Kingston (City) v. Ontario Energy Board

Ontario Superior Court of Justice – Divisional Court

Date: 2000-12-20

File No.: 415/00

Counsel: Guy J. Pratte, for the City of Kingston; Glenn Leslie and Sharon S. Wong, for Union Gas Ltd.; Jennifer Lea, for the Ontario Energy Board.

I. Nature of the Proceedings

[1] O'Driscoll, J.: The Applicant, the Corporation of the City of Kingston (the City), seeks leave to appeal (if leave be required) from a decision of the Ontario Energy Board (OEB), dated June 23, 2000. The OEB's order:

(i) renewed and extended the right of Union Gas Ltd. ("Union") to operate works for the distribution of gas in the City of Kingston, in the area comprised of the former Township of Pittsburgh ("Pittsburgh"), as well as the right to add to and extend that system;

(ii) ordered that the renewal or extension should be on the terms set out in the 2000 Model Franchise Agreement;

(iii) found that the City needs a Certificate of Public Convenience and Necessity, pursuant to s. 8 of the Municipal Franchises Act ("MFA") to construct any facilities in areas of the City that were formerly (prior to the 1998 amalgamation) in the Township of Pittsburgh or Township of Kingston, and may need a Certificate of Public Convenience and Necessity in respect of its existing works in the City as it existed prior to amalgamation.

[2] The City also seeks orders:

(1) that the application be heard on an expedited basis pursuant to s. 21(2)(c) of the Courts of Justice Act, R.S.O. 1990, c. C-43, and

(2) that the OEB's decision of June 23, 2000 be stayed pursuant to s. 106 of the Courts of Justice Act, supra, until the Divisional Court has disposed of the proposed appeal.

II. Background

[3] Since 1904, the City has provided its own gas utility service to its municipal residents who wish the service.

[4] In 1955, the Township of Pittsburgh, which bordered on the City, entered into a twenty (20) year franchise agreement which conferred on Union Gas Limited's (Union's) predecessor the right to construct and operate a gas distribution system within the boundaries of the Township of Pittsburgh.

[5] By a new franchise agreement, dated October 14, 1977, the 1955 agreement was replaced with a twenty (20) year agreement granting Union's predecessor the right to construct and operate a general distribution system within the Township of Pittsburgh and to supply gas to its customers within that municipality.

[6] On July 30, 1997, Union's predecessor filed an application with the OEB under s. 9 and s. 10 of the Municipal Franchises Act, R.S.O. 1990, c. M-55, as amended by S.O. 1996, c. 1, Sched. M, s. 25; S.O. 1998, c. 15, Sched. E, s. 21, for renewal of its right to distribute gas in the Township of Pittsburgh.

[7] On September 9, 1997, on consent, the OEB issued an interim order continuing Union's rights in the Township of Pittsburgh until, at the latest, October 24, 1998. The OEB has issued subsequent orders extending the interim renewal.

[8] On June 7, 1997, under s. 25.2 of the Municipal Act, R.S.O. 1990, c. M-45, as amended, the Minister of Municipal Affairs and Housing issued a Restructuring Order effective January 1, 1998.

[9] Paragraph 3.1 of the Restructuring Order stated:

"3.1(a) On January 1, 1998 The Corporation of the City of Kingston and the Corporations of the Townships of Pittsburgh and Kingston, and their local boards are dissolved and a new city to be named The Corporation of the City of Kingston is incorporated.

"3.1(b) The new City shall include the entire geographic area of the three former municipalities referred to in paragraph 3.1(a).

"7.3(a) All assets, liabilities, obligations and responsibilities of The Corporation of the City of Kingston and The Corporation of the Townships of Pittsburgh and Kingston and their local boards are transferred to the new Corporation of the City of Kingston on January 1, 1998, without compensation.

"8.1 (1)(a) On January 1, 1998 every by-law and resolution of the former municipalities and their local boards shall become by-laws and resolutions of the new City, the new Townships, the Frontenac Management Board and their local boards in which the area of the former municipalities is located."

[10] On October 15, 1998, Union filed a second application with the OEB for renewal of its right to distribute gas in what had been the Township of Pittsburgh. Union requested that the OEB approve a franchise agreement in accordance with the terms of a model franchise agreement previously approved by the OEB.

[11] On June 15, 1999, the City enacted Bylaw 99-100. It purported to authorize, under s. 62 of the Public Utilities Act, R.S.O. 1990, c. P-52, the expropriation of Union's gas distribution system in the former Township of Pittsburgh.

[12] In August 1999, the Minister of Municipal Affairs and Housing and the Minister of Energy, Science and Technology announced that the Government of Ontario would repeal s. 62 of the PUC Act retroactive to March 12, 1999.

[13] On December 22, 1999, the Fewer Municipal Politicians Act, S.O. 1999, c. 14, became law. It stated:

"9(1) Section 62 of the Public Utilities Act is repealed.

"(2) Any right, privilege, obligation or liability acquired, accrued or incurred after January 1, 1999 under section 62 of the Act or a by-law passed under that section is extinguished."

