ENBRIDGE'S LATE PAYMENT FEES FOUND TO VIOLATE CRIMINAL CODE
By Ian Macdonald and Paul Harricks
On April 22 the Supreme Court of Canada released a unanimous, 7-0 decision in Garland v. Consumers' Gas Co. (Consumer's Gas is now Enbridge Gas Distribution Inc. (Enbridge)). In an earlier aspect of the same case the Court had found that late payment penalties charged by Enbridge violated the usury provisions of Canada's Criminal Code. As a consequence of the latest Supreme Court decision, Enbridge will be required to repay as much as $100 million to customers who were charged usurious rates of interest on their overdue accounts. The exact amount that Enbridge will have to repay will be determined by the trial judge.
Section 347 of the Criminal Code makes it an offence to charge an effective interest rate in excess of 60% per annum. Until 2002, Enbridge charged its customers a late payment penalty equal to 5% of any amount outstanding more than 16 days after the issuance of a bill. Through the use of actuarial evidence, Garland, the representative plaintiff in the class action lawsuit against Enbridge, was able to show that the late payment fee resulted in an effective interest rate exceeding 60% per annum for customers who paid their bills within 37 days of their due date.
The Garland case was initially in front of the Supreme Court of Canada in 1998. At that time, finding that Enbridge's late fees violated section 347 of the Criminal Code, the Court sent the matter back to the lower court to determine the amount of money that Enbridge would have to repay to customers who had been overcharged. However, the lower court accepted Enbridge's argument that it should not be required to repay any amount on the basis that, among other things, its late payment fees had been approved by the Ontario Energy Board (OEB).
When the Supreme Court heard the case for the second time, it explicitly rejected Enbridge's argument that it should be excused from liability to reimburse customers on the basis that its late fees had been condoned by the OEB. Justice Iacobucci stated that when the Garland lawsuit was filed in 1994 and Enbridge “was put on notice that there was a serious possibility that its late-payment penalties violated the Criminal Code, it was no longer reasonable to rely on the OEB rate orders to authorize the late payment penalties.”
Shortly after the Supreme Court released its most recent decision, Enbridge announced that it plans to seek the OEB's permission to increase its distribution rates for all customers to offset the amount that it will be required to repay as a result of the court's decision.
Many utilities and local distribution companies (LDCs) in Ontario have charged late payment fees similar to those charged by Enbridge. Not surprisingly, these entities have followed the Garland case very closely. It is quite possible that the Garland decision will give rise to similar class action lawsuits against other utilities and LDCs.
Clearly any LDCs that still have a late payment policy that may run afoul of the Criminal Code provisions should seriously consider changing that policy immediately. To the extent that an LDC has, in the past, charged and collected penalties that may violate the usury provisions, it is probably premature to take any active steps to reimburse customers since any such steps may require OEB approval.
In addition, the Garland case was decided on its own facts. There may be defences available to a particular LDC to any claim for restitution that would depend upon the LDC's own circumstances.
Gowlings will continue to monitor developments with respect to this issue and will publish updates in future editions of energy@gowlings.
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UNIVERSITY NETWORK OF EXCELLENCE IN NUCLEAR ENGINEERING
By Peter Murphy
Canada's nuclear power industry and a number of Canadian universities plan to work together to provide the technology and training that is necessary to continue the safe and efficient operation of Canadian nuclear plants.
The Canadian nuclear power industry is facing some of the biggest challenges in its history as its equipment ages and grows obsolete and large proportions of its technical staff near retirement. To address these concerns, a number of Canadian universities and major participants in the Canadian nuclear industry have formed the University Network of Excellence in Nuclear Engineering (UNENE) to promote research and technology development in nuclear engineering.
It's not surprising that there is a growing need to replace equipment at Canada's nuclear generating plants. Many of the nuclear reactor units in Canada were built over 20 years ago and since then many of their analog-based electronic instrumentation and control devices have become obsolete. The problem is magnified by the fact that many of the original instrument manufacturers and vendors are either out of business or have discontinued their older designs.
