to the first guidepost – the presence or absence of a privative clause – the restriction placed by s. 99 on the Court bylimiting appeals to questions of jurisdiction and law and effectively excluding appeals respecting factual matters and inextricablyintertwined questions of mixed law and fact is effectively a privative clause regarding those factually-related matters.

On the other hand,inasmuch as the legislation allows appeals on jurisdiction and law, it is not a privative clause in respect of those matters. [81] In Barrie Public Utilities v. Canadian Cable Television Association, 2003 SCC 28, [2003] 1 S.C.R. 476 at paragraph 11,Gonthier J., for the majority , observed that: “While the presence of a statutory right of appeal is not decisive of a correctness standard …it is a factor suggesting a more searching standard of review”. See also, Michel Bastarache, “Modernizing Judicial Review” (2009), 22C.J.A.L.P. 227 at p. 234.

It must also be recognized, however, that the absence of a privative clause does not necessarily lead to theconclusion that a high level of scrutiny is necessarily intended “where other factors bespeak a low standard” (Pushpanathan v. Canada(Minister of Citizenship and Immigration), (SCC), [1998]1 S.C.R. 982, per Bastarache J. at paragraphs 30, 37).

Thatsaid, in the context of the legislative scheme involved in this case, this first factor, considered alone, points towards a correctnessstandard rather than a deferential one on issues of law and jurisdiction. [82] As to the second guidepost – the purpose of the tribunal – Cameron J.A. observed in Labrador City that: [17] The Board is comprised of full and part-time members who have different backgrounds. This would include engineers andaccountants, for example. It has a professional staff.

Its role is a many-faceted one, including the supervision of all public utilities and theregulation of rates, tolls and charges. Policy, both that imposed by legislation and that developed by the Board, plays a major role in theBoard’s performance of its duties. Some of those policies are developed over time. There can be no doubt that the Board is a specializedtribunal with expertise in matters related to the regulation of electrical utilities. In questions related to the determination of rates, whichinvolve the application of industry practice, the Board is clearly in a position superior to that of the Court.

This would suggest a moredeferential standard of review. …

[19] … The Public Utilities Act and the Electrical Power Control Act, 1994 provide a scheme for the regulation of electrical utilitieswhich requires the Board to address policy issues and to balance interests. They operate in tandem. This factor suggest[s] a moredeferential standard to the Board’s decisions. These observations are equally applicable today.

I would add the caveat, however, that the deference to be shown is in relation to thearea that is entrusted to the Board for regulation and where the Board’s superior expertise in the understanding, development andapplication of policy and the application of regulatory legal standards and balancing of interests exists. [83] In Council for Licensed Practical Nurses v.

Walsh, 2010 NLCA 11 Welsh J.A. at paragraph 11 pointed out that the existence ofa right of appeal does not automatically mean that a standard of correctness will apply where the nature of the question (in Walsh, one ofmixed law and fact) engages the expertise of the tribunal.

That brings us to the two remaining factors to be considered: nature of theissue and tribunal expertise. [84] With respect to the third factor – the nature of the issue – it is important to appreciate that “different standards of review willapply to different legal questions depending on the nature of the question to be determined and the relative expertise of the tribunal inthose particular matters.” (per Major J. in Canada (Deputy Minister of National Revenue) v.

Mattel Canada Inc., 2011 SCC 36, [2001] 2S.C.R. 100 at paragraph 27. [85] It is now recognized that deference should be shown to many types of tribunal decisions even though they involve a question oflaw. This is especially so where a specialized tribunal, in the course of carrying out its statutory duties, is interpreting its “home statute”within its area of expertise. See, Smith v. Alliance Pipeline Ltd., 2011 SCC 7, [2011] 1 S.C.R. 160, per Fish J. at paragraph 37; CelgeneCorp v. Canada (Attorney General), 2011 SCC 1, [2011] 1 S.C.R. 3 per Abella J. at paragraph 34.

