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PUBLIC UTILITIES - Operation of utility - Toll methodology - Rates

Friday, September 29, 2017 @ 8:38 AM  

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Appeal by the Yukon Energy Corporation (YEC) from an order of the Yukon Utilities Board (Board) setting a rate for its wholesale electricity sales. The Board denied YEC’s request to recover from its wholesale customer a payment it made into a Board-approved rate stabilization fund, which was triggered by better than forecasted hydro generation in a year in which the customer’s wholesale purchases of electricity were also higher than forecast. The Board interpreted YEC’s costs of diesel generation narrowly and confined them to its actual diesel generation costs without regard to the rate stabilization fund payment. In doing so, it acknowledged that its definition of “actual costs” for the energy reconciliation adjustment was different than that used for the rate stabilization fund. YEC appealed the order on the basis that the decision was unreasonable. It argued that the rate set by the Board did not enable it to recover all of its costs of generating electricity, and thereby contravened Order in Council 1995/90, which required the Board to set rates sufficient to recover all such costs.

HELD: Appeal allowed. The Board’s decision was unreasonable. While the Board had the discretion to choose the methodology by which it determined YEC’s reasonable costs of generating electricity, it had no jurisdiction to set a wholesale rate which did not enable YEC to recover its reasonable costs, including its costs of diesel generation. The Board interpreted “actual diesel generation costs” for the energy reconciliation adjustment and the rate stabilization fund differently, and in an internally inconsistent manner. As a result, the Board set a rate that prevented YEC from recovering diesel related costs it actually incurred for generating the electricity it sold to its wholesale customer. In doing so, the Board failed to adhere to a mandatory regulation constraining its authority. Furthermore, the Board did not adequately explain why it excluded YEC’s payment to the rate stabilization fund from its diesel generation costs.

Yukon Energy Corp. v. Yukon (Utilities Board), [2017] Y.J. No. 388, Yukon Territory Court of Appeal, D.C. Harris, L. Fenlon and G. Dickson JJ.A., September 12, 2017. Digest No. TLD-Sept252017012