Court of Appeal

Nova Scotia Court of Appeal

Citation:  Annapolis Royal (Town) v. Annapolis (Municipality)                                   2018 NSCA 35

Date:  20180420

Docket:  CA 462508

Registry:  Halifax

Between:

The Town of Annapolis Royal

Appellant

v.

The Municipality of the County of Annapolis, on behalf of its Water Utility, Attorney General of Nova Scotia and the Nova Scotia Utility and Review Board

Respondents

Reasons for judgment:

[1]              The Town of Annapolis Royal appeals from an Order of the Nova Scotia Utility Review Board dated March 17, 2017 following a decision on the merits (2016 NSUARB 218) and a supplemental decision (2017 NSUARB 36).  Those decisions in concert approved rates and charges for water and water services the Municipality of Annapolis County (“County”) had sought on behalf of the Annapolis County Water Utility (the “Utility”).

[2]              In addition to its retail customers, the Utility provides water to the appellant Town's water utility for resale to its customers.  The Utility has three water systems:  Margaretsville; Granville Ferry, which serves the local community and supplies water to the Town; and Cornwallis Park.  The Utility had accumulated a significant deficit, one equivalent to its annual revenue. 

[3]              The Board heard the Utility’s application for amendments to the then current water rates and charges in December 2016.  Among other things, the Utility proposed treating the Town as a wholesale customer and increasing its water rate by 410.7%, 2.1%, and 1.1% respectively in three fiscal years.  The Town, a formal intervenor at the hearing, had legal representation, cross-examined the Utility’s witnesses, presented evidence from its own witnesses, and made submissions.

[4]              In its decision on the merits, the Board accepted the Town’s argument that only the cost of operating the Granville Ferry system should be included in the wholesale rate.  It largely approved the amendments the Utility had sought and observed that, as the expenses for the Granville Ferry system had not been kept separately for some time, the Utility must use joint use allocations to derive the rate.

[5]              The Board provided guidance on the determination of joint use allocations.  It then continued:

[67]      The above are examples and not necessarily what should be used by the Utility to determine appropriate joint use expense percentages.  The Utility is directed to determine the appropriate attributes that can be used to calculate joint use expense percentages so as to come as close as possible to only have the expenses for the Granville Ferry system in the wholesale rate.  The evidence to support the attributes and the determination of the joint use percentages are then to be submitted as part of a compliance filing.  The compliance filing is to also include the application of these percentages in the determination of the wholesale rate.

It set deadlines for the Utility’s filing of the compliance filing and for the Town’s provision of “its comments to the Board.”

[6]              The Utility provided the compliance filing.  The Town responded with “Post-Hearing Submissions” that were supplemented with seven tabs of material which included pro forma calculations and comparative statements, historical operating information, financial and income statements, and minutes of a special council meeting.  The Utility objected, characterizing that material as additional evidence not previously presented to the Board or the Utility, or considered by the Board in reaching its decision on the merits.  

[7]              In a letter to the parties dated February 17, 2017, the Board wrote: 

The Board agrees with the Utility that the seven tabs of information is new evidence and will not be considered in preparing the final Order for this matter.  As well, within the body of the Town’s comments, there is additional information that had not been properly placed as evidence, as well as arguments to which the Utility should be given a chance to respond.  The Town had also commented on areas that were not requested in the Decision.  The Decision only requested input on the joint use percentage of four expense categories.

It noted that the Town had accepted the revised joint use percentage for source of supply, and asked the Utility to respond to the Town’s comments on the other three components.  The Utility did so in a second compliance filing.

[8]              In its supplemental decision, the Board found that the Utility’s two compliance filings were based on the evidence presented at the earlier hearing on the merits, and approved the rates and charges set out in the second compliance filing.  It stated that, at the time of the hearing on the merits:

[16]      … the Town had the opportunity to request (but did not) more detail, and to analyze the components of the various expense categories and the respective derivations using whatever expertise it wished to bring to bear on the Application.  The Board finds that the Utility’s action amounts simply to a reconfiguration of the data which was in the original Application, and does not constitute new evidence.  The Town, before and during the hearing on the merits, had ample opportunity to present its own such analysis and/or derivation of the data used in the Application, but did not do so.

[9]              The Town raises two issues on appeal:  (a) whether the Board breached procedural fairness by failing to provide the Town with the opportunity to properly respond to new evidence contained in the Utility’s first compliance filing; and (b)  whether it erred by treating the Town as a typical wholesale customer and in setting the rate for the Town as a wholesale customer.

