Alberta – Previous arbitral award did not create res judicata for regulator – #589

In TransAlta Corporation v Alberta (Utilities Commission), 2022 ABCA 37, TransAlta Corporation (“TransAlta”) argued on appeal that the Alberta Utilities Commission (“AUC”) erred in law when it refused TransAlta’s application to decide, as a preliminary matter, that certain issues were rendered res judicata by a previous arbitral award arising out of a dispute between TransAlta and a legislated entity called the “Balancing Pool”. The majority of the Court of Appeal dismissed the appeal as: (1) the AUC decision was an interlocutory ruling in an unfinished proceeding and the AUC may ultimately agree with the arbitral award; and (2) the AUC did not err when it refused to apply res judicata as a preliminary matter as it was making a decision in a different statutory context than the arbitral tribunal.

The AUC Proceedings – Under the Electric Utilities Act SA 2003, c E-5.1, which provides the framework for the regulation of Alberta’s electric industry, the “Balancing Pool”  (a “corporation” created under the Act), can be responsible for certain financial obligations. The decision under appeal arose in the context of TransAlta’s application to the AUC for payment from the Balancing Pool of its remaining uncollected costs to decommission two generating units at the TransAlta Sundance Power Plant. There is no definition of “generating unit” in the applicable regulations, but the Electric Utilities Act is the enabling statute of those regulations. Section 1(1)(u) of the Electric Utilities Act defines “generating unit” as including “associated facilities” such as “fuel and fuel handling equipment” that are “necessary for the safe, reliable and economic operation of the generating unit, which may be used in common with other generating units”. TransAlta’s position was that the Highvale Mine, which was a fuel source for those units, was an “associated facility” within the definition of “generating unit” in the Electric Utilities Act and therefore a proportionate share of the costs of decommissioning the mine should form part of the costs of decommissioning the generating units which Transalta sought to recover.

The Previous Arbitration Proceedings – TransAlta and the Balancing Pool had previously participated in a “private arbitration proceeding” under the Arbitration Act, RSA 2000, c A-43 in relation to two other generating units at the Sundance Power Plant. The arbitration concerned the Balancing Pool’s obligation to pay TransAlta the net book value of those generating units upon its termination of the PPAs for those units. PPAs sets out the terms for the sale of electricity from a generating unit. They are statutory instruments introduced as part the deregulation of the Alberta electricity market. The arbitral panel decided as part of its award that the Highvale Mine, which was also a fuel source for those units, was an “associated facility” within the definition of “generating unit” in the Electric Utilities Act and that TransAlta was entitled to a proportionate share of the decommissioning costs of the Highvale Mine as part of the costs that the Balancing Pool had to pay on termination of the PPA’s for those units.

The Decision of the AUC Subject to Appeal – TransAlta applied in the AUC proceeding to have the AUC make a preliminary ruling that the issue of whether the Highvale Mine was an “associated facility” was res judicata as a result of the previous arbitral award and that the AUC was bound to extend the arbitral panel’s conclusion to the generating units that were the subject of the application before the AUC.  

The AUC refused the application, stating among other things:

“19 In accordance with the Commission’s previous rulings on the matter of the inclusion of mine costs in the decommissioning costs for Sundance A generating units…the Commission intends to exercise its discretion to make its own determination on the mine issue after the record of this proceeding has closed…

20 The Commission acknowledges the expertise of the arbitration panel, consisting of two former Justices of the Court of Appeal of Alberta and a senior regulatory counsel, and considers that the parties to the arbitration would each have sufficiently supported their respective positions to ensure that the arbitration decision was well-considered. Notwithstanding, the fact remains that the context of the arbitration is distinguishable from the context in which the issue arises in this proceeding, wherein the Commission is determining decommissioning costs under a different enactment.

21 In summary, the Commission will make its own determination as to whether any mine costs are eligible to be included… on the basis of a complete evidentiary record. While not bound by the arbitration panel’s ruling, the Commission expects that the Balancing Pool and the [the Office of the Utilities Consumer Advocate] will abide by their respective concessions and undertakings.”

The Appeal Decision – On appeal, TransAlta argued, among other things, that the AUC’s ruling failed to refer to the legal tests for res judicata, issue estoppel, or abuse of process, and did not set out how the Commission applied those tests to the facts before it. It further argued the Commission did not identify or explain any discretionary power it might have exercised not to apply those doctrines.