Maintaining a supply of highly qualified engineers and scientists has also become a critical problem for nuclear industries as their technical workforce nears retirement. Cutbacks in funding for research in nuclear engineering in Canadian universities in the late 1980's and early 1990's and a vocal anti-nuclear lobby have deterred young people from pursuing careers in nuclear sciences and/or engineering. Obtaining experts from abroad can be an expensive short-term solution, as is apparent from Ontario Power Generation's Pickering A re-start project where a number of foreign experts were retained.
UNENE is combating these growing concerns by promoting research in nuclear engineering relating to CANDU based power plants. UNENE is establishing at least six industrial research chairs at Canadian universities to carry out research relating to different aspects of nuclear engineering. Bruce Power, Ontario Power Generation and Atomic Energy of Canada have committed $1million over five years to establish UNENE's first industrial research chair at the University of Western Ontario. Additional financial support is being provided for this research chair through the Natural Sciences and Engineering Research Council of Canada's industrial research chair program.
UNENE's University of Western Ontario chair is held by Dr. Jin Jiang, a Professor in the Department of Electrical & Computer Engineering. Dr. Jiang is regarded as one of the world's leading experts in reliable control system design and analysis. The chair has an initial term of five years and will focus its research on the control, instrumentation and electrical systems in CANDU Power Plants. The research will concentrate on improving the operational safety and reliability of both the control and instrumentation systems and the electrical systems in existing nuclear power plants and the development of novel techniques for newly designed CANDU based power plants.
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HYDRO-QUEBEC DISTRIBUTION ISSUES SHORT-TERM TENDER CALL FOR 250 MW
By William Van Horne
Hydro-Québec Distribution has issued a short-term call for tenders to meet electricity needs in Québec. All interested parties are invited to bid on the supply of 250 MW, with deliveries from January 1 to December 31, 2005. The call for tenders is open to all interested bidders.
The electricity may come from generating facilities inside or outside the province. Bids must be for blocks of 50 MW up to a maximum of 250 MW. A bidder may submit more than one bid.
The timetable for the bidding process is as follows:
- Pre-bid conference call - May 4, 2004
- Deadline for submitting the Call for Tenders Registration Form - May 10, 2004
- Deadline for submission of bids - May 17, 2004
- Contract award - May 19, 2004
For any additional information, interested bidders must contact the Official Representative, Raymond Chabot Grant Thornton, at hqdrep@rcgt.com mailto:mailto:hqdrep@rcgt.com or by telephone at (514) 954-4684.
The Call for Tenders Document, the Pre-bid Conference Registration Form, the Call for Tenders Registration Form and the Bid Form are available on the Hydro-Québec Web site:
http://www.hydroquebec.com/distribution/en/marchequebecois/.
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SMART METERING NOT JUST SMART METERS
By Paul Grod, Guest Author
The Ontario Government's recent announcements to put smart meters into every home by 2010 is a laudable goal. However, smart meters are simply the enabling technology and are a means to an end. What Ontario needs is smart metering. Smart metering involves system design, hardware standards and a regulatory framework that will foster the proper implementation of the Government's initiative.
Why is smart metering necessary? As aptly described by the Minister of Energy at the recent Ontario Energy Association Conference on April 26, our current system is analogous to driving a car without a fuel gauge and buying gas without knowing its cost. You don't know how much you buy when you buy the fuel or at what price. You then receive a bill from the gas company once a month or every second month with an estimate of how much you bought. This estimate may be based on a reading or may be based on an estimate of what you bought at the same time last year. Smart meters are the gas gauge and the price billboard that enable consumers to make buying decisions and lifestyle choices.
Like most technologies, smart meters have many different capabilities, and may incorporate all or a few of the following functions: remote meter reading (via drive by radio frequency, remote radio frequency, power line carrier, telephone, cable, Wi-Fi and internet), time-of-use pricing, net metering (to buy or sell electricity), power quality information, remote disconnects and reconnects, alarming capabilities, integration of gas and water readings, bi-directional communication capabilities at various bandwidths as well as many other functions.
