Court File and Parties
DIVISIONAL COURT FILE NO.: 141/16
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MOLLOY, DAMBROT and VARPIO JJ.
BETWEEN:
ROGERS COMMUNICATION PARTNERSHIP, TELUS COMMUNICATIONS COMPANY, QUEBECOR MEDIA INC. and ALLSTREAM INC.
Appellants
– and –
THE ONTARIO ENERGY BOARD and HYDRO OTTAWA LIMITED
Respondents
COUNSEL:
Jennifer McAleer and Leslie Minton, for the Appellants
M. Philip Tunley and Pam Hrick, for the Respondent Ontario Energy Board
Fred D. Cass, for the Respondent Hydro Ottawa Limited
HEARD: September 29, 2016 in Toronto
REASONS FOR DECISION
MOLLOY J.
A. INTRODUCTION
1The Ontario Energy Board (“OEB” or “the Board”) issued an Order on February 25, 2016 approving an increase in the rate Hydro Ottawa Limited (“Ottawa Hydro”) was permitted to charge to various carriers in order to attach their wireline communications equipment to Hydro Ottawa poles (known as a “pole attachment rate”). The appellants are all carriers affected by the 2016 Order. They participated in the hearing before the OEB and opposed the increased pole attachment rate sought by Hydro Ottawa. As a result of the 2016 Order, the pole attachment rate was set at $53 per pole, per year, effective January 1, 2016 and continuing indefinitely.
2The 2016 Order was the first change to the pole attachment rate since 2005, at which time the rate was set at $22.35 per year for each attacher on a pole. Prior to 2005, cable companies (such as the appellants) rented space on power poles under private contract with the local electricity distributor (such as Hydro Ottawa). In 2003, the Canadian Cable Television Association applied to the OEB requesting a province-wide uniform rate for access to power poles. That application culminated in the OEB issuing an order on March 7, 2005 which, among other things:
(a) accepted that it was in the public interest that there be a province-wide pole attachment rate, which should apply as a condition of all licences granted to local electricity distributors;
(b) established a methodology for calculating the rate, based on an equal sharing approach to common costs;
(c) assumed for purposes of the calculation that on average there would be 2.5 entities attaching to a pole, among whom those common costs would be shared; and
(d) permitted local electricity distributors to apply for a rate modification based on their own costing.
3The 2005 pole attachment rate was used uniformly throughout the province for over a decade. The only variation sought was by Toronto Hydro, which application resulted in a 2015 settlement approved by the OEB with a new pole attachment rate of $42 per pole per year.
4In the course of the application leading to the 2016 rate change, the appellants sought to persuade the OEB to revisit some of the methodology and assumptions underlying the March 2005 rate order.
5However, the OEB determined that it would deal with the Hydro Ottawa application based on the 2005 methodology and would not hear evidence or argument on the reasonableness of that methodology. The OEB determined that it would conduct a comprehensive policy review with respect to the province-wide pole attachment rate, which would include a review of the methodology and components for determining the rate. That process commenced in November 2015 and was still underway as of the date of the argument in this court. Because that process was ongoing, the OEB held that it would base the Hydro Ottawa rates on the 2005 methodology.
B. THE ISSUES
6The appellants submit that the OEB, having acknowledged that the 2005 methodology used to set the pole attachment rate needed to be reviewed, erred by setting rates for Hydro Ottawa based on that outdated and flawed methodology. Further, the appellants characterize this error as a breach of procedural fairness, arguing that the OEB did not give the appellants an opportunity to be heard on the central issue before it; the proper method for determining a just and reasonable rate.
7Alternatively, the appellants submit that the OEB fettered its discretion and erred in law and jurisdiction by applying the 2005 methodology. The appellants argue that it is neither reasonable nor possible for the OEB to set a fair rate by using a methodology that the Board acknowledged to require reassessment, while at the same time refusing to consider the appellant’s evidence and argument as to what would be a proper methodology.