In fact, in Alberta (Information andPrivacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654, Rothstein J., writing for the majority, wentso far as to say, at paragraph 39, that: “[w]hen considering a decision of an administrative tribunal interpreting or applying its homestatute, it should be presumed that the appropriate standard of review is reasonableness.” [86] That said, there must remain, if the rule of law is to be given effect, an area where a statutory delegate must be required to makedecisions that, on review by the superior courts, must be correct.

In Alliance Pipeline, Fish J., writing for a majority of eight, identifiedthe following areas where correctness still has application: [26] … The standard of correctness governs: (1) a constitutional issue; (2) a question of “general law ‘that is both of central importanceto the legal system as a whole and outside the adjudicator’s specialized area of expertise’” …; (3) the drawing of jurisdictional linesbetween two or more competing specialized tribunals; and (4) a “true question of jurisdiction or vires” … [87] In the Alberta Teachers’ Association case, the Supreme Court again recognized that the principle that deference will be shownto tribunal decisions interpreting their home statutes applies “unless the

interpretation of the home statute falls into one of the categoriesof questions to which the correctness standard continues to apply” (paragraph 30), i.e. the four categories identified by Fish J. in AlliancePipeline. [88] Alberta Teachers’ Association also stresses that the category of “true questions of jurisdiction or vires” is a very narrow one(paragraph 33) and that Courts should not be too quick to brand a legal question as jurisdictional and thereby revert to the interventionistattitudes towards judicial review that obtained prior to Canadian Union of Public Employees, Local 963 v.

New Brunswick Liquor Corp., (SCC), [1979] 2 S.C.R. 227. Rothstein J. explained: [34] The direction that the category of true questions of jurisdiction should be interpreted narrowly takes on a particular importancewhen the tribunal is interpreting its home statute. In one sense, anything a tribunal does that involves the

interpretation of its homestatute involves the determination of whether it has the authority or jurisdiction to do what is being challenged on judicial review. However, since Dunsmuir, this Court has departed from that definition of jurisdiction… [I]t is sufficient in these reasons to say that,unless the situation is exceptional, and we have not seen such a situation since Dunsmuir, the

interpretation by the tribunal of “its ownstatute or statutes closely connected to its function, with which it will have particular familiarity”, should be presumed to be a question ofstatutory

interpretation subject to deference on judicial review. [89] Nothing written in Alberta Teachers’ Association has eliminated true questions of jurisdiction or vires – narrow though thatcategory may be – as attracting a correctness standard of review. The real question is what in essence constitutes a true question ofjurisdiction or vires? Although Rothstein J. confessed in Alberta Teachers’ Association that he was “unable to provide a definition ofwhat might constitute a true question of jurisdiction” (paragraph 42), reference to Dunsmuir is nevertheless helpful.

There, Bastaracheand Lebel JJ. stated: [59] … “Jurisdiction” is intended in the narrow sense of whether or not the tribunal had the authority to make the inquiry. In otherwords, true jurisdiction questions arise where the tribunal must explicitly determine whether its statutory grant of power gives it theauthority to decide a particular matter.

The tribunal must interpret the grant of authority correctly or its action will be found to be ultravires or to constitute a wrongful decline of jurisdiction. [90] In the instant case, it was the Board that determined that before it could hear Hydro’s rate application (something that wasclearly within its jurisdiction to hear) a “preliminary hearing” had to be held to determine the question set out previously in paragraph 32of this decision.

The formulation specifically raised the question: Does the Board have jurisdiction to issue an order which changes how the Rate Stabilization Plan (RSP) operated before the date of theorder and, if so, does this jurisdiction extend to any aspect of the operation of the RSP, including the rate charged to customers, thedetermination of the balance(

s) in the RSP, and how these balances are allocated to customers or customer classes? (Emphasis added.) [91] In its Decision, the Board described the preliminary hearing as follows:

The preliminary hearing was held to receive submissions from the parties on the question of whether the Board has the jurisdiction to change the manner in which the RSP operated, including the rates charged, the determination of the balance(

s) in the RSP and how these balances are allocated to customer classes. This question of jurisdiction is raised in the context of the interim orders issued by the Board for Industrial Customer rates since December 2007. (Emphasis added.) [ 92 ] The parties at the preliminary hearing divided as to whether the Board had legal authority to make an order dealing with the money in the RSP that would include residential customers, as well as industrial customers, as beneficiaries.

