Executive Summary: Key Legal and Evidentiary Issues

• The BC Utilities Commission determined that local government corporations (LGCs) wholly owned and operated by municipalities are "public utilities" under the Utilities Commission Act and subject to regulation.

• Appellant municipalities argued the term "municipality" in the Municipal Exclusion should broadly encompass their wholly owned LGCs, effectively shielding them from Commission oversight.

• Statutory interpretation of "municipality" under s. 29 of the Interpretation Act proved central, as it defines the term narrowly as a corporation into which residents are incorporated — not a subsidiary entity.

• Section 121(1) of the UCA preserves the paramountcy of the Commission's regulatory powers over anything done under the Community Charter, undermining the appellants' harmonization argument.

• Procedural unfairness was alleged on the basis that the Commission failed to circulate a draft Final Report for comment, though a revised timetable had invited submissions on exemption frameworks.

• All four appeals were dismissed, with the Court affirming the Commission's interpretation and finding the inquiry process procedurally fair.

Background and the parties involved

The case of Richmond (City) v. British Columbia (Utilities Commission), 2026 BCCA 139, involved four appeals heard together by the British Columbia Court of Appeal. The appellants were the City of Richmond, Lulu Island Energy Company Ltd., the City of North Vancouver, and Lonsdale Energy Corporation. Lulu Island Energy Company Ltd. and Lonsdale Energy Corporation were incorporated by the City of Richmond and the City of North Vancouver in 2013 and 2003, respectively. The respondents included the British Columbia Utilities Commission (the "Commission"), FortisBC Energy Inc., FortisBC Inc., FortisBC Alternative Energy Services Inc., and British Columbia Hydro and Power Authority. The appeal challenged Order Number G-214-24, issued by the Commission on August 12, 2024, following a multi-year inquiry into the regulation of municipal energy utilities.

Origin of the inquiry and the two-stage process

In August 2019, the Commission established an inquiry into the regulation of municipal energy utilities, tasking a four-member panel with deciding whether the Municipal Exclusion under the Utilities Commission Act (the "UCA") includes LGCs that are wholly owned and wholly operated by municipalities. In August 2021, the Commission established a two-stage inquiry. The first stage considered two questions: whether the Municipal Exclusion encompasses wholly owned and wholly operated LGCs, and if not, whether these entities should nonetheless be exempted from regulation under the UCA. The second stage of the inquiry, which has yet to occur, will address regulatory considerations for other variations of utility service providers that may be affiliated with local governments.

The Commission's findings in the Final Report

In November 2022, the Commission released its final report on the first stage of the inquiry (the "Final Report"). The Commission concluded that the Municipal Exclusion does not encompass wholly owned and wholly operated municipal LGCs. Consequently, like other public utilities, they are subject to regulation. However, the Commission found that where an LGC is, at all times, 100 percent owned and operated by the local government, there is "little difference" between the LGC and traditional structures where the energy utility is a department of a local government. As such, subject to an annual reporting requirement, the Commission recommended to government that these types of corporations be exempted from application of the UCA under s. 88(3). The Commission accepted that with wholly owned and wholly operated LGCs, the "traditional justification" for its regulation of public utilities "loses force." In August 2024, the Minister responsible for the administration of the Hydro and Power Authority Act granted the Commission advance approval for a s. 88(3) exemption. The exemption is embodied within the order under appeal and remains in effect until the Commission orders that it no longer applies.

The appellants' statutory interpretation argument

The appellants alleged the Commission erred in its interpretation of the definition of a public utility specific to municipalities. They argued that the Municipal Exclusion should be read in its "entire context," including the Community Charter, which grants municipalities broad powers to deliver services directly or through another person or organization. According to the appellants, the municipal exclusion is "agnostic" as to the corporate nature and structure of the service provider; rather, what the Legislature intended to exclude from the definition of a public utility are all utility services that may be delivered by a municipality within its own boundaries, whether directly through a municipal department or indirectly through another entity, such as a wholly owned and wholly operated LGC.

The Court's analysis of the statutory definition

Writing for a unanimous panel, Madam Justice DeWitt-Van Oosten applied the modern approach to statutory interpretation and found the Commission's narrow reading correct. The Court emphasized that the UCA does not define the term "municipality." However, that term is defined in s. 29 of the Interpretation Act as "the corporation into which the residents of an area are incorporated as a municipality" under the Local Government Act, the Vancouver Charter, or any other Act. An LGC is not a corporation into which the residents of an area have been incorporated as a municipality, and only a municipality established under the Local Government Act and in accordance with that statute's incorporation requirements fits the definition. The Court also relied on the principle noted in Powell River Energy Inc. v. British Columbia (Utilities Commission), 2026 BCCA 93, that "a parent company and a subsidiary company, even a 100 percent subsidiary company, are distinct legal entities." The Legislature's decision not to amend the definition of public utility to add LGCs to the Municipal Exclusion when it enacted the Community Charter was viewed as significant, and s. 121(1) of the UCA — which provides that nothing done under the Community Charter supersedes or impairs a power conferred on the Commission — further supported a narrow interpretation.

Rejection of the absurdity and harmonization arguments

The appellants argued that the Commission's interpretation leads to an "irrational distinction in how local government services are treated" under the UCA. The Court disagreed, finding that the interpretation is not unreasonable, inequitable, illogical, or incoherent. The UCA itself contemplates that the narrow exclusions to the definition of a public utility may require an attenuated regulatory approach, and allows for case-by-case or class exemptions to regulation under s. 88(3). The scheme itself is sufficiently flexible to ameliorate the concern. On harmonization, the Court emphasized that the first of the two questions answered by the Commission was not about the scope of municipal powers; rather, it focused on the scope of the Commission's regulatory jurisdiction over public utilities, and these are two different things.

The procedural unfairness allegation

The appellants also alleged that the Commission's inquiry was procedurally unfair because the Commission had initially indicated participants would have an opportunity to comment on a draft of the Final Report, including a possible framework for exempting LGCs, but ultimately did not follow through on that opportunity. The Court found this complaint without merit. In February 2022, the Commission issued the last of its revised timetables, which no longer included reference to comments on a draft Final Report but instead allowed for submissions on "key themes," one of which specifically addressed the possibility of exemption from application of the UCA and the framework the Commission could use. None of the appellants responded to the February 2022 revised timetable or provided additional submissions. The Court also noted that the appellants did not raise the absence of commentary on a draft report as an issue following the revised timetable, did not seek any form of reconsideration after issuance of the August 2024 order, and only advanced this procedural ground in their second appeal — the first having been quashed for want of jurisdiction. The Court observed that the fact it finds form as a new issue "so late in the day speaks volumes about the perceived prejudice."

The ruling and outcome

The Court of Appeal unanimously dismissed all four appeals, affirming that the Commission correctly interpreted the Municipal Exclusion from the definition of a public utility under s. 1(1) of the UCA and that the Commission's inquiry at the first stage was procedurally fair. The successful respondents — the Commission, FortisBC, and BC Hydro — prevailed entirely. No specific monetary amount was awarded or ordered in this case, as the dispute concerned regulatory jurisdiction and statutory interpretation rather than damages or compensation.