[14] After the repeal of s. 62 of the PUC Act, the City pursued its objective by asking the OEB for an order allowing the City, without Union's consent, to assume control immediately of Union's distribution system in the former Township of Pittsburgh. The City also sought an order from the OEB that the City be allowed to acquire, gradually, at a rate to be determined by the City, ownership of the system as the City replaced Union's system.

[15] Union objected to the City's proposal on the basis, inter alia:

(1) that the OEB has no jurisdiction, in the absence of Union's consent, to give the City the right to use Union's property and distribution system, and

(2) the OEB had no authority to allow the City to expropriate Union's assets.

[16] On December 11 and 12, 1999. Union's application for renewal of its franchise rights in the former Township of Pittsburgh came on before the OEB. Counsel for Union, the City and Consumers Gas (intervenor) made submissions on January 31, 2000 and February 2, 2000.

[17] On June 23, 2000, the OEB issued its Decision and Reasons and held:

(i) "[the Board] has no jurisdiction to expropriate Union's assets and the fact that the expropriation occurs gradually over a period of time does not change its character". (Decision with Reasons: page 27: 4.0.10 to 4.0.13)

(ii) that Union's franchise in the area of the former Township of Pittsburgh be renewed while acknowledging the City's right to expand its distribution system into the area that was formerly the Township of Pittsburgh.

III. Rights of Appeal

[18] The Ontario Energy Board Act, 1998, S.O. 1998, c. 15, Sch. B.

"s. 19(1) The Board has in all matters within its jurisdiction authority to hear and determine all questions of law and of fact.

"(6) The Board has exclusive jurisdiction in all cases and in respect of all matters in which jurisdiction is conferred on it by this or any other Act.

"s. 20. Subject to any provision to the contrary in this or any other Act, the powers and procedures of the Board set out in this Part apply to all matters before the Board under this or any other Act.

"s. 33(1) An appeal lies to the Divisional Court from any rule made under Part III or any order of the Board.

"(2) An appeal may be made only upon a question of law or jurisdiction and must be commenced not later than 30 days after the making of the rule or order.

"s. 128(1) In the event of conflict between this Act and any other general or special Act, this Act prevails.

"(2) This Act and the regulations prevail over any by-law passed by a municipality."

[19] It is noted that before the 1998 amendment, the OEB Act, R.S.O. 1990, c. 0-13, required leave to appeal:

"s. 32(1) An appeal lies to the Divisional Court from any order of the Board upon a question of law or jurisdiction, but no such appeal lies unless leave to appeal is obtained from the court within one month of the making of the order sought to be appealed from or within such further time as the court under the special circumstances of the case allows."

[20] Municipal Franchises Act (as amended) (supra):

"11. With leave of a judge thereof, an appeal lies upon any question of law or fact to the Divisional Court from any certificate granted under section 8 or any order made under section 9 or 10 if application for leave to appeal is made within fifteen days from the date of the certificate or order, as the case may be, and the rules of court apply to any such appeal."

IV. Conclusions

[21] In my view, the impugned decision of the OEB, dated June 23, 2000, is an "order of the Board" under s. 33(1) of the OEB Act, 1998. S.O. 1998, c. 15. Therefore, under the provisions of s. 33(2) of the OEB, the City of Kingston has a statutory right of appeal without obtaining leave to appeal.

[22] In my view, the provisions of s. 11 of the Municipal Franchises Act, supra, requiring leave to appeal, are overridden by the provisions of s. 128(1) of the OEB Act. 1998:

"128(1) In the event of conflict between this Act and any other general or special Act, this Act prevails.

"(2) This Act and the regulations prevail over any by-law passed by a municipality."

[23] In the event that I am in error in concluding that the City does not need leave to appeal and it is held that leave to appeal is required by reason of s. 11 of the Municipal Franchises Act, supra, I would grant the City leave to appeal on the following questions:

(i) Did the Ontario Energy Board err in deciding that it did not have the jurisdiction under the MFA to constrain the scope and duration of Union's right to operate its gas distribution works in Pittsburgh.

(ii) Did the Ontario Energy Board err in deciding that it had jurisdiction under the MFA to authorize Union to add to and extend to the gas system in the Former Township of Pittsburgh which existed on the expiry date of the 1977 franchise;

(iii) Did the Ontario Energy Board err in requiring that the City apply for a Certificate of Public Convenience and Necessity if it were to construct any facilities in the former Townships of Pittsburgh and Kingston and suggesting that a Certificate would also be required in the territory known as the old City of Kingston?

In my view, the question of whether leave to appeal is required and the question of OEB's jurisdiction to order expropriation in favour of the City merit the attention of the Divisional Court.

V. Stay of Proceedings

[24] Under the provisions of s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C-43, an order will issue granting a stay of that portion of the OEB's order of June 23, 2000 which imposes the 2000 Model Franchise Agreement.

[25] In the interim, prior to the final resolution of the appeal, Union's right to distribute gas in what was formerly the Township of Pittsburgh continues on the same terms and conditions as in the 1977 municipal franchise agreement.

VI. Expedited Hearing

[26] The material does not persuade me that either the nature of the issues or the perceived need for expedition requires an order under s. 21(2)(c) of the Courts of Justice Act for this matter to be heard and determined by one judge.

VII. Costs

[27] Costs of this application are left to the panel of judges hearing the appeal.

Order accordingly.