8In addition, the appellants argue that the OEB committed a further breach of procedural fairness by striking their reply record, thereby denying them the right to be heard on the issues raised therein.
9Alternatively, the appellants submit that the effect of relying on the old methodology is to improperly remove the burden of proof that should be on Hydro Ottawa to establish a fair rate.
10In addition, the appellants specifically challenge the reasonableness of the OEB’s decision to assign a value of 5% of common costs for equipment on the pole solely for the use of Hydro Ottawa. The appellant argues that this value is arbitrary and therefore unreasonable.
11Finally, and most significantly, the appellants submit that it was unreasonable for the OEB to have made a final order in this situation, as opposed to an interim one. Counsel conceded in argument that if the OEB had characterized its order as interim, the appellants would not have brought this application.
PROCEDURAL FAIRNESS
Standard of Review
12With respect to issues of procedural fairness and natural justice, some courts have held there is no standard of review. Rather, once the scope of the duty of procedural fairness is established, the tribunal is simply obliged to observe it. As stated by the Supreme Court of Canada in Moreau-Bérubé v. New Brunswick (Judicial Council)1 (at para. 74):
The [procedural fairness] issue requires no assessment of the appropriate standard of judicial review. Evaluating whether procedural fairness, or the duty of fairness, has been adhered to by a tribunal requires an assessment of the procedures and safeguards required in a particular situation.
13In other cases, courts have held that the standard of review for issues of procedural fairness is correctness. For example, the Supreme Court of Canada stated in Mission Institution v. Khela2 that the “standard for determining whether the decision maker complied with the duty of procedural fairness will continue to be ‘correctness’.”
14In my view, how this is characterized does not impact the analysis. The first step for the reviewing court is to decide whether the tribunal is required to observe principles of procedural fairness for the decision at issue and to then determine the scope of the duty owed. The tribunal is required to have complied with the scope of the duty identified by the court, which is essentially the same thing as saying the tribunal must be correct in its application of procedural fairness.
15In determining the scope of the duty, the relevant factors to be taken into account were described by the Supreme Court’s 1999 decision in Baker3 and have been consistently applied ever since. Although these are acknowledged not to be exclusive factors, the following should be taken into account:
(i) the nature of the decision being made and the process followed to make it;
(ii) the nature of the statutory scheme and the terms of the statute pursuant to which the body operates;
(iii) the importance of the decision to the individual or individuals affected;
(iv) the legitimate expectations of the person challenging the decision; and
(v) the choices of procedure made by the agency itself.
16The first four of these factors point to a requirement that the OEB provide the highest degree of procedural fairness. The fifth factor demonstrates that the OEB itself has adopted procedures for hearings that reflect a high standard of procedural fairness. Further, this factor has particular significance in the circumstances of this case.
17The Supreme Court of Canada held in Knight v. Indian Head School Division4 that a tribunal is the master of its own procedure; a principle that has been widely-applied in the jurisprudence. It is natural, therefore, that a tribunal’s choice of procedures is a factor in determining the precise scope of procedural fairness in proceedings before it. As noted by Stratas J.A. in Forest Ethics Advocacy Association v. Canada (National Energy Board)5 (in reference to the National Energy Board, a tribunal very similar in nature to the OEB):
The Board has considerable experience and expertise in conducting its own hearings and determining who should not participate, who should participate, how and to what extent. It also has considerable experience and expertise in ensuring that its hearings deal with the issues mandated by the Act in a timely and efficient way.
18Thus, although the standard of review for procedural fairness is correctness, in determining the scope of procedural fairness for a particular procedural decision by a tribunal, there is a degree of deference. Evans J.A. in Re: Sound v. Fitness Industry Council of Canada,6 described it this way (at para. 42):
In short, whether an agency’s procedural arrangements, general or specific, comply with the duty of fairness is for a reviewing court to decide on the correctness standard, but in making that determination it must be respectful of the agency’s choices. It is thus appropriate for a reviewing court to give weight to the manner in which an agency has sought to balance maximum participation on the one hand, and efficient and effective decision-making on the other. In recognition of the agency’s expertise, a degree of deference to an administrator’s procedural choice may be particularly important when the procedural model of the agency under review differs significantly from the judicial model with which courts are most familiar.
