Archived — Project Summaries 2006-2007 - Public Interest Advocacy Centre (PIAC)
1204 – ONE Nicholas Street
1. The ATCO case — Did the Supreme Court of Canada Alter the Regulatory Compact?
The recent decision of the Supreme Court of Canada (S.C.C.) in the case of ATCO Gas and Pipelines Limited v. Alberta (Energy and Utilities Board), 2006 S.C.C. 4, has potentially altered the powers of regulators to superintend regulated industries in the public interest. The majority decision narrowly interpreted the discretion of the regulator in rejecting the Alberta Energy and Utilties Board's attempt to decide upon the disposition of the proceeds of sale of regulatory assets. In doing so, the S.C.C. rejected long accepted principles of regulatory practice, namely that ratepayers have an interest in the rate base assets of the regulated company upon which they pay for a return on equity in their rates. This is not an abstract principle. In addition to potentially placing severe limits upon the powers of regulators to compel the regulated companies to behave in the public interest, it also may involve potential disposition of billions of dollars of rate base assets in a manner that is adverse to the interests of millions of Canadian customers.
The project would involve research and analysis of the ATCO decision including its likely impact upon the way in which industries are regulated in Canada and the treatment of ratepayers in accordance with the interpretive rules derived from the decision. The methodology would involve a study of the decision and its background, a comparative review of similar statutory provisions in Canadian and other jurisdiction, an analysis of the likely effects upon Canadian utility customers and recommendations concerning consumer strategies to deal with ATCO including possible statutory reform. The likely outcome will be a report that will be useful in guiding the approach to ATCO-type issues in future regulatory proceedings and a blueprint for statutory reform if necessary.
The key elements of the research methodology will consist of the following:
- Thorough analysis of ATCO case and determinations in the Alberta Court of Appeal and the AEUB
- Review of applicable statutory provisions.
- Review of existing statutes and practice associated with issues raised by ATCO in other jurisdictions.
- Review of accepted regulatory literature concerning theory and practice.
- Review of fallout from ATCO decision.
"The income trust structures provide unique challenges for regulators in these and related industries. In particular, the income trust's tax structure (with tax liability generally being paid by trust unit holders, rather than, as formerly, the corporation) means that several assumptions upon which regulators have set energy, telecommunications and other rates may need to be revisited. It also has implications for the capital investments of those entities converted to income trusts.
The issue has already arisen in relation to gas and utility rates in Alberta (AltaLink decisions (AEUB Decisions 2003-061, 2004-007 and 2005-11) and British Columbia (In the Matter of Pacific Northern Gas Ltd., Application for Approval to Recapitalize Under an Income Trust Ownership Structure (September 9, 2005)). Given the trend to income trusts, including, most significantly, Bell Canada, , this challenge can continue to confront regulators for some time.
The dispute over income tax liability, and possible utility expenses in the result has the potential to greatly affect consumer rates for such regulated services, as the rate of return or price cap formulae used by regulators typically includes an income tax liability mark-up. As well, the income trust instrument may remove the incentive for the utility to invest in needed changes to utility rate base to preserve rate payers interests in safety or quality of service. However, consumer representatives may be ill-prepared for the public policy and regulatory debate that will eventuate either in the next rate-setting process or in the context of any government review of the appropriateness of the instrument, without fully understanding the income trust structure and its full implications for corporate cost structures, and ultimately just and reasonable rates for regulated services.
The project would involve research and analysis of the main regulatory decisions on income trusts in energy and telecommunications to date. The project would provide an analysis of the likely impact of income trusts upon the way in rates are set, and rate base capital is developed and maintained. The study would make recommendations on best practices for the use of income trusts by the regulated utility from the standpoint of fairness to customers.
The key elements of the research methodology will consist of the following:
- Thorough analysis of the AEUB and BC Utilities board decisions
- Review of existing literature regarding the tax and other effects of income trusts
- Review of applicable statutory provisions
- Review of existing statutes and practice associated with issues in other jurisdictions
- Review of accepted regulatory literature concerning theory and practice
- Contact with stakeholders, including regulators, industries involved, tax officials
Cell phone and other mobile communications providers are increasingly rolling out services which allow consumers to buy electronic products via their cell phones such as songs, ring tones and games. These providers are also proposing uses of these mobile devices as a kind of electronic wallet, capable of paying for such items as parking meters and concert tickets, and potentially acting as a mobile electronic financial interface: for online banking or stock trading.
The key consumer question is whether these mobile devices are really adapted for this use. Cell phones and similar mobile devices are vulnerable to fraud in being lost, stolen, or misplaced, in having their transmissions intercepted, even in being 'cloned' to fool a network. How are consumers to be protected from the inevitable fraud-artists who will try to profit from this economic cell phone use? Are biometric handsets, voice identification or other such technologies the right answer, or only part of the right answer? Will industry adopt standards for security to minimize risks? And when things do go wrong, will there be a coherent set of principles setting out the rules for liability of the consumer and the mobile provider, as well as any merchant or bank?
PIAC will study the current and potential uses of mobile communication devices, including wireless phones, digital assistants and pocket PCs with a view to identifying the potential threats to privacy, economic and network security of the users. The study will canvass the state of consumer awareness and market information concerning such threats, and the extent of the current and potential problems. The study will suggest where appropriate remedial measures that may include increased consumer awareness and education, industry imposed standards or government or regulatory action to prevent abuses.
The methodology would consist of the following:
- Literature Review including study of existing and future mobile commerce market, potential threats to personal and network security arising there from, analysis of existing and proposed protections in Canadian and other jurisdictions, extrapolation from consumer protection principles in other electronic communication and commerce, existing reports on problems
- Interviews with law enforcement, security personnel and others with direct fraud knowledge
- Review of existing consumer awareness from national survey questions
- Analysis of fit between available consumer remedies and identified issues
- Report and recommendations
Administrative Monetary Penalties ("AMP"s) involve a penalty imposed by law or by government officials rather than by the courts subsequent to a conviction. AMPs can be a useful tool in compelling compliance with administrative regulatory regimes where there is high incentive for a breach of the law. AMP schemes may also provide for relatively informal hearings prior to an AMP being levied and internal reviews of AMP decisions.
The levying of AMPs for marketplace misconduct is an increasingly important issue particularly as it pertains to cyberspace. Such action is viewed by many consumer advocates as an effective sanction against misconduct that is difficult to police and extremely lucrative to the miscreant. It is a remedy frequently employed by The Federal Trade Commission in that regard. Recently for example a multimillion dollar civil penalty was levied against Choice Point for their failure to protect personal information entrusted to their care.
Recent efforts on the part of the Competition Commissioner to introduce AMPs as part of a legislative package dealing with misleading advertising and abuse of dominant position met with fierce opposition from large business interests and a challenge to the constitutionality of their application.
This project would examine the use and effectiveness of AMPs in relation to consumer protection issues and, in particular, with respect to its use to compel compliance with e-commerce laws and rules. The study would examine the history of AMPs to date in this and other jurisdictions with a view to analyzing their impact in accordance with the governing legislation. The study would review existing objections, leg al or practical to the use of AMPs.
The research methodology consists of :
- A literature and statutory review of the current theory and use of AMPs in Canadian and other jurisdictions.
- An analysis of the use of AMPs and their effectiveness in consumer protection and electronic commerce based transactions.
- Consultation with stakeholders with respect to potential uses and problems with AMPs.
- Review of the constitutionality of AMPs as well as the C-19 debate concerning the same.
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