[10]         I reject the Town’s claim that the Board’s refusal to consider the material it sent in response to the first compliance filing amounted to a breach of procedural fairness.  Quite simply, an examination of the record shows that, as correctly stated by the Board, that filing contained no new evidence nor anything which the Town had no chance to address and, furthermore, the Town had had an opportunity to raise such matters at the hearing on the merits.  At the hearing of its appeal, the Town conceded that its material was new evidence.

[11]         The Town now focuses its arguments on two Notes in the first compliance filing.  The first sentence of each of those Notes reads:

3.         A portion of the Electrical expense item has been moved from Power and Pumping to Water Treatment based on discussions with the Utility Staff to reflect the cost of operating the Cornwallis Water Treatment Plant.  …

…

5.         Each expense item in the Water Treatment cost centre has been reviewed by the County of Annapolis Water Utility Staff and has been assigned the percentage that applies to the Granville Ferry supply source.  …

The Town submits that the communications between staff and the person who completed the compliance filing constitutes new evidence, and the Board should have permitted it to cross-examine those staff persons or to serve Requests for Information upon them.  It urges that, contrary to procedural fairness, it was not given any opportunity to challenge that information.

[12]         With respect, I cannot accept the Town’s argument.  Since the expenses of the Granville Ferry system had not been kept separately, Utility staff had to figure out the joint use expense percentages as best they could.  The Board described what was done for the compliance filing it directed as “a reconfiguration of the data.”  In essence, the staff had performed arithmetical calculations.  The compliance filing did not contain any new or different evidence from the Utility.  Not only had the Town had a full opportunity to present its evidence and case at the hearing, but it could have provided its own reconfiguration of that same data in its response to that compliance filing.  In these particular circumstances, there was no breach of procedural fairness.

[13]         Nor can I accept the Town’s submission that the Board erred in treating it as a wholesale customer.  In its written argument, its claim is founded on a 1998 joint water supply agreement (“1998 Agreement”) between the Town on behalf of its water utility and the County on behalf of the Granville Ferry water utility, which the Town insisted was not only still applicable, but determinative of the water rates it should pay.  Among other things, that document set out which party was responsible for certain capital improvements, and provided that the cost of the system and services would be shared by the two water utilities in proportions equal to their respective water usages.  According to the Town, the 1998 Agreement means it should be considered and treated as a partner rather than a customer.

[14]         In 2009, the Board approved the amalgamation of the Granville Ferry water utility with those for Cornwallis Park and Margaretsville to form the Utility (2009 NSUARB 159).  In 2016, the Municipality filed an application respecting the Utility which included rate increases affecting the Town.  The Town and the Utility disagreed as to whether the 1998 Agreement remained in force and, if so, its significance.  The Town questioned the Board’s jurisdiction to set rates for the Utility, given the 1998 Agreement, a position which the Board described as “a long-standing argument” by the Town. 

[15]         In an earlier decision dated June 9, 2016 (2016 NSUARB 99), the Board referred to the broad powers conferred upon it by the Public Utilities Act and, in particular, s. 87(1) which gives it the power to declare null and void existing contracts dealing with such things as rates, and to order that different rates apply.  In finding that it had jurisdiction to hear the water rate hearing respecting the Utility, the Board at ¶ 76 and 77 rejected “. . . any position of the Town to the effect that the 1998 Agreement is necessarily determinative of the appropriate rates which the Board should order to be set . . .”.  It clarified that it was not making any finding that the 1998 Agreement was irrelevant, whether it or any of its provisions was null and void, or as to its significance; rather, the 1998 Agreement was “simply a piece of evidence to be taken into account” in the course of a rate hearing.  The Town did not appeal this decision.

[16]         At the hearing on the merits in December 2016, the Town was unsuccessful in arguing before the Board that the 1998 Agreement was applicable.  At the hearing of its appeal, it conceded that the Board was not bound by the 1998 Agreement.  However, it submits that, given the historical context, it was simply not equitable to treat the Town as a wholesale customer. 

[17]         With respect, the Town’s submissions are completely unsustainable in the face of s. 87 of the Act which gives the Board the power to cancel any rates found to be discriminatory or preferential and to declare any contracts or agreements null and void.  Moreover, in Board of Commissioners of Public Utilities v. Nova Scotia Power Corporation, et al. (1976), 18 N.S.R. (2^nd) 692, this Court considered the Board’s jurisdiction to regulate electrical rates which were the subject of several municipal contracts and industrial contracts and, after reviewing the Act, held that the Board had the power and the duty to regulate all rates and charges of a public utility as defined in that legislation.

Disposition

[18]         I would dismiss the appeal.

Oland, J.A.

Concurred in:

Bryson, J.A.

Hamilton, J.A.