Application to this Case
19The OEB’s decision with respect to which methodology to use in setting rates is not easily characterized as being procedural as opposed to substantive. On the one hand, the OEB chose to apply the existing methodology rather than implementing changes to it – a decision that could be said to be substantive, within its area of expertise, and subject to a reasonableness standard. On the other hand, it cannot be denied that the methodology to be used to determine a rate is a relevant factor in setting that rate and the appellants were prevented from eliciting evidence as to the appropriate methodology – a decision that could be characterized as a denial of the right to be heard on a relevant issue; a fundamental tenet of procedural fairness.
20However, in my opinion, this dichotomy is easily reconciled in this case by affording appropriate deference in determining the scope of the duty of procedural fairness owed by the OEB in this situation. The OEB did not refuse to reconsider the 2005 methodology. On the contrary, it recognized the need to review and modify it. All the OEB did was determine the appropriate procedure and timing for deciding the new methodology. The Board decided that this was a policy decision with broad ramifications and should be undertaken as a province-wide review with all stakeholders, including the appellants, having an opportunity to participate. In that way, the Board was providing the broadest participation rights possible, rather than making a decision in one geographic area which could have ramifications for other areas of the province and affect others who had no opportunity to be heard. Seen this way, the Board was enhancing, rather than circumventing, procedural fairness. Further, the Board did not simply avoid the issue of methodology. It proceeded promptly and the province-wide review was already underway prior to the issuance of the Board decision now before this Court.
21The OEB is in the best position to determine when and how to make a major policy decision such as this one. It is also in the best position to decide the potential impact of making a decision in one sector that could affect others without a broader consultation. In deciding its own procedure for how it would revisit the 2005 methodology, the OEB is drawing on its core expertise and is entitled to deference. Within that broader consultation, principles of procedural fairness will still apply.
22I do not consider the OEB to have breached procedural fairness by telling the appellants in this case that the time and place for them to challenge the 2005 methodology is within the broader policy review, rather than in this particular hearing dealing only with Hydro Ottawa.
23The other alleged procedural fairness breach relates to reply submissions delivered by the appellants. The Board conducted pre-hearing consultations to work out an appropriate procedure and schedule for submissions. No provision was made for reply submissions. Given that the whole procedure and all of the issues were known to the parties, a procedure that does not include an opportunity for reply is not, per se, a breach of procedural fairness. When the appellants attempted to file reply submissions based on its assertions that four new issues had been raised, the Board ruled that three of these issues had been raised earlier and the appellants were therefore not prejudiced by not having an opportunity to file reply submissions. With respect to the fourth point, the Board held that this point would not be dealt with in its decision and reply submissions were therefore not necessary. The Board noted that permitting a reply by these applicants would require granting the same right to all parties, thereby delaying and extending the proceedings for no good reason. The Board therefore determined that it would not take the reply submissions into account in making its decision.
24The Board imposed a fair process, respecting the rights of all parties to be heard, and it applied that process consistently. These are issues upon which the Board is entitled to deference, as master of its own procedure. I find no breach of procedural fairness.
FETTERING DISCRETION AND BURDEN OF PROOF
25The OEB decided that it would have a broad consultative process to set the methodology for determining rates. That is how the 2005 methodology was developed. It was completely reasonable for the Board to have done so, and to apply that methodology consistently throughout the province. That does not constitute fettering of discretion. It was always open to the Board to vary the 2005 methodology and, indeed, it has undertaken that very process in its ongoing policy review. Consistently applying a methodology until a new methodology has been devised cannot be seen to change the burden of proof, nor can it be characterized as fettering discretion. The Board is not required to constantly re-invent the wheel by revisiting the methodology and starting from point zero in every single case.