The smart meter initiative, however, cannot succeed without smart metering. Smart metering incorporates system design, implementation strategies, standards (hardware, software, communication and service), consumer education, regulatory oversight and a market framework that will give consumers the incentives to utilize this technology and the private sector the opportunity to provide innovative technologies, services and financing solutions. The challenges faced by the government are:
Regulatory oversight - to establish and maintain a framework for retail metering in Ontario. Take a lesson from Ontario's wholesale marketplace where the IMO has established and maintains regulatory responsibility of the market cash registers. The IMO licences meter service providers to deliver the services and charges them with the responsibility for the implementation, maintenance and reliability of metering for their customers.
Conforming metering standards - (hardware, software and communication) to which manufacturers must comply. A conforming meter list should be developed that includes a list of meters that have been tested by the regulator to verify that the meters are by design compatible with the regulator's requirements for the province. This will avoid "carpet bombing" the province with a patchwork of incompatible technologies that lack a common communication platform or provide the baseline features.
Lack of metering expertise in Ontario - local distribution companies (LDCs) in many instances do not have the in-house metering expertise to design, implement and maintain a metering system. Even the gathering of data to incorporate into an LDC's billing system will be a challenge. Licensed meter service providers should be provided the opportunity to install, own and maintain metering installations as well as provide data management and other ancillary services, as is currently the case in the wholesale market. This will lead to the development of a metering knowledge base, innovative technologies and product offerings at a low cost. Competition provides customer choice, improves quality of services and drives down costs to the electricity consumer.
By Paul M. Grod, LL.B., MBA, President, Rodan Metering Services Inc., paul.grod@rodanpower.com. Rodan is a leading provider of wholesale and retail metering and data management solutions to power producers, distributors and consumers in Ontario.
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OEA'S ENERGY MANAGEMENT/DSM CONFERENCE A SUCCESS
By Renée Summers
The Ontario Energy Association held a very successful conference titled, "Energy Management/DSM", on April 26 and 27 in Toronto. Over 200 leaders in the energy industry attended this timely event and took a closer look at demand-side management - part of the Ontario government's new energy mandate.
Gowlings' Partner David McFadden spoke on a panel on, “Now, Who Does What?” David spoke about his work as a member of the Ontario Minister of Energy's Electricity Conservation and Supply Task Force. One of the recommendations of the report stated:
“Ontario needs to create a conservation culture that delivers cumulative and sustainable improvements in energy use and demand response. Ontario's long-term plan for electricity should include a comprehensive strategy, with clear targets reflecting a full analysis of the costs and benefits of conservation.”
David pointed out that electricity productivity in Ontario has improved 21% between 1992 and 2002, yet Ontario is still a relatively high consumer of energy per capita. Three key players were cited who must move our conservation goals forward - government, consumers and program deliverers.
To achieve the reduction set out by the Premier, the government will have to take a lead. The key factor will be price signals which would encourage conservation. The rise of the price cap was a move in the right direction. Other initiatives will be required such as consumer education and regulatory requirements and incentives. Large and small consumers will most likely respond to price signals. However, a focus must be placed on small consumers who account for over 50% of consumption.
David suggested every home and business needs to be metered, as the government has proposed, and energy efficient appliances need to become part of everyone's lives. Also, new home construction and retrofitting should be subjected to regulation which mandates energy efficiency.
Ontario's network of LDC's may be in the best position to access consumers across the province and deliver demand side management systems, but there is a clear role for the private sector to work with LDC's in the installation and servicing of meters, as well as, in the financing of meters and other energy efficiency concepts.
Gowlings' Partner Tom Brett was a moderator for a session titled, “What do Customers Want?”
Further information about the conference is available at:
http://www.energyontario.ca/DSM/index.htm.
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BRITISH COMPANY BUYING NORTH AMERICA POWER
By Renée Summers
One of Britain's largest energy suppliers, Centrica, is purchasing a power station in Texas for US$143 million. Centrica expects this to be the first of many similar deals it will do in North America over the next five years (they anticipate spending US$617.9 million). Centrica has agreed to buy Bastrop Energy Partners L.P, owner of the 540-megawatt, gas-fired Bastrop Energy Center plant near Austin for cash from FPL Energy LLC.
Centrica is building a fleet of power stations in the UK to supply its customers from its own resources rather than buy electricity. It appears that they are following this strategy in Texas as well. They currently have 900,000 customers in Texas.
