Ontario Energy Board v. Ontario Power Generation Inc., et al.

(Ontario) (Civil) (By Leave)




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Administrative law - Boards and tribunals - Public Utilities - Electricity - Standing - Whether reasonableness is the applicable standard of review for the Board’s decision - Whether the board’s decision to reduce the forecast compensation costs is reasonable - Whether the Board was required to utilize the prudent investment test to assess “committed costs” - Whether the Board acted unreasonably in not utilizing the prudent investment test to assess the forecast compensation costs - Whether the Board was required to presume that forecast compensation costs arising from a collective agreement are prudent - Whether the Board used hindsight to assess the forecast compensation costs - Whether the Board required utility company to manage forecast compensation costs that it could not manage.

The Respondent, Ontario Power Generation Inc. (“OPG”) is Ontario’s largest electricity generator. Some 90 percent of OPG’s regulated workplace is unionized. The Respondent, Power Workers’ Union (“PWU”) represents approximately two-thirds of the unionized staff. The Respondent, Society of Energy Professionals (“the Society”) represents the remainder of its unionized workforce. OPG entered into a collective agreement with PWU for the period April 1, 2009 to March 31, 2012 and with the Society for the period January 1, 2011 to December 31, 2011. These agreements prescribe the compensation rates for each staff position held by its represented employees. They also provide strict terms regulating the staff levels at OPG’s stations. Under these agreements OPG is not free to reduce compensation rates unilaterally. Nor can it unilaterally reduce staffing levels.

On May 26, 2010, OPG filed an application seeking approval of the rates its customers must pay for its electricity. The rates sought provide the revenue required by OPG to cover its projected costs for operating and maintaining its assets, for making new investments, and for earning a fair rate on invested capital. The application was for the period from January 1, 2011 to December 31, 2012. The terms of the two collective agreements cover the same period, save for nine months, in the case of the PWU contract.

OPG’s application was filed under s. 78.1 of the Ontario Energy Board Act, 1998, S.O. 1998, c. 15, sched. B (“the Act”). It empowers the Ontario Energy Board (“OEB” or “the Board”) to fix the rates that OPG is entitled to charge its customers. Section 78.1(5) requires that those rates be “just and reasonable”. The OEB reduced by $145,000,000, the nuclear compensation costs applied for by OPG: $55,000,000 for the 2011 year, and a further $90,000,000 for the 2012 year. The OEB concluded that OPG’s compensation rates and its staffing levels were both too high. The OEB treated both compensation rates and staffing levels as forecast costs that OPG could manage downward. Neither was treated as committed costs. The majority of the Divisional Court found that OEB’s decision was reasonable and should not be disturbed on appeal. The dissenting judge concluded that the collective agreements imposed compensation costs on OPG that are committed costs. A prudence review was therefore required to determine whether the costs are just and reasonable. The Court of Appeal concluded that the OEB acted unreasonably. The appeal was allowed and the OEB’s decision set aside. OPG’s application was remitted to the OEB to be heard in accordance with the principles set out in the reasons of the Court of Appeal.

Lower Court Rulings

February 14, 2012
Ontario Superior Court of Justice

184/11, 180/11 and 194/11, 2012 ONSC 729
Appeal dismissed
June 4, 2013
Court of Appeal for Ontario

C55602, C55641 and C55633
Appeal allowed; Decision of Ontario Energy Board set aside; Application remitted to Ontario Energy Board