26I see no merit to this argument. By proceeding in this way, the Board acted reasonably and did not breach procedural fairness.
REASONABLENESS
Applying the 2005 Methodology
27The appellants also argued that it was unreasonable for the OEB to have made a decision in this case without addressing the deficiencies in the 2005 methodology. I disagree. The OEB engaged in a broad consultative process before setting the 2005 methodology. The Board determined that it would be appropriate to continue applying that methodology until such time as it was replaced or modified by a new methodology developed in the same manner. This is a broad policy issue, about which the OEB is far more knowledgeable and well-positioned to decide than is this court. Deference is required. The Board’s decision was a reasonable one, supported by cogent, policy-based reasons. There is no basis to interfere.
Interim or Final Nature of the Order
28Having determined to defer any changes to the 2005 methodology until after the broad Policy Review, the OEB invited the parties to provide submissions as to whether its decision in this case should be on an interim basis pending that Policy Review. In due course, the parties made submissions on the point and the Board held that its decision would be final, rather than interim. Having considered those submissions, the Board ruled that its order in this case would be prospective in its effect, rather than interim. The Board held that this was consistent with the stance taken in other OEB decisions involving new policies. The Board found that the new pole attachment rate should be prospective as of January 1, 2016 to provide rate certainty to the third-party wireline attachers and revenue certainty to Hydro Ottawa. These are relevant and important considerations, in keeping with the OEB’s mandate to govern the industry fairly in the interests of consumers as well as industry participants. Certainly, a compelling argument could also be made for an interim order. However, the option chosen by the OEB is a rational outcome and is supported by the evidence and reasons provided. There is no basis for finding it to be unreasonable.
The Common Costs Analysis
29Finally, the appellants object to the OEB’s finding that there should only be a 5% adjustment to the rate in order to reflect power-specific fixtures on the poles that are of no benefit to third party attachers such as the appellants. The appellants had argued before the Board that a 15% adjustment should have been made and submitted to this Court that the Board’s decision to make only a 5% adjustment was arbitrary, not based in the evidence and unreasonable.
30In its reasons, the Board referred to the submissions of the parties as to which of the two adjustment rates should apply. The Board also referred to the evidence provided by Hydro Ottawa as to the actual configuration of its assets (using brackets rather than crossarms in its distribution system construction), which was evidence canvassed at the technical conference. Based on this, the Board concluded that the 5% adjustment rate was more appropriate.
31This was a finding of fact open to the Board on an issue squarely within its area of expertise. It is a reasonable finding, supported by evidence, for which the Board provided rational reasons.
32There is no basis for this Court to interfere.
CONCLUSION
33Accordingly, this application is dismissed. If the parties are unable to agree on costs, written submissions may be forwarded through the Divisional Court office, on a timetable to be agreed upon by counsel, with all submissions to be filed by no later than January 30, 2017.
MOLLOY J.
I agree:
DAMBROT J.
I agree:
VARPIO J.
Released: December 14, 2016
Footnotes
- Moreau-Bérubé v. New Brunswick (Judicial Council), [2002] 1 S.C.R. 249, 2002 SCC 11; see also London (City of) v. Ayerswood Development Corp., [2002] OJ No 4859; 167 OAC 120; 34 MPLR (3d) 1 (O.C.A.).
- Mission Institution v. Khela, [2014] 1 S.C.R. 502, 2014 SCC 24 at para. 79; see also Canada (Citizenship and Immigration) v. Khosa, [2009] 1 S.C.R. 339, 2009 SCC 12 at para. 43
- Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817
- Knight v. Indian Head School Division No. 19, [1990] 1 S.C.R. 653 at 685; see also Prassad v. Canada (Minister of Employment and Immigration), [1989] 1 S.C.R. 560 at 568-569
- Forest Ethics Advocacy Association v. Canada (National Energy Board), 2014 FCA 245 at para. 72
- Re: Sound v. Fitness Industry Council of Canada, 2014 FCA 48