The Board described the difference as follows: All parties agree that the Board has the jurisdiction to set final rates for the Industrial Customers as of January 1, 2008. Hydro, Newfoundland Power and the Consumer Advocate submit that, in establishing those rates, the Board also has jurisdiction to deal with the manner of how those rates, and in particular the RSP rates, are calculated as of the date of any interim order, including the disposition of any balances in the RSP arising.

The Industrial Customers submit that s. 75 of the Act only allows the Board to set interim rates and that the rules and regulations affecting those rates cannot be made interim.

The Industrial Customers argue that the Board’s jurisdiction with respect to the disposition of any balances in the RSP is confined to the existing RSP rules and regulations. (Underlining added.) Noting that the RSP was a type of “deferral account”, the Board approached this issue by reference to, amongst other things, the scope of the authority granted by s. 75 of the PUB Act , as well as the underlying principles of utility regulation, derived in part from this Court’s decision in the Stated Case as well as other jurisprudence. [ 93 ] The Board’s conclusions, reproduced in paragraph 43 of this decision, were also stated in jurisdictional terms.

In particular, note is taken of the statement, “… the Board does not have jurisdiction to change how the Newfoundland Power RSP operated in prior years, either in terms of the rates charged or the resulting balances” (Italics added.).

While it is true that in the elaboration of its reasons leading to this conclusion the Board purported to rely on underlying principles and policies of utility regulation – matters with which it has great familiarity and some expertise – in the end the conclusion reached was that the Board had no jurisdiction, in the sense of legal authority, to distribute deferral account balances, and in particular the RSP in question, to customers other than industrial customers or to otherwise benefit them in the context or orders setting interim rates. [ 94 ] We agree with counsel for Newfoundland Power, who submitted: The issue that the Board stated for itself was a true question of jurisdiction or vires .

It engaged the question of what the Board had the legal power and authority to do, not what the Board should do as a matter of regulatory judgment and decision-making. The issue was engaged on a preliminary hearing before the Board proceeded to a hearing on the merits. (Paragraph 122, Newfoundland Power’s Factum.) [ 95 ] If the Board is incorrect on this issue, its decision in effect would amount to declining to exercise an authority it has by law (i.e. a “wrongful decline of jurisdiction”, as referred to by Bastarache and Lebel JJ. in Dunsmuir , quoted above).

The result, if incorrect, would be the shutting out of a large class of power consumers from the benefits of the legislative scheme being administered by the Board. The issue, therefore, of the authority of the Board to benefit customers other than industrial customers through regulating a deferral account like the RSP under s. 75 in the context of interim orders has all the hallmarks of a true question of jurisdiction. [ 96 ] In Milner Power Inc. v.

Alberta (Energy and Utilities Board) , 2010 ABCA 236 , which dealt with a statutory appeal from a decision of the Alberta Energy and Utilities Board on questions of law and jurisdiction, the court confirmed that despite the general expertise of the Board and regulatory purpose of the legislation, the “key factor” was the nature of the questions raised on the appeal (whether the Board should have referred to investigate and hold a hearing into a complaint and, instead, summarily dismissed it).

The court concluded that the question of law relating to the right of the Board to refuse to investigate or hold a hearing was an important question of law that did not engage the specialized expertise of the Board. The Court stated: [29] … [T]he legislation provides for a right of appeal on questions of law and, in our view, because this is a question of the proper

interpretation of the Board’s right to refuse to act on a complaint, the Board must be correct. [ 97 ] In similar manner in the instant case, because this is a question of the proper

interpretation of the Board’s right to decline, according to law, to deal with a deferral account, in the context of interim rates, for the benefit of certain classes of customers, the Board should also be correct because the matter involves the jurisdiction of the Board. [ 98 ] Counsel for the Board submitted, however, that a key consideration differentiating the Board’s decision in this case from a true question of jurisdiction is the statutory direction in the Electrical Power Control Act, 1994 , s. 4 to apply “generally accepted sound public utility practice” to the implementation of the power policy of the province, something that falls within the expertise of the Board.