The majority noted that leave to appeal was not specifically granted on “issue estoppel” and that the doctrines of abuse of process and issue estoppel are applicable to the conduct of a party, not to the reasoning of a tribunal or other decision-maker and so refused to address those issues and only considered res judicata.

The majority first considered whether the AUC’s decision finally disposed of the question of whether the AUC had to “yield to the award”. The majority found it did not. In terms of the fact-findings made by the arbitral panel, the majority of the Court concluded that the AUC had merely stated it would decide the question of decommissioning costs at the end of the process and not that the AUC would summarily dismiss the fact-findings in the arbitral award.  As to the AUC’s decision that it was not bound by the arbitral panel’s interpretation of “associated facilities”, the Court of Appeal concluded that the decision was part of an interlocutory ruling in an unfinished proceeding and the AUC may yet agree with the arbitral award. The majority stated:

“[42] TransAlta argues for interpretation and application of the law of res judicata in its favor on an interlocutory basis and doing so is contrary to the policy which generally insists upon exhaustion of remedy within a tribunal system before court review. Furthermore, the Court would be doing so on a premise of inevitable future ‘error’ which the law does not assume: compare Sagkeeng Anicinabe aka Fort Alexander Band v Manitoba, 2021 MBCA 88 [2021] MJ No 305 (QL), under motion (SCC No 39976). TransAlta did not show that continuing through [the Proceeding before the AUC] would be “futile”: compare Rebel News Network Ltd v Alberta (Election Commissioner), 2021 ABCA 376 at paras 11-13, [2021] AJ No 1541 (QL). “

The majority then went on to consider whether the AUC erred in finding that res judicata was inapplicable because the AUC was determining decommissioning costs under a different enactment than the one considered by the arbitral panel (see para. 20 of its decision cited above). The majority stated:

“[49] …There was nothing erroneous about the Commission looking at the big statutory picture and concluding from the situation before it and before the arbitration panel, that a summary disposition [based on res judicata] at this preliminary stage of [the Proceeding before the AUC] on interpretation of the provisions was not required.

It noted again that the AUC might ultimately conclude that “it would be in the public interest and would be consistent with the overall legislative scheme and with the purposes of the Legislature to interpret the wording as did the arbitration award”. But at this point in the proceedings the AUC did not err “in its first impression” that there was a material difference in the contexts in which the two decisions were made (para. 50).

Contributor’s Notes:

A couple of observations.

First, the majority found the applicable standard of review was correctness based on Northern Regional Health Authority v Horrocks, 2021 SCC 42 at paras 8 – 9, which is a case concerning the jurisdictional lines between competing statutory tribunals (in that case, a labour arbitrator and a human rights adjudicator).

However, the present case, which involves an arbitral panel, does not appear to concern the competing jurisdictions of “statutory tribunals”. At best, it might be arguable that arbitral panels appointed pursuant to arbitration clauses found in PPAs are “statutory tribunals” (PPAs being statutory instruments see: ENMAX PPA Management Inc v Balancing Pool, 2017 ABQB 605, paras. 31 to 38 ). That said, it appears the arbitration at issue in this case was not conducted pursuant to an arbitration clause found in a PPA. Instead, it appears, the arbitral award was the product of a “private arbitration proceeding” that simply included statutory interpretation as part of its terms of reference. It was not a statutory arbitration. Put differently, the arbitral panel was “not making a statutorily-authorized decision” (see para. 133).  

Second, it is established that arbitration awards may create res judicata or issue estoppel for subsequent arbitrations see: Enmax Energy Corporation v TransAlta Generation Partnership, 2015 ABCA 383 (“Enmax”).  Enmax was distinguished in this appeal by Justice O’Ferrell, in concurring reasons at paras. 129 to 132. He observed that Enmax was not an authority for the proposition that a prior arbitration award necessarily binds a regulatory tribunal charged with statutory duties and obligations. He noted among other things:

[132]   …it is one thing for an arbitral decision interpreting a contractual provision to be held to be binding on a subsequent panel of arbitrators interpreting the same contract and the same or similar provisions. It is quite another for a decision, which was made by arbitrators appointed by the parties because they could not agree, to be binding on a regulatory tribunal statutorily charged with making a determination in the public interest.”