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ONTARIO GOVERNMENT UNVEILS CONSERVATION PLAN
By William Van Horne
Ontario Premier Dalton McGuinty has set a target of reducing Ontario's energy consumption by 5 % by 2007 as part of his government's plan to create a culture of conservation and make Ontario a North American leader in energy efficiency.
Highlights of the conservation plan include:
- Creating an Ontario Power Authority that will include a Conservation Secretariat led by a Chief Conservation Officer;
- Launching a public education and outreach campaign, including town hall meetings, to encourage conservation;
- Setting aggressive targets to put smart meters into every home by 2010, with an interim target of 800,000 meters in place by 2007;
- Developing regulations which enable homeowners and businesses generating renewable electricity to receive credit for the excess energy they produce;
- Allowing local distribution companies to begin investing approximately $225 million for local, community-based conservation programs; and
- Creating incentives for local distribution companies and Hydro One to reduce expensive, wasteful "system loss" that can occur when transmitting electricity to consumers.
To lead by example and help pioneer energy-saving ideas, Premier McGuinty has asked the provincial government to reduce its own electricity consumption by 10 % by 2007.
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ONTARIO MINISTRY OF ENERGY RELEASES RFQ IN QUEST FOR 300 MW OF RENEWABLE ENERGY
By Noreen Flaherty
The Ministry of Energy released a Request
for Qualifications ("RFQ") on April 28, 2004 for 300 MW of renewable energy,
including wind, solar, water, biomass and landfill gas. This document is a
prelude to the Request for Proposals ("RFP") that is expected to be released
prior to May 31, 2004. The RFQ was issued in response to a committment by the
McGuinty Liberal Government to both increase supply to meet the growing demand
for electricity in the Province as well as increase renewable power sources.
The Government has set targets of 1350 MW of renewable capacity to be in service
by 2007 and 2700 MW to be in service by 2010.
The RFQ states that once the Government has
reviewed the responses to the RFQ, which are due May 25, 2004 (as extended from
May 24, which is a holiday), it may opt to purchase more than the 300 MW of
power sought in this round. It is expected that the Government will receive
well over 300 MW of interest from a variety of parties across Canada and the
U.S..
The eligible projects are facilities that
generate electricity from wind, solar, biomass, bio-oil, bio-gas, landfill
gas or water. In addition, projects do not necessarily have to be newly
constructed in response to this RFP. There are 3 categories, 2 of which
include circumstances where a facility is being expanded or construction has
commenced and the expected commercial operation date is prior to December 31,
2007. The successful proponents are to be announced November 5.
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NEWS & NOTES FROM THE ONTARIO ENERGY BOARD
By William Van Horne
On December 16, 2003, the Canadian Cable Television Association (CCTA) filed an application, on behalf of its member companies operating in Ontario, seeking an amendment to the licences of all electricity distributors to establish uniform terms and conditions of access to electricity distribution power poles for the purpose of transmitting cable services. The CCTA also requests that the Board set a specific pole rental charge, retroactive to January 1, 1997. Further information may be found at:
http://www.oeb.gov.on.ca/html/en/industryrelations/ongoingprojects_ccta.htm.
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IN OTHER GOWLINGS NEWS
From Boardrooms to Courtrooms:
Bill C-45 and the New Health & Safety Crime
Bill C-45 came into force March 31, 2004, and will hold organizations and their decision-makers criminally liable for workplace health and safety.
Join Gowlings for a half-day seminar on the Criminal Code changes that could put corporate decision-makers in jail.
Norm Keith, a leading Canadian occupational health and safety lawyer, and Yvonne O'Reilly, CRSP, Senior OHS Consultant will province practical information on what steps to take to avoid criminal liability. The following topics will be discussed:
- The scope of the new OHS Criminal Code legal duty
- The liability of organizations and their decision-makers
- The OHS criminal negligence penalties
- Insurance protection for organizations and executives
- The development of a comprehensive OHS Management System
To register, please complete and submit the registration form, or contact Yvonne O'Reilly, Senior OHS Consultant at 1-866-862-5787 x 3580, or yvonne.oreilly@gowlings.com.
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