That argument, however, has no application to the issue in this case. This is not a case where the Board purported to make a determination that, as a matter of sound public utility practice, it should not exercise its powers in a certain way; rather, it is a case where the Board purported to determine that it could not do so. [ 99 ] To determine whether the Board could exercise its authority in the circumstances of this case, the Board had to interpret s. 75 in light of the underlying principles of utility regulation (such as the principle against retroactivity).

There is nothing in s. 75 of a technical nature that requires the Board’s expertise in its construction. Indeed, the underlying principles which the Board purported to apply are those which were pronounced upon by this Court in the Stated Case . As noted previously, the results of stated cases brought under s. 101 require the Board to defer to the view of the Court rather than the other way around. That would include the Court

subsequently pronouncing on the meaning of what it said in earlier jurisprudence.

The Court is therefore in as good a position as the Board to determine the scope of s. 75 insofar as it confers legal authority on the Board. [ 100 ] In Bell Canada 1989 , which involved a statutory appeal from the Canadian Radio-Television and Communications Commission to the Federal Court of Appeal on questions of law or jurisdiction, where the issues, as ultimately stated by the Supreme Court of Canada, were whether the Commission had the “legislative authority” to review revenues made by Bell Canada during a period when interim rates were in force and whether the Commission had “jurisdiction” to make an order compelling Bell to grant a one-time credit to its customers, the Court, recognizing that deference should be given to the Commission’s decisions on issues which fell within its area of expertise, nevertheless held that the issues at play were jurisdictional and were not within the Commission’s area of expertise.

Gonthier J. explained at p. 1747: In this case, the respondent is challenging the appellant’s decision on a question of law and jurisdiction involving the nature of interim decisions and the extent of the powers conferred on the appellant when it makes interim decisions. … It is … a question of jurisdiction because it involves an inquiry into whether the appellant had the power to make a one-time credit order.

Except as regards the choice, amongst remedies available to the appellant, of the most appropriate remedy to achieve the goal of just and reasonable rates throughout the interim period, the decision impugned by the respondent is not a decision which falls within the appellant’s area of special expertise … [ 101 ] The decision in the foregoing case can usefully be contrasted with Bell Canada 2009 where the issue was the appropriateness of the manner in which the Commission exercised its rate-setting jurisdiction in directing the allocation of certain funds to various purposes.

In that, case, unlike the earlier Bell Canada 1989 , the question was not whether the Commission had the legal authority to order certain dispositions but whether its choice of methodology was appropriate, something the Court held was at the “core” of the Commission’s specialized expertise. As a result, a deferential standard of review was employed. [ 102 ] The instant case is more akin to the 1989 decision.

Here, the core of the dispute is the Board’s decision that it did not have the jurisdiction, or legal authority, to allocate balances accrued under RSP rules to other classes in circumstances where industrial customers’ rates were interim. [ 103 ] We conclude, therefore, that the issue before the Board, as stated in its decision to hold a preliminary hearing, in the arguments made at the hearing, in the Board’s formulation of the issues in its Decision and in the conclusions it reached, was a true question of jurisdiction and should be reviewed on a standard of correctness. [ 104 ] There is, of course, a fourth factor to be considered – the expertise of the Board.

However, in light of the conclusion reached above, little more need be said. As noted in Barrie Public Utilities , “The proper concern of the reviewing court is not the expertise of the decision-maker in general, but its expertise relative to that of the court itself vis-à-vis the particular issue” (per Gonthier J. at paragraph 12). [ 105 ] There is certainly little doubt that the Board is regarded as a specialized tribunal with expertise in the area of regulation of electrical utilities and the establishment and approval of rates, tolls and charges.

As noted in the Labrador City case, the legislative scheme requires the Board to develop and apply policy in the course of its work.

Further, s. 6 of the PUB Act requires the Lieutenant- Governor in Council, when making appointments to the Board, to “take into consideration the need of the board to be composed of commissioners who have expertise in law, engineering, accountancy and finance.” It is clear that the legislature intended the Board to be a tribunal with specialized expertise within the field of its legislative mandate. [ 106 ] As pointed out in the Bell Canada 1989 decision, however, the Board is not to be regarded as superior to the Court in respect of questions of a true jurisdictional nature.

With respect to the issues engaged in this appeal, therefore, the fact that the Board is a specialized tribunal within the area of its mandate does not call for deference to its decisions relating to true jurisdictional matters. [ 107 ] Taking all factors together, there should be appellate review of the Decision on a correctness standard. (

d) The Board’s Approach [ 108 ] In the context of an application by Hydro that previously-approved interim rates for certain industrial customers be made final, the Board determined that, by way of preliminary hearing, the parties should first address whether the Board had “jurisdiction to issue an order which changes how the … RSP operated before the date of the order and, if so, does this jurisdiction extend to any aspect of the RSP, including … how these balances are allocated to customers or customer classes.” [ 109 ] The Board appeared to be concerned, amongst other things, that a change to the RSP that could involve customers, other than industrial customers, potentially benefiting from any change in the RSP rules even though those other customers’ rates were, for the relevant period, no longer interim, was not permissible.

The Board was also concerned with whether exercising such a jurisdiction, if it existed, might offend the presumption against retroactivity. [ 110 ] The Board described the position of Hydro, Newfoundland Power and the Consumer Advocate as follows: Hydro, Newfoundland Power and the Consumer Advocate submit that, in establishing these final rates, the Board also has the jurisdiction to deal with the manner of how those rates, and in particular the RSP rates, are calculated as of the date of any interim order, including the disposition of any balances in the RSP arising. (p.7) [ 111 ] By contrast, the Industrial Customers took the position, in the view of the Board, that although the Board could set interim rates, “the rules and regulations affecting those rates cannot be made interim” and that “the Board’s jurisdiction with respect to the disposition of any balances in the RSP is confined to the existing RSP rules and regulations”.

Put another way, it meant that the balances in the RSP

could not be distributed to anyone other than the Industrial Customers under the guise of making interim rates for Industrial Customers final when other customers’ rates had already been made final. [ 112 ] The Board restated the “fundamental question” as follows: “how an established deferral account, such as the RSP, should be treated by the Board in the context of interim orders affecting the balances in the account” (p.7) [ 113 ] The Board’s approach to the questions it had posed for preliminary decision essentially involved a consideration of three matters: 1.

The nature of deferral accounts generally and how they could be disposed of; 2. The impact of interim decision-making on the disposition of deferral accounts; 3. The impact of how, procedurally, the issue had been brought before the Board. Although interrelated, it is necessary to consider each of these matters in turn. In fact, the procedural issues in item three cut across the Board’s consideration of the other two items as well. (

i) Deferral Accounts [ 114 ] A deferral account in utility regulatory practice is an accounting practice whereby a separate account is used to [54] … “[e]nable a regulator to defer consideration of a particular item of expense or revenue that is incapable of being forecast with certainty for the test year”.

They have traditionally protected against future eventualities, particularly the difference between forecasted and actual costs and revenues, allowing a regulator to shift costs and expenses from one regulatory period to another. (Bell Canada 2009.) [ 115 ] As discussed previously, use of such accounts helps to smooth out the occurrence of unexpected or currently unknown costs or revenues and to provide rate stability to customers. Deferral accounts are regarded as “accepted regulatory tools” to be operated as part of rate-setting powers: Bell Canada 2009 , paragraph 54.

As noted earlier, the proper use of deferral accounts does not involve violation of the principle against retroactivity or retrospectivity. [ 116 ] Implicit in the creation of deferral accounts is the power of the regulator to order the disposition of the funds contained in them: Bell Canada 2009 , paragraph 56. In Bell Canada 2009, for example, the Supreme Court held that deferral account balances representing the difference between certain telephone rates actually charged by local exchange carriers and those de

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